Woot woot! Congratulations to the Class of 2015!
After four, or five, years of hard work, you’ve finally graduated. As the days of long nights in the library, overwhelming extracurricular schedules, and Thursday night partying come to an end, there is a lot to think about as you begin your life in the workforce. If you are like most recent graduates, you probably have some form of student loan debt. With 7 out of 10 graduates leaving school with student loan debt, student loans are a huge problem. As you leave college, and your student loan repayment period begins, your student loans may all the sudden become a big part of your new life. Before making your first student loan payment, remember to do these 4 simple steps.
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1. Check your balance
Your weekly paycheck might be much bigger upon graduation, that being said, you should find out how much you owe on your student loans before repayment begins. You can start by tracking down all of your federal student loans at Studentaid.gov/login. StudentAid.gov will let you view all of your federal student loan balances, interest rates, servicers, and more. You student loan servicer is the company that will collect payments and manage your debt.
And if you have private student loans, you should start by logging into your loan accounts. Private student loans are issued by private student loan lenders, who, will provide you with private login information. If you are really unsure of what type of private student loans you have, you can check your credit report to find your lender.
2. Pick a smart repayment plan
After graduation you will automatically be signed up for the standard 10 year repayment plan for your federal student loans. If you don’t think you can afford your standard monthly payment, there is help available. The Department of Education offers a few different income-driven repayment plans. According to the Department of Education, “Income-driven repayment plans are designed to make your student loan debt more manageable by reducing your monthly payment amount.” In short, these plans give you repayment flexibility if you can’t afford the standard payment. However, when choosing an option where you make lower payments or extend your repayment period, you will likely pay more in interest over time. Additional interest may be costly over the long term.
Private student loan repayment plans vary by lender and the type of loan. In general, you will have about 6 months after graduation before you will need to start making payments. Once logged into your private student loan account you will be able to view your repayment plan and payments. Unfortunately, private student loan lenders do not have formalized income-based repayment plans.
3. Sign up for auto-pay
It is critical to make your student loan payments on time each month. Late student loan payments can result in costly late fees, negative credit marks, and can even make you ineligible for student loan refinance. By signing up for auto-pay you can electronically pay your student loan bill right from your checking account through ACH transfer. In most cases, you will even qualify for a 0.25% discount if you sign up for auto-pay. Even 0.25% can add up to hundreds of dollars over the life of the loan.
4. Look at refinancing
Refinancing student loans is a great way to reduce your interest rate and save money over the long term. When you refinance a student loan, you consolidate all or some of your student loans at a new interest rate. You can only refinance student loans with a private lender. In general, there are no origination or pre-payment fees on refinanced student loans. Moreover, you can choose a new term length that best meets your financial objectives. With all the new student loan refinance lenders on the market these days, finding the best option may be tough. We put together this short student loan refinance lenders guide to help you find the best options available in one place. Please be aware, you must have good credit and a good income to qualify for student loan refinance.
Nate Matherson is the Co-Founder and CEO of LendEDU, an independent marketplace for student loans and student loan refinancing. LendEDU allows borrowers to compare personalized student loan quotes from multiple lenders with just one application.
LendEDU was built by student loan borrowers for student loan borrowers. We want to help student loan borrowers find the best rates and terms available.