So you’ve just graduated from college and are getting ready for the next chapter of your life. Perhaps you’ve even made a graduation checklist and have started crossing things off.
What’s more, you’re also preparing to enter the repayment period for your student loans. Although planning ahead for student loan payments may not be that fun, it is a vital part of improving your finances and cutting down on student loan debt.
If paying your student loans isn’t on your graduation checklist, it’s time to put it there. Here are four important student loan questions you need to be able to answer before you get started on the rest of your life.
1. How much do I owe?
It can be easy to put your head in the sand rather than face that big amount of money you’ll be paying off for the next 10 or more years. But the only way to truly be ready for repayment (and cross it off that graduation checklist) is to know exactly how much you owe and to whom.
Your exit counseling should cover all of that information for your federal student loans. But it’s also a good idea to double check with the National Student Loan Data System (NSLDS). This is a database managed by the Department of Education (DOE) where you can have a complete view of your student loans.
The NSLDS website will tell you exactly how much you owe to Uncle Sam and who is servicing your federal loans.
Unfortunately, there is no national database of private student loans. So if your private lenders have not already been in touch with you, contact your lender directly to find out the specific amount you owe.
2. When do I have to pay back student loans?
The first thing graduating students need to know is just when they will have to start repaying their student loans. The answer to that question depends on what kind of loan you have.
Also, just because you do not have to pay back your loans until the end of your grace period, doesn’t mean you can’t start making payments prior to the first repayment due date. This will help you cross off paying back student loans on your graduation checklist much more quickly.
This is especially helpful for those borrowers whose interest will accrue during the grace period. Even making interest-only payments can help save you money in the long run.
Federal Stafford loans
These loans offer a six month grace period for borrowers once they complete their degree or drop down below half-time status.
If you have a subsidized Stafford loan, no interest will accrue during your grace period. Unsubsidized Stafford loans do accrue interest during the six-month grace period.
Federal Direct loans
These also feature a six-month grace period before repayment begins. Subsidized Direct loans do not accrue interest during the grace period, while unsubsidized ones do.
Federal Perkins loans
The program expired on Sept. 30, 2017. They offered a nine-month grace period for borrowers after graduation or dropping to half-time status, with no interest accrual.
These loans have no grace period. In general, PLUS borrowers must begin repayment within sixty days after the final loan disbursement for the period of enrollment for which the loan was borrowed.
However, deferment is available for most PLUS borrowers for the first six months after the student leaves school or graduates. Keep in mind that interest does accrue during that time.
Private student loans
Private lenders may or may not offer a grace period, and your interest may or may not accrue during that time.
If you have any private student loans, make sure you contact your lender to determine the specifics of your repayment schedule.
3. What will my monthly payment be?
There are various repayment plans available for federal student loan borrowers. That’s why it’s a good idea to determine exactly what your monthly payment will be now so you can be prepared to cross it off your graduation checklist later.
In addition to knowing how much you can expect to pay each month, make sure you know what your specific due dates are so you are not caught off-guard. For Federal Direct, Stafford, and PLUS loans, these are the following monthly payment plans available to borrowers:
This plan has a fixed payment amount over a 10-year timeframe. Under this plan, you will pay less over time for your loan than you will with other repayment plans.
You can use the calculator below to see how much your monthly payment will be.
Student Loan Payment Calculator
You’ll have lower payments initially. Then you’ll face an increase in your monthly payment amount every two years throughout a ten year period.
This plan can be very helpful to graduates with a low starting salary who anticipate earning more as their career progresses. However, you will pay more over time with graduated repayment compared to a standard repayment plan.
You will be able to stretch out your repayment timeframe up to 25 years. Your payments can be either fixed or graduated.
The monthly payments will be smaller with this plan, but you will pay more over time.
Revised Pay As You Earn Repayment Plan (REPAYE)
This plan is only available for Direct loans. REPAYE reduces your monthly payments to a maximum of 10 percent of your discretionary income, and this payment will be recalculated once per year. If you have not repaid your loan in full after 20 or 25 years, your outstanding balance is forgiven.
Depending on your income and other factors, your payment may be higher than it would be under the standard repayment plan. You may also have to pay income tax on any amount forgiven.
Pay As You Earn Repayment Plan (PAYE)
This is also only for Direct loan borrowers. As with REPAYE, the PAYE program reduces your monthly payments to a maximum of 10 percent of your discretionary income. It then recalculates your payment annually.
Unlike REPAYE however, your monthly payments can never be larger than they would be under the standard repayment plan. You can also have your loan balance forgiven after 20 years of payment under this plan. Additionally, you should be prepared to pay income tax on the forgiven amount.
In order to qualify for PAYE, you must have a high debt relative to your income.
Income Based Repayment (IBR)
This plan lowers your monthly payments to 10 or 15 percent of your discretionary income. Eventually, your remaining balance is forgiven, though you may have to pay income tax on the forgiven amount.
However, you will never have a higher monthly payment with IBR than you would with the standard repayment plan. In order to qualify, you must have high debt compared to your income.
Use this calculator here to find out how much you can potentially save with this plan.
Income Contingent Repayment (ICR)
This is only available for borrowers with Direct loans.
Under this repayment plan, your monthly payment will be either 20 percent of your discretionary income or the amount you would pay on a 12-year fixed payment plan, whichever is lower. Your monthly repayment amount is recalculated annually.
If you have not paid off your loan in 25 years under this plan you can have the balance forgiven, though you may owe taxes on the forgiven amount.
Income Sensitive Repayment
This is only available for Stafford loans and FFEL PLUS loans. With this repayment plan, your monthly income is based on your annual income, and the repayment term will last up to 15 years.
4. What’s my contingency plan?
If you have not yet found a job post-graduation, or you anticipate having variable income, it’s important to know what your options might be if you are unable to pay your student loans.
There are multiple types of payment relief options available to borrowers like forbearance or deferment, as well as some of the different types of repayment plans outlined above.
However, making time to understanding your student loan obligations should be at the top of your college graduation checklist. That way, you can be totally prepared for the next stage of your life now that you’ve graduated.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
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 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% 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 email@example.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
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. 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. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
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.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.57% – 6.97%1||Undergrad & Graduate|
|2.47% – 6.99%3||Undergrad & Graduate|
|2.68% – 8.77%4||Undergrad & Graduate|
|3.24% – 6.66%2||Undergrad & Graduate|
|2.61% – 7.35%5||Undergrad & Graduate|
|3.01% – 9.75%6||Undergrad & Graduate|