Student Loans: Repayment Options

Consider your options when repaying student loans.

If you've recently graduated from college and started your career, paying your student loans may be one of your first financial obligations. Once you start getting a paycheck, it can be tempting to indulge in the things you could not afford in college, but it is important to remember that your lenders will expect you to repay your debts.

Understanding your grace period
You may be given a grace period between when you graduate from college and when you are expected to begin repaying your student loans. Your grace period depends on the kind of loan you were given. For instance, if you were given a Federal or Direct Stafford Loan, you may be given six months before you must start repaying your debt. Or, if you were given a Federal Perkins Loan, you may be given nine months before you are expected to start repayment. If you have other private student loans, your repayment plan may be different. Some student loan programs require exit counseling, so when you graduate, you will know exactly when you are going to have to start repaying your debt. Regardless, it is a good idea to revisit your student loan paperwork so you know when your payments will begin, and you can prepare your monthly budget accordingly.

Choose the repayment plan that works for you
Once you know when you are expected to start repaying your student loans, you should also make a plan for repaying it. Depending on what kind of loan you have, you may have different repayment options. If you have a Stafford Loan, you can choose a standard, graduated or income-sensitive repayment plan. The standard plan sets fixed payments for the term of your loan. The graduated plan starts off with low initial payments and then increases them over time. The income-sensitive plan calculates your payments depending on your income. Your repayment options may vary if you have private student loans or other kinds of federal loans, but one of the best ways to successfully repay your student loans is to make a monthly budget and to monitor your spending.

You can also look into other student loan repayment options that can positively impact your finances. For instance, depending on what kind of student loan you have, you may be able to lower your interest rates by having your payments electronically debited from your account. This can save you money and you won't have to keep track of paper statements and due dates. Contact your lender to see what options are available to you.

Pay in full and on time every month
Remember, no matter which repayment plan you decide on, it is essential that you make the full payments and make them on time. Making late payments, or not paying the full amount, can negatively impact your credit score which can then make it harder to get other lines of credit or loans, and to get good interest rates when you do get them. A lower credit score can make it difficult to achieve your other financial goals.