The most important thing to know when you start paying off student loans is when your payments are due. Repayment begins at the end of your student loan grace period, usually six months after you graduate or leave school.
Making that first payment on time will put you on the path to success. But taking additional action immediately can also help if you want to do any of the following:
Pay off your loans faster.
Reduce your monthly payments.
Qualify for a loan discount.
Here’s how to start repayment on the right foot.
Know how to make student loan repayments
Your lender will likely work as part of a student loan manager that you will pay directly. You can manually pay your loans online or by check, just like any other bill. But automatic payment is particularly beneficial for student loans, as you’ll typically get a quarter-point-point interest rate reduction when you sign up.
Autopay allows your provider to automatically debit the monthly payment from your checking account. By signing up for automatic payment, you won’t forget to make a payment and fall behind by accident. Just make sure there is enough money in your checking account each month to avoid overdraft fees.
Start paying off your student loans early to save money
You pay more interest at the start of your repayment period than afterwards. If you want to limit the amount you pay back, engaging in certain strategies when you start paying off your student loans can maximize your savings.
Make additional payments. You can pay off student loans faster by making larger automatic payments or bi-weekly payments. By paying half the amount you owe every two weeks, you’ll make 13 full payments by the end of the year, instead of 12. Or you can make an extra payment every two weeks and take over your loans by half the time.
Refinance at a lower interest rate. Once you have a solid income, refinancing can save you money. To get the best interest rate, you or a co-signer will need a solid income and a credit score of at least 600. There is little downside to refinance private student loans. You can also refinance federal student loans, but it will cost you benefits like income-tested repayment and loan cancellation. You will want to be comfortable letting go of them.
Lower your payment if necessary
You might know right away that you can’t afford that first bill when it arrives. Instead of ignoring your loans, ask your agent to pay less with an income-based repayment plan.
Income-based repayment plans cap payments at 10% to 20% of your discretionary income and can be as low as $ 0. After 20 or 25 years of qualifying payments, your remaining balance is forfeited, although that amount is taxable. Switching early to an income-based repayment plan can ensure that every payment you make counts toward the rebate.
Track loan forgiveness eligibility
If you are entering the workforce with a job in the public service or in a non-profit organization, you can Public service loan remission. PSLF eliminates any federal student loan debt that you have after making 120 qualifying payments.
When you start paying off student loans, follow these steps to make sure that all of your payments will qualify for this program.
Make sure you have the right loans. Only direct loans are eligible for public service loan forgiveness. You can consolidate the federal family education loan program or Perkins loans to make them eligible, but only payments on the new direct loan will count towards the 120 needed for forgiveness.
Certify your job. After completing a qualifying year of employment, submit a Certificate of employment form at the Ministry of Education. Once the government confirms that your job is for an eligible employer, your student loan manager will change to FedLoan. You will then need to resubmit this form each year or if you change employers.
Choose an income-based repayment plan. Only payments made under the standard repayment plan and income-based repayment plans count towards the civil service loan forgiveness. Since the standard plan pays off your loans after 120 installments, you would have nothing to forgive once you qualify for the forgiveness. Ask for an income-driven plan instead of Studentaid.gov.
Teachers and Perkins loan borrowers have additional federal student loan exemption options. Also understand the requirements of these programs before you make your first payment to make sure you’re on the right track.