No matter what happens with the tax cut bill before Congress, which would eliminate the deduction for student loan interest, most 2017 college graduates have to start repaying their loans this month or next. That’s when the six-month grace period after graduation ends.
Though it sounds simple, student loan repayment can be complicated, and not just because of the inexperience of the borrower. Here are some tips for graduates and their families gathered from Sallie Mae, a private lender which until 2014 serviced federal student loans, and Mark Kantrowitz, a financial aid expert.
1. Get organized. Graduates should gather any billing statements they have received from their loan servicer or lender and make a list of all their student loans, including the lender’s or servicer’s name, loan amount, payment amount, payment due date and payment address. They can check StudentLoans.gov for a list of all their federal student loans and AnnualCreditReport.com for a list of their private debt.
Sallie Mae suggests a spreadsheet for all this, including also the home number of the lender or servicer, loan interest rate and whether it’s fixed or variable.
2. Build a budget to figure out an affordable monthly payment — Sallie Mae offers a monthly budget worksheet but there are many similar apps to be found online.
3. Set up a repayment plan that’s affordable. For most borrowers the standard repayment has the highest monthly payment and will be paid off the quickest, saving the borrower the most money over the life of the loan, says Kantrowitz. Extended repayment and income-driven payment offer the lowest monthly payments but will cost borrowers more over the long run. Kantrowitz advises borrowers to choose a repayment plan with the highest monthly payment they can afford. Repayment calculators at the Federal Student Aid website, Sallie Mae website or other websites can help them figure out that payment level.