How to Manage Your Student Loan Debt
Once you’ve taken out student loans to pay for college, you will need to figure out how to pay them back. At this point, you will not be able to change the fact that you took out a large amount of student loan debt, or that you received private education loans instead of maximizing federal loan funds.
The good news is that compared to other financial vehicles, student loans may be easier for you to manage (especially federal loans). We’ve put together a list of ways you can make your student loan payments easier to deal with:
- Postpone Your Student Loan Payments
Federal student loans come with deferment and forbearance benefits that you may qualify for and will allow you to “postpone” your student loan payments temporarily, generally in 6 -12 month increments. You must meet certain qualifications for a deferment. If you have subsidized federal loans, the government will pay the interest that accrues on your behalf during the period of deferment. Forbearance is granted by your lender and is often available for both federal and private student loans. If you have private student loans, check with your lender to see if any deferment and forbearance options are offered.
- Change Your Student Loan Repayment Plan
Many lenders automatically set their borrowers on a standard repayment plan if no plan was chosen. The standard repayment plan requires you to make the same monthly payment amount over the term of the loan. If you are having financial difficulties, you may want to switch to another student loan repayment plan if one is offered by your lender..
If you have federal loans, there are many repayment options available. The Department of Education provides a description of each student loan repayment plan available, and a calculator to help you determine your monthly payments under each plan. We’ve put together a description of each student loan repayment plan here.
If you have private student loans, you’ll need to check with your lender to see what type of repayment plans are offered.
- Check into Student Loan Consolidation
Student loan consolidation is another option for borrowers to lower their student loan payments. However, be aware that should you consolidate it will take you longer to pay off your loans. If you have federal loans, student loan consolidation terms are based on the loan balance and may lengthen your repayment term (federal loans originally have a 10-year term). You will most likely need to be credit-approved to obtain a student loan consolidation for your private loans. For more information, read our student loan consolidation section.
- Loan Forgiveness
There is a new public service loan forgiveness program that was implemented on July 1, 2009 that you may qualify for if you are employed or considering a career in a public service field. However, in order to participate in this program, your loans must be Direct Loan Program loans, not FFEL loans. If you have FFEL loans, you can still participate if you consolidate your FFEL loans into a Direct Loan Program consolidation loan. After you make 120 payments while employed full-time in a public service field, the remainder of your federal student loans will be forgiven.
- Pay Extra When You Can
If you want to get rid of your student loan payments faster, consider increasing your loan payment every month, or make an extra payment when you can. Deferring or reducing your monthly payments is only going to increase the interest you will pay on your loan.