Student loans are a reality of life for about three-quarters of all college graduates, with an average debt of around $35,000.
For some college graduates, paying back those loans could take decades.
Having student loans doesn't have to mean putting the rest of your life (and your goals for saving and investing) on hold! There are a lot of ways you can manage this debt and still save money for your future, buy a house and go on vacations.
How is it possible? There are a surprising number of repayment options!
The best option for you depends on a lot of things, including your income, career plans, the loan types you have, and your personal long-term financial goals. What works for you might not be the best repayment strategy for your former classmates, so be sure to focus on your needs and don't compare yourself to others too much!
The best way to get information is really to pick up the phone. Call your loan service provider and talk to them about your goals and plans to get advice on the best repayment options for you. Here's some information to get started:
Standard Repayment Plans - These are the most common for most federal student loans, and these plans are fine if you can afford fixed monthly payments and can pay back your loans in about 10 years. You'll save money on interest with this repayment plan over time.
Graduated Repayment Plan - A graduated repayment plan is one where you have smaller payments in the beginning, and your payments grow over time. You'll pay more in interest over time, but it might make things easier as you get your career started. These also allow you to pay back your loans in 10 years or less.
Extended Repayment Plan - Need more time to pay back those loans? You can ask for an extension on your payments, giving you up to 25 years to pay back your student loans. This plan can make your monthly payments lower, but you'll pay more in interest over the life of the loan.
Income-Based or Income-Driven Repayment Plan - You'll want to ask your lender (even if it's a federal loan) if you qualify for this type of plan, which calculates your payments based on your income. This means you'd pay less on your student loans when you make less money, and pay more when you make more. Depending on your plan and federal regulations, you could get a portion of your loan wiped out if you make payments on time and in full every month.
Looking for other ways to get those loans forgiven? If you work in certain government or non-profit positions, you might be able to get your loans forgiven after a certain number of years. These Public Service Loan Forgiveness programs are often offered for teachers, nurses, government employees and certain non profit organization employees. Not all loans qualify, so be sure to talk to your loan services about this!
If you have private loans, you should look into Student Loan Refinancing. If you have a relatively good credit score and a stable job, you may be able to refinance your student loan to get a lower interest rate, lower monthly payments and the ability to combine multiple loans into one for savings and convenience. But, be careful with this, because if you refinance and combine federal loans and private loans, you might miss out on Public Service Loan Forgiveness or other programs that can be helpful later on. Refinancing loans is different from just consolidating loans (which usually does not yield a lower interest rate), so be sure you talk through both options with your service provider.
If you've been able to cover your payments as well as saving for retirement and building an emergency fund, you can always choose to make extra payments toward your loans. That can shorten how long it takes you to pay back the loan and save you money on interest, too. Talk to your service provider about how to do that properly so that your extra payments go toward your principal instead of being treated as an advance payment in future months.
Need help? Come talk to your credit union! Not only do we offer student loans for your time in school, but we can help you refinance your loans once you graduate! In addition, we have several certified financial counselors on staff who can help you with budgeting, increasing your credit score, saving for big purchases (or retirement) and a lot more. We're here for you, for every stage of your life from high school graduation to college graduation, your first new car, your first house and beyond.
