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Life right after college is confusing, if not more confusing, than life during college. (What should I major in? Should I join Greek life?) Once you graduate and the excitement of having survived the past grueling four (or six!) years of your life fades, reality sets in: it’s time to pay off your student loans. Before you get an anxiety attack and conclude your life is going into a tailspin—we’ve all been there—take a deep breath. Here are 10 Tips for Paying Back Your Student Loans, and resources to help you out.
Ultilize the Grace Period
You get to enjoy six months of a “grace period” before you have to start making repayments after graduation. If you’re one of the lucky people who has a job in their career field lined up, start saving up for your loan payments and get a head start. It'll save you a headache down the line.
If you don’t have a job lined up, which most people don’t (can I get an Amen from Arts majors?), find—or stick with—another job in the meantime, and stack up those extra shifts. You'll miss out on getting turnt up with your friends, but you’ll be better off in the meantime.
Look at Your Finances
Figure out how much you owe and think about what repayment plan you want. This is more about looking at your finances and seeing how much you think you can afford to repay each month. You’ll have to choose a loan servicer, a company that will be in charge of your repayment.
Websites for servicers are helpful, and are clutch if you have a question outside of business hours. But you should call your servicer when you can and check up on your account often to make sure everything is in check. Besides, customer service representatives might make suggestions based on the questions you have or answer questions that aren’t on the loan servicer website.
Consolidate Your Loans
Before you even choose a payment plan and start paying off your debt, you’ll want to consolidate your loans. Seriously, do it. This puts all of the loans together into one lump sum with one interest rate. Meaning, you'd only need to worry about checking one payment a month and not several payments for different loans. Also, instead of having loans with different interest rates, this will give you a fixed interest rate for all of them. Consolidation helps lower your monthly payment therein extending your repayment time, which can be a double-edged sword.
You can apply for consolidation online, but you'll also need to submit a physical application. If you plan on choosing an Income Driven Repayment Plan (more on this later) you’ll need to send your loan service information about your finances. That can be your last two pay stubs, or a letter from your boss saying how much you earn. Fax these documents over instead of mailing them. This might seem outdated, but it’ll get your documents there faster and it will speed up your application process. Typically the consolidation process can last four to six weeks, so no need to delay that process with snail mail. Once you send over your documents and application, call your servicer to confirm that they received your documents. You'll be notified when the application process is complete.
Choose a Repayment Plan
Picking a repayment plan is crucial, but not a life or death situation. Why? Because you can change your repayment plan at any time, unlike changing your major. Say you get a higher paying job and you can make bigger payments, then you can choose a plan that accommodates your new income.
There are several different repayment plans to choose from and a lot of them are income-driven. After you provide proof of your income (see Tip #3) your monthly payments are determined by your income. In some instances you’ll qualify for a $0 monthly payment. That would technically be the payment you’d be responsible for. This can happen if your income is really low. But you should try to at least pay a small monthly amount if you can. (We’ll explain why further ahead.) Some plans even offer loan forgiveness—meaning the rest of your debt will be forgiven after either 20 or 25 years, depending on the plan—if you’ve paid a minimum amount.
Defer or Forbear
There’s two ways of putting off your loans: deferment or forbearance. Ignoring letters and multiple phone calls from your loan servicer doesn’t count as a legitimate way. When you defer, your repayment temporarily stops and the government pays the interest on your loans during that period of time. Keep in mind that this doesn’t apply to all loans. Some loans will require you to pay the interest.
Forbearance, on the other hand, requires you to pay interest on your loans no matter which loans you have. Reasons why you might want to defer or forbear can include, but aren’t limited to, school enrollment, unemployment, and military deployment. Again, you’ll need to apply with your servicer to see if you qualify for deferment or forbearance.
Loan Forgiveness Programs
You can get some of your loans shaved off with different loan forgiveness programs such as the Peace Corps or military service. We're sure you know what military service entails, but volunteer programs like the Peace Corps (or Americorps) require you to volunteer for a certain time. You’ll either be compensated with money towards your loans or you’ll be partially pardoned for your loans. There’s career-specific programs for teachers, social workers, or nurses, among others, that award you loan forgiveness for working in either low-income school districts or hospitals in dire need of assistance.
How to Pay
You can pay online, over the phone, through mail with a check or money order, so long as you include your loans account number. There’s also direct debit payments where your servicer takes out a designated amount from your bank account each month and you won't have to worry about forgetting to make a payment. Plus, direct debit reduces your loans interest by 0.25 percent. But you should know that the loan servicer will deduct that amount no matter what, even if you already made a payment for the month.
You can also make payments to a specific loan. Say you want to take care of your biggest loan first, or the loan with the highest interest, you can go online to your servicer’s website and specify what loan you’re paying off.
Make Timely Payments
Procrastinating can be tempting—as any student who’s pulled off an all-nighter writing a paper would know—but do yourself a favor and make your payments on time. If not, your account will become delinquent and your federal loan servicer will hunt you down. Kidding. But a delinquent account can affect your credit and it’s a hassle. Even worse than that is when your loans default (you haven’t made a payment in 270 days), and you have your tax refunds withheld, your income messed with, and a bunch of legal trouble. If that wasn’t bad enough, you’ll have to pay the rest of your debt immediately.
You can totally avoid this by picking the right repayment plan with an affordable monthly amount. Another way to prevent this is by choosing a payment due date that’s convenient for you. For example, if you get paid the 15th of each month, then you can schedule your monthly payment to after you get paid. The only requirement is that the payment must be made by the 28th of the month.
Stay Organized
This is the equivalent of asking a college student to buy all of the required books for a class—ahem, impossible. If college taught you anything it’s that people are unreliable. We’re looking at you, financial aid department—the people there will lose any and every document that you ever give them, making you resubmit the said document at least three times. Put an end to future mess-ups and keep track of all your payment records.
Organize all of your confirmation emails or other proof of payment and have it handy. If your servicer tries to pull off some #fuccboi stunt like saying you missed a payment, you can show them a copy of it and be good to go.
Pay More (When You Can)
You’re barely making enough money to get off your ramen noodles struggle diet, so how are you going to pay more than the minimum, you ask? Take any extra money you get and put it towards repayment. Use your tax rebate money, job bonus money, birthday money your grandma still sends you (even if it is $5), or any other income that you create for yourself, like selling online all of your college books that your school’s bookstore was going to horribly underpay you for. (Getting back $10 for a brand new $200 book is straight-up ridiculous.) Paying more than the minimum is easier if you qualify for the $0 monthly payment, but it’s still something you should consider doing even if your minimum is a little high. The faster you get out of debt, the faster you can get on with the rest of your life.