4 Key Tips for Repaying Student Loans

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Graduating from college brings all sorts of emotions — you’re anxious to get out of the town you’ve been living in for the last four years. You’re excited to start applying for jobs and take that big next step. You’re happy that you’ve made some lifelong friends. And you’re terrified of trying to figure out how to repay your student loans.

If you took out money to pay for your education, you’re not alone. In fact, the average student debt load is worth $27,253, a 58 percent increase since 2005, according to FICO. As you proceed with determining how to repay student loans, consider these tips.

1. Identify and research your repayment plan options.

When you sit down to choose your repayment plan, it can be appealing to go for the one with the cheapest monthly payment. After all, why pay $200 a month when you could pay $50? But it’s important to keep it mind that paying more each month results in paying less interest over time and can help you to avoid student loan nightmares.

That said, everyone’s financial status and income level are different, which is why there are a variety of plans to choose from. Federal loans often offer a standard repayment plan, which requires payment at a fixed amount of at least $50 per month (they’ll increase depending on your student loan amounts) for up to 10 years. The graduated repayment plan, like the Standard Plan, has a 10-year limit, but the payments start smaller and increase over time. There are also extended repayment plans, which go up to 25 years. Finally, there’s the income-based repayment plan, which allows your monthly payments to be based entirely on your income level.

Once you’ve identified your plan, consider other programs and options that your lender might offer. For example, Upromise by Sallie Mae is a program that allows you to earn cash back when you shop at online retailers. The cash back goes directly toward your loans, helping you to pay them off faster, simply by spending money that you would have spent anyway.

2. Pay your loans on time.

Defaulting on your student loans can have serious consequences. If you’re 90 days late on a payment, you could see your credit score suffer, making it harder to sign up for utility bills, get homeowner’s insurance, or get approval to rent an apartment.

To ensure you always pay your loan bills on time, use Manilla.com to receive automatic text or email reminders. Manilla will remind you one, three or seven days before your bill is due so you never miss a payment and never pay late fees.

3. Try to pay more than the minimum balance each month.

Solidifying your repayment plan is the first step in repaying your loans, but the process is far from over. Try reworking your budget to determine how much you could be putting toward your loans each month. Sure, you should haven’t to completely sacrifice your hobbies to pay back your loans, but see if there are areas where you could cut back on spending — such as dining out or entertainment — that could open up room for increase loan payments. Like with good card habits, paying more than the minimum amount due on your loans each month is essential in paying less interest over time.

4. Explore consolidation.

Consolidating your loans helps bring them together into one loan, so you’re not making multiple monthly payments. Consolidation has a wide range of benefits, such as it allows you to only track one monthly due date, it can lower your monthly payment, and it helps you lock in a fixed interest rate. But there are also a long list of downsides, such as extending the life of the loan. Even though your monthly payments are lower, it’ll take you longer to pay off the loan and, therefore, you’ll pay more in interest. Before consolidating your loans, do extensive research to determine if it’s the right move for you. 

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