College graduation is a time of new beginnings. It’s also when you’ll have to begin making student loan payments soon, potentially for the first time.
Federal student loans and many private student loans allow you to defer payments while you’re in school and for up to six months after graduation, but this grace period will be over before you know it.
“Grace periods give you time to transition between school and work, but those six months go by quickly,” said Misty Lynch, a certified financial planner and lead financial consultant with John Hancock.
We consulted experts and identified eight key steps you’ll need to take to be ready when your grace period ends.
1. Start planning early
You might not be looking forward to making student loan payments, but it’s important to not procrastinate.
“Plan ahead to make sure you start loan payments as soon as they’re due,” Lynch advised. Starting on the process early gives you time to take care of any paperwork you need to complete.
“If you’re applying for an Income-Based Repayment Plan, it takes time to complete the application and verify your information. Don’t wait until the day before your first payment is due to set this up,” said Vicki Jacobson, a financial aid coordinator at Missouri State University. See below for more information about this process.
Jacobson recommended you contact your servicer around two to three months before the end of your grace period. “Call your servicer over the summer when they’re more easily available and can help you select a repayment plan,” Jacobson said.
2. Find out what and whom you owe
If you’re like most students, you probably took out multiple loans, which means you’ll need to get ready to deal with multiple lenders.
“Know how much you owe and who you owe,” Jacobson said. She advised visiting the National Student Loan Data System to find out which companies are servicing your federal loans and visiting AnnualCreditReport.com to get your credit report, which will list all your private loan lenders.
You also can pull up information on all your loans through the Student Loan Hero dashboard, one of the many free resources available on our site.
“Compile a list of all your loans, the loan ID numbers, the monthly loan payments, the due dates, interest rates, and lender contact information,” advised Mark Kantrowitz, a student loan expert and the publisher of Private Student Loans Guru. Your school’s financial aid office can help you find this information, he said.
3. Contact your lender
The next step is to contact your lenders to confirm that they have your updated address, to ask how to set up an online account, and to explore repayment options.
“The lender will send you coupon books or statements,” Kantrowitz said. “However, the payment is still due even if you don’t receive them.”
4. Set up a budget
It’s important to know how much money you’ll be able to devote each month to repaying student loans because that amount will influence your choice of repayment plans. Setting up a budget allows you to see how much money you’ll put toward your loans and which expenses can be trimmed so that you can pay back your debt as quickly as possible.
“Your student loans should be at the top of your budget since default interest rates are high and loan debt is nearly impossible to cancel,” Lynch said. “You may be able to negotiate in other areas, but you will not have much wiggle room when it comes to your student loans.”
You should live below your means as long as you can to get rid of student debt quickly, she advised. This effort might include keeping your old car a little longer or living with a roommate.
5. Explore repayment plan options
Once you know the names and details of all your lenders and the amount you can afford to pay, visit the company websites to explore repayment options. There are different ones for private and federal loans.
Federal student loans offer a standard repayment plan, a graduated plan, and income-driven options. Check out our complete guide to student loan repayment to learn about all the possibilities for repaying federal and private student loans. You also might be able to score a lower interest rate by refinancing your debt, but first, make sure you know the pros and cons of student loan refinancing.
Select a plan that has the highest monthly payment you can afford so that you can pay off your loan as quickly as possible and save on total interest charges, Kantrowitz advised. However, there are caveats. If you qualify for Public Service Loan Forgiveness, you’ll need to enroll in an income-driven repayment plan.
6. Sign up for your plan
After you evaluate repayment plans carefully, sign up for your choice on your lender’s website or call the company to complete the process. You’ll want to find out what information you need to submit, if any, to be eligible for your chosen plan.
Kantrowitz also advised signing up for direct debit so that payments are made automatically from your checking account. “Not only will you be less likely to be late with a payment, but many lenders give a slight discount as an incentive,” he said.
7. Start paying right away if you can
Although many student loans have a grace period, you don’t have to use it. In fact, it’s a great idea to start making payments as soon as you can after graduation.
“Students can pay down the interest that has accumulated on their federal Direct Unsubsidized Loans during their grace period,” Jacobson said. “Any interest which has accumulated will be capitalized, or added to, the principal loan when the grace period ends.”
In that case, you’ll have to pay interest on the accrued interest as well as on the principal balance, which makes repayment costlier.
8. Get help
Paying your loans ASAP after graduation often makes sense, but not everyone can do it. You might not find a job right away, or your income might be too low to start payments. If this happens, you still have options.
“You can apply for forbearance if you can’t find any way to pay the student loan bill,” Lynch said. Federal loans and most private loans allow you to enter into forbearance, which pauses your monthly payments. This option should be a last resort, though. “Putting off your loan payments for any amount of time means more money will be required to make monthly payments in the future,” she warned.
If it takes you time to get on your feet, don’t feel bad. Be proactive and talk to your lender immediately to find out options before your payment becomes due.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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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
|2.47% – 6.99%3||Undergrad & Graduate|
|2.46% – 6.97%1||Undergrad & Graduate|
|2.57% – 8.44%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|