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It's Time for Student Loan Repayment. Now What?

So, you graduated college, and now you have a degree, a job and mounds of student loan debt. You're not alone.

Student loans can seem daunting, but they don't have to take over your life! Understanding your student loans is the best way to conquer them. Here are some common student loan repayment questions and answers.

How do I keep track of my student loans?

Starting something brand new, like paying off loans, can be very overwhelming.

The first step to managing your loans is organizing and understanding each one you have. To begin, create a detailed list of all your loans, including the type of loan, interest rate, length of repayment, minimum monthly payment, and lender's or servicer's contact information. Our student loan worksheet can help you start building that list.

Types of Loans

There are two main types of student loans: federal and private. Like many students, you may have taken out both federal and private student loans with different terms.

Federal Student Loans

Federal student loans can be divided into more categories:

  • Subsidized and Unsubsidized
  • Perkins
  • PLUS (for parents or grad students)

Visit the Federal Student Aid website to get details on your federal loans. You can use your FSA ID to access your information quickly.

Private Student Loans

Private loans are issued by lenders, banks and credit unions. For example, ISL Education Lending offers private student loan options to students and parents to help pay for college. The promissory notes or credit agreements you signed to take out the loans will include contact information for your lender or loan servicer. Can't find your paperwork? The financial aid office at your college or university can help you.

Interest Rates

Federal loans have fixed interest rates, while private loans can have either variable or fixed rates. A fixed rate will never change over the life of the loan. A variable interest rate will rise and fall with market conditions.

Why is knowing your interest rates important? First of all, if you have a private loan with a variable interest rate, your monthly payment could change according to market conditions so be aware of that. Secondly, if you're able to put extra money toward your student loans, you typically want to put that extra money to the loans with highest interest rates first.

It's also important to understand that interest rates on student loans are calculated differently than for most other types of credit. Interest on student loans accrues daily and is calculated using a simple interest method.

Length of Repayment and Payment Amount

All loans have a repayment term that is set when you apply for and sign for a loan. Federal loans typically have 10-year repayment terms that are flexible based on the total amount you borrow. Private loans have repayment terms set by the lender and that usually cannot be extended unless refinanced.

Your loan documents may detail the repayment term in years or months. For example, a repayment term may be detailed as a 10-year term or as 120 monthly payments. If you did not have to make payments or made interest-only payments during college, your repayment term does not include the time you were in college.

Your minimum monthly payment is the amount you have to pay each month to pay off the loan in the allotted repayment term. Making payments late or inconsistently may mean your payments will increase, due to daily accrued interest, over time so that the loan is paid off in time. Federal loans and most private loans can be paid off early with no penalty.

Contact Information

While repaying your student loans, you may need to contact your loan servicer or lender with questions or for assistance. Knowing their website address and phone number is important in these cases.

When are my first student loan payments due?

Most federal student loans have a grace period. This means your first student loan payment will be due approximately six months after graduation, dropping below half-time enrollment or leaving college. If you leave college, use your grace period, then go back to college later, you will not be eligible for a second grace period after college the second time.

Private student loan repayment is dependent on the type of loans you have. Check with your lender or loan servicer to see when your first payments are due.

Private Student Loan Payment Options

Many private student loan lenders offer traditional loans where repayment is deferred while you're enrolled in college, but more and more lenders are offering different in-school repayment options to help reduce costs. What kind of private student loan do you have?

Find out what type of private loan you have
What kind of payments are due while you're in college? What it may be called: When full repayment of principal and interest typically begins:*
Full, principal and interest payments Immediate Payment Once all the loan funds are sent to your college
Interest only Interest-Only Payment Six months after you graduate, leave college or drop below an enrollment threshold
Set amount (for example, $25 per month) In-School Fixed Six months after you graduate, leave college or drop below an enrollment threshold
None Deferred Repayment Six months after you graduate, leave college or drop below an enrollment threshold

*Always verify with your lender or loan servicer to understand when payments are due as private loans are not all the same.

After you have identified your student loan repayment type, you'll have an idea when your first private student loan payment is due. To plan ahead for your specific first due date, check your promissory notes or credit agreements and reach out to your lender or loan servicer.

If you opted to make interest-only or smaller set payments while in college, remember that you likely need to continue making those smaller payments during the six months after college and before you begin making full principal and interest payments.

Which student loans should I pay off first?

You should always pay your minimum monthly payments on time for every loan.

If you have extra money to put toward student loan payments, it's usually best to put that extra toward the loans with the highest rates first. Loans with high interest rates will typically cost you the most money in the long run. If those rates are also variable, you may want to focus especially on those, as rising variable rates mean higher costs. If you have a mix of private, subsidized and unsubsidized federal, and PLUS loans, determine which loans have the highest rates or balances and focus extra payments to those first.

By refinancing your loans, you may be eligible for a lower interest rate that can help you pay less so that you have more money for living life. Learn more about refinancing with the Reset Refinance Loan and find out if you pre-qualify.

How much time do I have to pay off my student loans?

Most federal student loans have repayment terms of 10 years with longer terms available for larger balances. Private student loan repayment terms vary by lender but generally are between 10 and 20 years. Talk with your lender or servicer to determine the terms on your specific loans.

If you'd like to pay off your loans sooner, the good news is, just because your repayment term is for 10 years doesn't mean it has to take you that long! Budgeting will help you save money in the long run so you can work on paying your loans off sooner. Check out our monthly budget calculator to get started.

Can I change my repayment plan?

Yes; you may change your federal student loan repayment plan at any time, without cost. There are four main repayment plan types for federal loans:

  • Standard repayment
  • Graduated repayment
  • Extended repayment
  • Income-driven repayment plans

Learn more about federal loan repayment plans by contacting your servicer or visiting the Federal Student Aid website.

Most private loan lenders offer different repayment plans as well, but those will vary depending on the lender and your circumstances. Contact your servicer or lender to figure out what repayment plan is best for you and your finances.

How do I lower my student loan payments?

If you have private student loans, or a mix of federal and private, you may be able to lower your monthly payments by refinancing. While you may need a creditworthy cosigner if you haven't established much credit, refinancing can be worth it in savings. The federal government also offers a consolidation program for federal student loans only, although it doesn't typically lower interest rates as the existing rates for the loans being consolidated are averaged.

Other ways you can lower your monthly payment* include:

  • Extending your repayment term.
  • Seeing if you qualify for an income-driven repayment plan.
  • Switching to a graduated repayment plan that allows for lower payments at the start that then increase over time.

*It's very important to understand that if you lower your monthly payment using one of these methods, you will pay more in interest over the life of the loans because the principal balance will decrease at a slower rate.

How soon can I refinance my student loans?

You can see if you are eligible to refinance student loans at any time. If you are still in college and don't want to make payments until after you're done, you may want to learn more about the Reset Refinance Loan for In-School Borrowers, which allows you to continue deferring payments until after you leave school. Few lenders offer the option for students or their parents to refinance and postpone payments while the student is still in school.

Refinance loans are offered by private lenders that set eligibility and credit requirements that you or a cosigner, such as a spouse or parent, will need to meet. Typically, you or a cosigner will need good credit, stable income and a manageable debt-to-income ratio to qualify.

Interested in refinancing student loans?

If you're paying high interest rates or want to lower the monthly payment amount on your student loans, a Reset Refinance Loan might be right for you. Our competitive student loan refinance program features several different refinance loans, fixed interest rates with multiple repayment terms, a way for you to release your cosigners from their obligations and an interest rate reduction benefit. For more details, check out our Reset Refinance Loan.

You can even use our student loan refinance calculator to compare your current monthly payment amounts to the estimated amounts you could pay with our regular Reset Loan.

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