Strategies for Student Loan Repayment

For many students, managing student loan repayment is the first step into the adult financial world, and it can feel overwhelming. If you haven't had much experience budgeting, dealing with loan terms and making regular monthly payments, finding ways to deal with your student loan repayment can definitely present a challenge. When you're struggling to balance your student loan repayment with payments on your new car, consider these strategies for student loan repayment:

Figure Out What You Owe
Student loan repayment can be a complicated prospect, as most graduates have several student loans, both federal and private, to meet their college financial aid needs. The first step to setting up a manageable student loan repayment plan is to make a list of all your loans. The list should include the loan holders, the monthly payment amount, payment due date, length, interest rate and total balance of each loan. The monthly payment amount, due date and lender are the most important aspects of managing student loan repayment in the short term, but adding other loan information makes it easier to determine if consolidating the loan may be a good option in the future.

Look at Your Current Student Loan Repayment Plan
Lenders set up student loans on one of three types of repayment plans: a fixed repayment plan, a graduated repayment plan or an income-contingent repayment plan. A fixed repayment plan has the same monthly payment and interest rate throughout the life of the loan. A graduated repayment plan starts off with a lower monthly payment, but then you'll see your payment increase in increments throughout the life of your loan, resulting in an overall higher payment at the end of the loan. An income-contingent repayment plan provides the most flexibility, scaling your payments to a percentage of your total income.

One benefit of an income-contingent repayment plan is that you won't have to worry as much about struggling to make astronomical student loan payments you can't afford, but you might pay significantly more over the life of the loan or be paying back the student loan for a much longer period of time than with a fixed or graduated student loan repayment plan.

Consider Consolidation
Most students take out multiple loans to help pay for school, and juggling multiple due dates and payment amounts can make it difficult to manage student loan repayment. If you're simply having trouble keeping track of all your student loan payments, or want to lower your interest rate and monthly payment, consolidation might be a good choice. When you consolidate your student loans, you take out a single big loan with one lender to pay off all the smaller loans with multiple lenders.

You must do the math if you're considering consolidation for your student loan repayment; calculate the individual monthly payments versus the new single payment, the interest rates of your old loans versus the interest rate of your new loan and the life of the loan. If you've already paid off six of your ten years of a student loan, it might not make sense to consolidate the remaining four years into a new ten-year loan.

Sign Up for an Automatic Student Loan Repayment Plan
One of the best methods to manage your student loan repayment is to set up automatic debits from your bank account. Most financial institutions make it easy for you to set up recurring monthly payments to be deducted automatically from your account, so you don't have to worry about forgetting a payment or getting the money in on time. The biggest problem that most people have with using an automatic student loan repayment plan is to make sure the money is in the account when the debit goes through. If you stagger your monthly payments throughout the month, instead of paying in one big lump at the beginning or the end of the month, you won't have to worry about too much going out at once.

Deferment and Forbearance Options
If you're having problems with your student loan repayment plan, two short-term solutions might be a deferment or forbearance. Deferment is a temporary hold on your student loan payments, often given while you're attending school or in the case of short-term economic hardship. If you go back to school at least half-time, most lenders are willing to defer student loan payments, even if they predate your return to school. If you can demonstrate severe economic hardship, you might qualify for a forbearance option. Forbearance is typically granted in 6- or 12-month increments, and you must re-apply at the end of the time period if you're still unable to manage your student loan repayment.