The Beginner’s Guide to Paying Off Student Loans

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As another school year comes to a close, students are graduating in droves and getting thrust into the “real world.” With that, there is a feeling of excitement and adventure, ready to start the next chapter. But one area that is not so exciting? Paying off student loans.

Most student loan providers offer a six-month grace period before sending graduates their first bill. Yet, that time passes quicker than ever and once the bill arrives, it can be confusing.

I remember after I had graduated with my Bachelor’s, I milked the grace period, pretending that I wasn’t actually in debt while trying to get my life together.

When the first bill arrived, I wasn’t exactly sure who my lender was, how much I actually owed, and what my repayment terms were.

I was in for a nice surprise when I realized my original loan balance of $18,000 had ballooned to $23,000 by the time I graduated. Oh, right. Interest! Somehow I had blocked that from my mind, too.

If you’re a new graduate or you’re just looking to for the basics on repaying student loans, here’s your go-to guide for paying off student loans. (so you don’t have to be as ignorant as I was)

Find Out the Who, What, When and Where

When you are just getting started, you’ll want to know the who, what, when and where of your student loans.

Who Do You Owe?

This step may sound obvious, but it can be a bit confusing as your student loan lender isn’t necessarily your student loan servicer.

For example, my undergraduate loans were provided by the Department of Education but were serviced through ACS, Brazos, and Nelnet. Yes, my loans changed hands three times — another thing to keep on top of! (Pro tip: actually read your mail for important updates.)

Not sure where to start? Your first step is to go to the National Student Loan Data System (NSLDS) to see who is your loan servicer — i.e. who you will be paying. Think of loan servicers as third parties that are managing your payments.

It’s crucial to know who your student loan servicer is so you can actually pay back your student loans and keep in communication with them if you are struggling to pay back your student loans.

What Do You Owe?

As I mentioned, I thought I owed around $18,000 and didn’t even think about interest. It wasn’t until I saw the final number in black ink that it hit me. It can be shocking to find out how much you actually owe. If you’re like me, your parents helped you along and you just signed on the dotted line and set it and forget it.

If you’re like me, your parents helped you along and you just signed on the dotted line and set it and forget it.

To truly understand what you owe, you need to know:

  • How much you owe
  • How many loans you have
  • What the interest rates are

Now that you know who your loan servicer is, log into their website to get a clearer picture of what you owe. Each loan servicer is different, but you should be able to easily access your loan information, including total balances and interest rates within your account.

Another option is to sign up for Student Loan Hero to get easy access to all of this info. Our co-founder, Andy Josuweit, started Student Loan Hero after he was thrown for a loop trying to manage 16 different student loans.

Not only can you see exactly how much you owe, you can also see your repayment options and get actionable tips on paying off student loans faster.

The one thing you will need to sign up for Student Loan Hero or to find out what you owe on one of the Federal Student Aid websites is an FSA ID. In the past, you would have a Federal Student Aid PIN to access the information, but as a security update, the Department of Education is now using the FSA ID. To get started,

In the past, you would have a Federal Student Aid PIN to access the information, but as a security update, the Department of Education is now using the FSA ID. To get started, sign up here for an FSA ID or read more about the FSA ID if you need help.

When Do You Make Payments?

Now that you have verified your loan servicer and have gathered all relevant information on your loans, it’s time to figure out when you make payments. As a recent graduate, you are likely entitled to a six-month grace period, so your first payment may be months away.

When you log in to your loan servicer’s website, there should be information on when exactly you need to make a payment. I make sure I’m on top of my payments by setting up calendar reminders a few days before my payments are actually due.

Where Do I Make Payment?

Typically you can make a payment within the user portal of your loan servicer’s website. You will need to sync up your bank account to make payments. You could also go old-school and mail a check, but for easy access, you can make online payments.

Understand Your Repayment Options

When you graduate, you are automatically enrolled in the Standard Repayment Plan for your federal student loans. This is a payment plan of fixed monthly payments over the course of ten years. This means you will make equal payments for ten years until your debt is gone.

If you are carrying six-figure debt, the monthly payments under the Standard Repayment Plan would likely be four figures and difficult to pay back. Using something like the Extended Repayment Plan or Income Based Repayment Plan might be a better option. Here is a rundown of current repayment options for federal loans.

Standard Repayment Plan: This is the standard default plan for most student loans and gives borrowers 10 years to pay back their debt. This option is a shorter time frame than most of the other options, meaning you will pay less interest over time. If you can afford to, make more than the minimum payments to really save on interest and get out of debt faster.

Extended Repayment Plan: Borrowers with more than $30,000 in debt can extend their repayment up to 25 years. The payments under this plan can either be Standard (equal monthly payments) or Graduated (increasing over time). This plan is ideal for people who have lots of debt and cannot financially manage the Standard Repayment Plan.

Graduated Repayment Plan: These plans are useful for borrowers that expect their income to continue growing over time. One thing worth noting is that because less of the balance will have been paid off early on, more interest will accumulate over time than with a standard plan. Monthly payments start out low and increase every two years, during a ten-year repayment period.

Income-Based Repayment Plan: For borrowers who are experiencing financial hardship, or those with lower incomes, Income-Based Repayment might be a good fit. These plans are designed so that your minimum monthly payments are capped at 15 percent of your discretionary income.

Income-Contingent Repayment Plan: This plan calculates your monthly payment based on your salary as well as family size. Loans under this plan are also eligible for forgiveness, if unpaid after 25 years. You do not need to demonstrate financial hardship to qualify for this plan — but you will pay more in interest over time.

Pay As You Earn Plan: Borrowers that demonstrate financial hardship can have their monthly payments limited to ten percent of their discretionary income under this plan. If your loans aren’t paid off after twenty years, your loans are eligible for forgiveness.If you are banking on your loans being forgiven, one piece of news that is often missing from student loan conversations is that the current tax law states that

If you are banking on your loans being forgiven, one piece of news that is often missing from student loan conversations is that the current tax law states that forgiven loans can be considered as income, so you may be hit with a hefty tax bill.

It is important to keep in mind that these various packages apply only to federal loans. Private student loans often have fewer repayment options and less flexibility in switching between them. To discuss private student loan repayment options, talk to your lender.

Choose the Best Repayment Option For You

After you get a firm grasp of what repayment options are available to you, it’s time to choose the best one and prepare to make payments. Consider your current income, employment situation, as well as how much you can afford to put towards your debt.

It’s crucial that you do the math and understand how much you will be paying in interest over time with whichever plan you choose, but it’s also important not to jump into a plan that will stretch your finances too thin.

If you feel like you are having a difficult time managing all of your federal student loans, you may want to consider consolidating through a Direct Consolidation Loan.

Direct Loan Consolidation helps make managing payments a bit easier by creating one new loan to replace several existing federal loans. You are then left with one loan and one lender.

To apply, go to StudentLoans.gov and apply under the Repayment and Consolidation tab. It’s important to note that if you extend your repayment period through consolidation that you will pay more interest over time.

In addition, while consolidating is helpful, you can also lose some of your borrower benefits such as interest reduction and loan cancellation. If you have federal and private student loans and want to consolidate your loans, look into student loan refinancing.

Through refinancing, you may be eligible for a better interest rate, and you could save money in the long term while paying off your student loans. There are some good reasons to consider refinancing your student loans, especially if they’re high-interest and/or private student loans. However, you will be giving up your federal loan protections such as Income-Based Repayment and loan forgiveness, so make this decision carefully.

Important (and Not Obvious) Things You Should Know

Now you’ve got the basics down so you can start your student loan repayment. But first, there are several important things you should know as a borrower:

  • If at any point in time paying off student loans is difficult for you, contact your lender immediately or risk hurting your credit score. Your credit score is what lenders use to verify your creditworthiness. If you have bad credit, it will be difficult to find an apartment, get approved for a credit card, or an auto loan. Make your payments on time — and if you can’t, consider requesting deferment.
  • If you choose to defer your loans, interest will continue adding up. Before you decide to defer, understand how much the added interest it will cost you.
  • Private student loans often have higher interest rates and less flexible repayment options. If you have both federal and private student loans, consider paying off private student loans first.
  • You can save a lot of money in interest by focusing on your highest interest debt first — often referred to as the debt avalanche method. However, many people believe the debt snowball method, which focuses on paying off the smallest balances first is a great strategy because of the emotional wins.
  • Bonus! Student loan interest payments are tax deductible, so include them on your tax return.
  • If you are hoping to get your student loans forgiven through a qualifying plan, it’s crucial to note that the current tax law states that the forgiven loans can be seen as income, for which you will be taxed, which could result in a several thousand dollar tax bill. If you are pursuing Public Service Loan Forgiveness, you are exempt from paying taxes on your forgiven loans.
  • Do you have a cosigner? If so, look into cosigner release. Keeping a cosigner could mean trouble if something happens to you or your cosigner down the line.
  • It’s extremely difficult to discharge your student loans through bankruptcy.

Keep these factors in mind when making decisions about your student loans and future repayment options.

Is there anything else you want to know? Do you have any additional questions about paying off student loans? Let us help!

Interested in refinancing student loans?

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1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on ourstudent loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


2 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 3.899% APR to 8.179% APR (with AutoPay). Variable rates from 2.570% APR to 6.980% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. SoFi rate ranges are current as of September 14, 2018 and are subject to change without notice. See APR examples and terms. Lowest variable rate of 2.570% APR assumes the current index rate derived from the 1-month LIBOR of 2.08% plus 0.740% margin minus 0.25% AutoPay discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score.
  2. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

4 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.


5 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

6 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.57%-8.17% (2.57%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.75%-8.69% (3.75%-8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Estimated average savings amount is based on 14,659 Education Refinance Loan customers who saved on loans between August 1, 2017 and July 31, 2018. The calculation is derived by averaging monthly savings across Education Refinance Loan customers whose payment amounts decreased after refinancing, calculated by taking the monthly payment prior to refinancing minus the monthly payment after refinancing. We excluded monthly savings from customers that exceeded $4,375 and were lower than $20 to minimize risk of data error skewing the savings amounts. Savings will vary based on interest rates, balances and remaining repayment term of loans to be refinanced. Borrower’s overall repayment amount may be higher than the loans they are refinancing even if monthly payments are lower.

2.57% – 6.98%3Undergrad
& Graduate
Visit SoFi
2.47% – 5.87%1Undergrad
& Graduate
Visit Earnest
2.47% – 8.03%4Undergrad
& Graduate
Visit Lendkey
2.80% – 6.22%2Undergrad
& Graduate
Visit Laurel Road
2.48% – 6.25%5Undergrad
& Graduate
Visit CommonBond
2.57% – 8.17%6Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.