There are steps you can take to minimize the pain of beginning to repay your student loans. Here’s how to get a jump on the process:
Know your loans. Staying organized is critical, says Jodi Okun, founder of College Financial Aid Advisors in Seal Beach, Calif. Gather all your loan information in one place, including the lender, balance, repayment status and account number for each loan, and whether the loan accrues interest while you’re in school (ask your lender if you’re not sure), Ms. Okun says. Also be sure to note when your first payment is due for each loan, she says.
Research repayment options. For federal student loans, you’ll be enrolled by default in a standard payment plan, Ms. Okun says. But there are typically other options, such as income-based plans, she says, so be sure to explore the alternatives.
Ms. Langley of Washington, D.C., for example, says she plans to enroll in an income-based repayment plan, which would cap her monthly student-loan payment at 15% of her discretionary income (what’s left after taxes and essentials like food)—but would tack on a longer repayment timetable, causing her to accrue more interest and ultimately pay a higher total amount.
Triage. Pay off the loan(s) with the highest interest rate first, and move down from there, Ms. Okun says.
Consider consolidation. If you have several loans with various rates, consider whether consolidating them is the right move for you, Ms. Okun says. Consolidating refers to the process of combining like loans (federal with federal, for example) into a single monthly payment with a fixed interest rate, she says. But be aware that your interest rate could rise if you consolidate, she says, so you’ll want to crunch the numbers with an online loan calculator, such as the one at discover.com/student-loans. Consolidated federal rates typically reflect a weighted average of your individual rates, but consolidated private rates typically depend on the borrower’s credit score, as well as market conditions.
A little extra. If you can make more than the minimum monthly payment without stretching yourself too thin, it’s a good idea to do so, Ms. Okun says.
“Just adding a small payment of $25 to the minimum each month can make a huge difference in loan length and cut down on interest,” she says.
For example, if a student’s loans total $17,000 with varying interest rates, paying $25 more than the minimum each month could save a student close to $2,500 in interest and cut the repayment term by at least a year, Ms. Okun says.
Communicate with your lender. If you’ve hit a rough spot, your lender will likely work with you to set up a feasible repayment plan, Ms. Okun says—so be sure to keep lines of communication open.
For example, if you’re a recent grad having trouble finding a job, Ms. Okun suggests calling your lender to ask, “I’m not employed and my grace period is ending—what are my options?”
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