Your Ultimate Graduation Checklist for Student Loans

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.

PLUS loans

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:

Standard Repayment

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.

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Graduated Repayment

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.

Extended Repayment

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.

Good luck!

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