How to Pay Off Student Loans After You Graduate

How to Pay Off Student Loans After You Graduate

Tushar Mathur is the creator of Everything Finance, a site about exactly that – everything related to finance. There, you can find information about investing, saving money, shopping, blogging, and making money online.

So… how do you pay off student loans after you graduate? It’s the $60,000 question – literally. How in the world should you go about paying off your student loans after you graduate? Take heart: you’re not the only one asking it. In fact, the cost of higher education has been the “go-to” political hot potato for the last few years. Although the Obama administration implemented a program to help recent grads manage their debt after school, it unfortunately ended earlier this summer. That’s why it’s important to understand how to pay off your student loans after you graduate – even without the extra federal incentive.

Find Out About Your Options

One way to get a handle on your student loan debt is to consolidate that bad boy directly through the federal government. Stop on by the US Department of Education’s website to obtain information about how to do this. You can also check out private loan companies that offer consolidation options, but the government is generally the most reliable – and cheapest – way to consolidate your loans around.

Once you have one single (and manageable) loan to repay, find out about income-based repayment. Many loan companies and the federal government offer this as an option. An income-sensitive program adjusts your monthly repayment based upon the amount of money you’re currently earning. This is great for grads who are just starting out with a company and trying to work their way up the ladder.

Get Organized

Once you have your repayment terms and loan amount figured out, it’s time to get organized. Inquire about automatic repayments – it’s the single best way to ensure you don’t miss a payment, and you won’t have to think about it again once you’ve set it up. Added bonus: many loan companies deduct half a percentage point or more from your loan if you opt to make automatic payments.

If you want to keep track of all your loans and other debts in one place, you can use ReadyForZero, which allows you to manage and pay off your debt in one place. You’ll get timely reminders about payments and you will be able to see how much interest you’re paying over the long run.

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Make Your Payments Over – and On Time!

Once you’re organized and your payments are set up, it’s time for a little follow-through. Make sure that your payment is withdrawn from your account every month without fail. You should also ensure that your student loan company withdraws the right amount each month. Try to never, ever make a late payment – a late payment on a student loan can damage your credit score (check out this article on what happens if you can’t make your student loan payment).

In addition, making extra payments directly to your loan’s principal is the fastest way to pay off your loan over time. It will also save you major money in interest charges down the road. For those who may have student loans in the future, be sure to choose your student loans wisely. And for everyone else, hopefully the tips above are helpful in paying off your student loan debt!

Image credit: SLU Madrid Campus

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  • Heather Andrews

    When I did my undergrad exit interview with financial aid in 2000, we were advised to not consolidate, as there are a number of “extra” benefits that we would forfeit if we consolidated. For example: if I died, my debt would be forgiven rather than passed along to my executor. Is this not the case anymore? It would be lovely to consolidate my grad school loans and be able to pay down more principal each month than I currently can, but I am concerned I’ll be giving up some valuable benefits. Thoughts?

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Hi Heather, that is a really interesting point. I have not been able to find any confirmation of the rule you mentioned, but it certainly seems possible that it’s the case. If you (or anyone) can find any more information on this, we’d love to add it to the blog post. Thanks!

    • http://twitter.com/KrisMatt Kris Mattera

      It is worth reading the fine print. In most cases, consolidation rounds UP to the nearest 1/8th of a percent. The Special Direct Loan Consolidation program that ran through Summer 2012 was one of the few that didn’t. Since Congress redid the Staffords (now Direct Loans), interest rates are set in the 6-6.8% range, so there typically isn’t an advantage to consolidation – other than a single payment. Those with federal loans that used to adjust on July 1 of every year (2006 and earlier) may look into consolidation as the loans may have all different rates. Do not consolidate private loans with federal.

      For those with co-signers also read the fine print for what happens upon death, or if you can get them released after X number of on time payments (typically 36).

    • Nika van Tilburg

      Heather: see my post. To address your particular situation, check what’s on the web BUT don’t rely on any web site that does not have .gov in the URL without some serious research on your part.

  • Nika van Tilburg

    Depending on the repayment plan, debt can be discharged after 20 or 25 years BUT you have to pay income tax on the amount discharged. Debt cannot be discharged through bankruptcy except under the most extreme conditions. Debt is not passed on to your estate when you die UNLESS you had a co-signor. If you did, then the co-signor is responsible for the debt if you don’t pay. Some loans may be forgiven under the Public Service Loan Forgiveness program: you must work at a qualifying job and make 120 monthly payments, i.e., work at a qualifying job for 10 years. The amount forgiven IS NOT subject to income tax.

    Even with some of these programs, many law school grads will never be able to pay off their loans. Expect to see a rash of suicides in 20-25 years as a result.

  • Frustrated with this world

    I had been consistent in paying my student loans off for more than 8 years, unfortunately, I lost my job, then my house and car and now I have been threatened with garnishment. Where do I go from here, I can’t get anyone from the U S Dept of Educ to discuss any options with me and it has now been two years since I was employed anywhere, no money, no job and a very expensive education/degree!

    • Michael

      What degree did you get? Some are not so rosy, such as English, and others like accounting get employers fighting over the job applicant. If your degree isn’t in serious demand, most likely you just didn’t think to find out what college degrees have excellent job prospects.

      In your situation, I’m assuming you can’t make ends meet? Find a charity or social service group that can help. Walk in, explain your situation, and follow up the leads. Sounds like you already figured out you just need to get moving.

      Hope this helps!

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      I’m really sorry to hear about all the challenges you’ve faced. I hope things will start going better for you soon. In the meantime, I can only imagine how frustrating it must be to have the loans outstanding and have the lenders contacting you and threatening you. I’ll paste two links that might help you below. Wish I could help more! Let us know if you have any other questions.
      http://www.readyforzero.com/resources/student-loan-debt/
      http://abovethelaw.com/2011/06/student-loan-debt-whats-the-worst-that-could-happen/

    • Johnathan Huntington

      You keep your student loans with you until you die. I should know
      cause that is what happens if the career you seek never gets started and
      have to settle for far less in pay and benefits. Then your health deteriorates and bankruptcy won’t forgive the college loan debt.
      There are many former students in default on their college loans and they can’t pay it back ever, Your told by fantasy island counselors that you’ll get the job you seek. Yeah right!

      • http://www.twitter.com/bwfeldman Benjamin Feldman

        Johnathan, sorry to hear about this. I know many people are in this kind of situation right now, and it’s devastating. One thing I wanted to mention is that in the case of health problems or disability you can sometimes get your student loan debt discharged. This page has more info on how this works:
        http://studentaid.ed.gov/repay-loans/forgiveness-cancellation

        Anyway, best of luck to you.

  • Guest

    Take your life insurance policy and every student loan company to it, it is security that the loan company will be paid if you die, and the debt will not roll over to a family member.

  • Timothy Bragg

    Take your life insurance policy
    and add every student loan company to it, it is security that the loan
    company will be paid if you die, and the debt will not roll over to a
    family member.

    • CP

      Federal Student Loans can be discharged if the borrower dies. It is called a Death Discharge. There is no need to tie it to life insurance. http://studentaid.ed.gov/repay-loans/forgiveness-cancellation#death-discharge

      • KK

        However, if Mom and Dad (or another family member) co-signed, they would have financial responsibility for repayment, correct?

        • http://www.twitter.com/bwfeldman Benjamin Feldman

          Yes, I believe that’s correct.

  • Eugene T Chu

    Another idea…consider the military as an option…

    The U.S. armed forces have loan repayment programs for certain student loans. For three years of enlisted service, up to $65K in subsidized loans can be forgiven…

    Downside: underemployment (enlisted, NOT officer), strict lifestyle, risk of deploying to a hostile fire zone

    Upside: room, board, salary, insurance… and STUDENT LOAN REPAYMENT

  • Johnny

    Debt will never roll over to another family member – they have no obligation for the debt incurred by the student receiving the student loan so long as they do not sign the student loan note and do not guaranty the student loan on behalf of the student!!

  • Plentyostocks

    A lot of young people are driving around in fancy new cars, but cannot pay their student loans. That is a good place to start. Average student loan debt is $26k, so instead of a 5 year new car loan, pay off the college loans in 5 years, then get a new car. You’ll live (I did).

  • Michael

    Susanna, you should’ve replied to frustrated’s post, k? My dad’s paying my college expenses out of his pocket, so I don’t need student loans, but thanks for the offer.

  • KK

    Wow. While I get pointing out that she didn’t thread right, did you have to take that tone with her? Rude.