Graduation + Loans = Now What?
written by: Sarah Miller for Student Choice
So you graduated college?! Hooray for you! You’ve got your diploma in hand and are ready for all the joys of adulthood – your own place, a job doing something you love, no one telling you what to do. Unfortunately adulthood also comes with responsibility, and that includes paying bills and repaying your student loans. (Sorry to rain on your graduation parade!) How can you keep track of your student loan payments and make sure you’re on the right track? The U.S. Department of Education outlines a number of topics and tips here, but we’ll give you the abridged version. Here are three steps you need to take to start repaying your loans.
1. Exit Counseling
If you have received a subsidized, unsubsidized or PLUS loan(s) under the Direct Loan Program or the FFEL Program, you must complete exit counseling each time you:
- Drop below half-time enrollment
- Leave school
This online counseling walks you through information about understanding your loans, plans to repay, avoiding default, and other topics. You’ll need to sign in to studentloans.gov using your Federal Student Aid PIN. Then select “Complete Counseling” and “Exit Counseling” under “Choose Counseling Type.” Pay attention to what you read and you may get answers to questions you already have.
2. Find out how to contact your loan servicer(s).
You’ll want to make note of phone numbers or websites for each loan servicer you have. (It’s probably a good idea to bookmark these sites so you don’t forget!) When you visit their websites you should be able to view your payment information, select payment terms, and set up automatic monthly payments.
Some repayment plan options may include:
- A standard repayment plan, where you’ll pay a fixed amount every month for a certain amount of years (often ten years).Pros: You’ll always know how much your payment will be, and you’ll pay less in interest over time than with other options.
Cons: Your payments may be slightly higher than with other plans.
- A graduated plan (your payments will increase every two years). This is a good option if you aren’t making a large salary right out of school but hope to bring home a bigger paycheck in years to come.Pros: You won’t be shelling out a ton of money when you start an entry-level job.
Cons: You’ll pay more interest over time than with a standard plan, and there’s no guarantee your salary will increase every two years.
- An extended repayment plan allows you more time to pay back your loans (up to 25 years as opposed to the standard ten).Pros: You’ll have longer to repay your loans, meaning smaller payments each month.
Cons: You’ll pay more interest over time than with a standard plan, and there are restrictions for which loans qualify.
- Income based plans factor in your personal income. Unlike the graduated repayment plan that automatically increases every two years, this plan uses your specific income as the basis for your payment amount.Pros: Your payments will be more affordable because your income is taken into consideration, and longer repayment terms are available.
Cons: You’ll pay more interest over time, and restrictions apply.
*Note: All options may not be available for every loan.
3. Consider consolidation.
You can save money and roll multiple payments into one by consolidating student loans. Learn more by checking out our posts on loan consolidation for college students and when is the best time to consolidate.
Once you understand how loan repayment works, remember to budget for it! Create a monthly budget spreadsheet or checklist for all of your bills to make sure you’ll have enough money and avoid late fees or loan default. There are plenty of tools available to help you track your spending, including mint.com and these iPhone and Android apps.
While there’s nothing fun or glamorous about loan payments, they are necessary for financing many college educations these days. Take the time to figure out your payments and plan for them, and they’ll eventually become a distant memory!
If you’d like to get a financial fitness check up or speak to a credit union about consolidating your loans – use our CU Select Tool to find the right credit union for you!