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6 Tips to Repaying Your Student Loans

By on October 3, 2013
Categories: COLLEGE PLANNING

Students who borrow for college typically graduate with an average of $26,600 in student loan debt. This can be manageable if graduates understand how to safely repay their loans. Here then are five tips to help college borrowers get a better handle on their college debt:

1. Track down your student loans.

Unlike a mortgage or an auto loan, a college grad can possess many student loans since students often borrow for each year of college.  All too frequently, borrowers don’t know what they’ve got and whether they possess private and/or federal college loans. You can find all your federal student loans (but not private ones) at the website of the National Student Loan Data System.

2. Decide how to repay your federal loan.

The amount you ultimately pay will depend on the repayment plan that you select.  The traditional repayment plan spreads a loan out over 10 years. The federal government also offers a standard repayment plan with lower initial payments that can be an option for borrowers who anticipate higher salaries in the future. You should use the federal loan repayment estimator to explore your choices.

3. Check repayment plans for struggling borrowers.

Federal student loans provide a safety net for students with debt who graduate without a job or a low-paying one.  For grads who find themselves in that category, there are other repayment plans to temporarily reduce their financial stress. Under these special repayment plans, borrowers essentially repay their loans based on what they can afford rather than on what they owe. The newest federal repayment plan for borrowers who are encountering financial difficulty is called Pay As You Earn. This plan typically provides for the lowest monthly payments among the plans based on a borrower’s income. You can use this calculator to see if you qualify for this repayment plan. Another plan is the Income-Based Repayment Plan or IBR, which applies to more federal loans. You can learn more about the IBR here. You can use this IBR calculator to see if you qualify for this repayment plan.

4. Look at loan forgiveness plans.

The federal government offers special loan repayment programs for the 25% of the labor force that works in public service. This includes teachers, librarians, firefighters, law enforcement, military personal, nurses and social workers. The federal Public Service Loan Forgiveness program eliminates unpaid loan balances on federal Stafford Loans after 10 years of public service. Some state governments and private employers also offer loan forgiveness programs. The requirements for all these programs can be tricky so be sure to be thorough when evaluating your options.

5. Pay on autopilot.

Borrowers can find themselves in financial trouble if they miss loan payments. Borrowers are at a higher risk of this happening when they just graduate and don’t realize when the repayments begin. The best way to avoid problems is to arrange for automatic monthly repayments. By the way, you are responsible for submitting your payments even if you don’t receive a bill!

6. Repay strategically.

With any extra money, repay the student loans with the highest interest rates first. You won’t be penalized for paying off a college loan early.

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