Student Loan Repayment - Where to Start?

Student Loan Repayment…where to start? Well, if you just graduated from college you have 6 months before repayment starts on your student loans. This is your grace period, the time for you to figure out your job and living situation before you are expected to start making payments.

The important thing right now is to get your budget in line and figure out how much your monthly payments are going to be. The National Student Loan Data System (NSLDS) is the US Department of Education’s central database for student aid and has the list of all your federal loans, how much you owe, your interest rate, who your loan servicer is, and their contact information. Visit https://www.nslds.ed.gov/nslds/nslds_SA/ to get started. You’ll need your FSA ID to gain access.

If you have private loans they will not appear on the NSLDS website so you’ll have to contact each lender individually for the loan information.

Once you have all your loan information gathered, the next decision will be to consolidate or not. Consolidating your loans will take all your individual loans and payments and combine them into one balance and one payment.

It’s good to note here that federal loans and private loans cannot be consolidated so if you have both you’ll always have at least two loan payments.

Consolidation can be a good idea if you can get a lower interest rate than your current loans have individually. If you have a loan for each year of college you have four individual interest rates. Let’s say for example:
  • ·         Year One: 4.5%
  • ·         Year Two: 5.6%
  • ·         Year Three: 6.8%
  • ·         Year Four: 6.8%


When you look into consolidation, inquire about the current loan rate. If your consolidation loan would give you a rate of 5.6% then it makes sense to consolidate years two, three, and four together but to leave year one as a stand-alone loan because it already has a lower interest rate than your consolidated rate.

You can contact your loan servicer or visit their online account portal to determine your consolidation options and your repayment options.

So now we can talk repayment options, there are several.
  • ·         Standard Repayment
  • ·         Graduated Repayment
  • ·         Extended Repayment
  • ·         Revised Pay As You Earn Repayment
  • ·         Pay As Your Earn Repayment
  • ·         Income-Based Repayment
  • ·         Income Contingent Repayment
  • ·         Income Sensitive Repayment


For all the details on these Federal Repayment Options visit https://studentaid.ed.gov/sa/repay-loans/understand/plans.

My advice on loan repayment is pretty simple; pick the plan that enables you to live comfortably but also enables you to pay the debt down in the fastest amount of time with the least amount of interest. Some of the repayment options offer extended repayment terms up to 25 years and very low monthly payments, however this just means you are adding more interest to your balance and carrying the debt with your through most of your adult life.

There are other things you will want to focus on in a few years. For some marriage and children are on the horizon. Some will want to purchase a home. Some want to travel or buy a new car. All of these things are major financial decisions that can be impacted by your choice of student loan repayment plan.

You also want to focus on planning for retirement. I know you just graduated from college and retirement seems a lifetime away, however now is the best time to capitalize on that lifetime of savings. The more you can contribute to a 401k or Roth IRA now, the more time it has to grow.


The sooner you are out from under your student loan debt, the sooner you can start capitalizing on your financial freedom and bring your focus on your future goals. 



Brittania - ICAN Hiawatha Center