If you have graduated from college or graduate school recently, you might be feeling overwhelmed thinking about paying off student loans. Luckily, there's some great resources that can help. Whether you're still in your grace period or you've been paying them for a few years already, take a look at some of the options available to you that could make the process a little easier.
Step 1: Figure out what loans you have and who services them.
Log in to
http://www.nslds.ed.gov/nslds_SA/ for your complete list of all federal loans (excluding any private loans). When you click on the individual loans, you can find out who services each one.
"Servicers" are the providers the federal government has chosen to send you the bills, and you may have more than one. For instance, one of your federal loan bills may come from NelNet, while another comes from Sallie Mae. If you are thinking about changing your repayment plans, make sure to check requirements for each provider. You can set up online accounts with each to find out exactly how much to owe and when.
To make changes to all your federal loans, such as changing your repayment plans, visit
https://studentloans.gov/myDirectLoan/index.action.
*Perkins Loans are Federal Loans that are most likely serviced by your school. Check with them for information about repayment options or cancellations.
Consider Consolidation: If you find yourself tired of juggling so many accounts, you can consolidate your federal loans so you only have to make one payment a month (excludes private loans). Information on consolidation can be found at
http://www.loanconsolidation.ed.gov/. Make sure to read the benefits and drawbacks first, because once you consolidate, it cannot be undone. (For instance, in some cases a Perkins loan can be forgiven if you work for a number of years in a certain field, but if you have consolidated it into a direct loan, it can no longer be forgiven because it is now a direct loan and therefore cannot be taken out.)
Alternative Payment Plans:
The default payment plan for most student loans is the ten year
Standard Repayment Plan, but if you are having trouble making payments, you could consider two other options, the
Graduated Repayment Plan and the
Extended Repayment Plan. The Graduated Plan keeps payments low the first few years, and then slowly increases them every two years. The Extended Plan stretches out payments up to 25 years. You will pay more for your loans over time than with the Standard Plan, but it may help during the first few years of your career when money is tight.
For more information, visit
http://studentaid.ed.gov/repay-loans/understand/plans#direct-and-ffel.
More Payment Plans- Income Based:
Other repayment options are based on your income. If you qualify, you may be able to cut your monthly payments so that they are never more than a certain percentage of your income (usually 10%-15%). Choices include
Pay As You Earn (New!!)
, Income-Based Repayment, and
Income-Contingent Repayment. For details on each of these plans and to see if you qualify, click here:
http://studentaid.ed.gov/About/announcements/income-driven. Along with the other payment plans, there are benefits and drawbacks for each, so make sure to investigate what the best option is for you. Compare options with this chart:
http://studentaid.ed.gov/repay-loans/understand/plans#direct-and-ffel.
Loan Forgiveness Plans:
Some professions may qualify for loan forgiveness. For instance, if you work for a local, state, or federal government organization (like in a school or library), and make 120 payments over ten years, the rest of your federal loans can be forgiven. You can combine Loan Forgiveness Plans with Income Based Plans (because otherwise your loan may have been paid off after ten years anyway.) Click here for more information:
http://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts/public-service
http://studentaid.ed.gov/repay-loans/forgiveness-cancellation
http://www.finaid.org/loans/forgiveness.phtml
Perkins Loans may also be forgiven for certain situations. Check with your school for details, or click here:
http://studentaid.ed.gov/repay-loans/forgiveness-cancellation/charts#perkins-loan-cancellation.
More Resources:
*Federal Student Aid Glossary: http://studentaid.ed.gov/glossary
Confused about the difference between Subsidized and Unsubsidized? Want to know what a PLUS loan is? Don't know if you have a Direct or FFEL loan? Look up common student loan terms here.
*Federal Student Aid Understanding Repayment site: http://studentaid.ed.gov/repay-loans/understand/
Great overview of first steps in the process, starting with your grade period.
*Income Based Repayment Calculator: http://studentaid.ed.gov/repay-loans/understand/plans/income-based/calculator
Estimate how much you can expect to pay on an Income-Based Repayment Plan.
*Davidoff, Howard. The Everything Personal Finance in Your 20s & 30s Book: Eliminate Your Debt, Manage Your Money, and Build for an Exciting Financial Future. 3rd ed. Avon, MA: Adams Media, 2012.
Great up-to-date and easy to understand chapter on student loans.
*PSLF (Public Service Loan Forgiveness) Fact Sheet: http://studentaid.ed.gov/sites/default/files/public-service-loan-forgiveness.pdf
Information on the Public Service Loan Forgiveness Program from Federal Student Aid.
*Student Loan Borrower Assistance Project site: http://www.studentloanborrowerassistance.org/
A project of the program of the National Consumer Law Center (NCLC), this site provides more help for student loan borrowers, with lots of answers to FAQs and links to further resources.
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