IF you graduated from college last spring, it may soon be time to start repaying your student loans.
Many federal student loans come with a six-month grace period after graduation, during which payments are not required. The idea is that new graduates need some breathing room while they (hopefully) land a job, buy a work wardrobe and find an apartment to rent, which will probably require a security deposit and furnishings.
That means many 2015 graduates may need to start making loan payments in November. (Some federal loans offer a longer grace period, and grace periods for private loans vary.) So student borrowers who have so far avoided thinking about the eventual repayment of their debts need to start focusing.
Mark Kantrowitz, a financial-aid expert, suggests that borrowers make a list of all their loans, including the lender, the servicer and the date when repayment begins. It’s not unusual for students to have up to a dozen separate loans. “It’s very easy to overlook a loan,” he said. If you’re unsure of the details, you can check the Education Department’s National Student Loan Data System.
Often, Mr. Kantrowitz said, borrowers are late with their first payment because they don’t know where to send it or are unaware of the due date. But borrowers are responsible for making the first payment on time, even if they don’t receive a formal statement or payment book from their lender. So borrowers should contact their servicer to make sure that their current address and other contact information are on file.
Borrowers should also choose a payment plan, said Lauren Asher, president of the Institute for College Access & Success. If borrowers don’t select one, they will automatically be signed up for the standard 10-year repayment plan, which comes with a fixed monthly payment. This is usually the lowest-cost option over the long term, but monthly payments are higher.
Borrowers who think they will have trouble managing standard payments should consider an alternative repayment option. Some programs link monthly payments to borrowers’ income, while others offer a “graduated” repayment plan, with monthly amounts that increase over time. Borrowers’ eligibility for the various plans depends on the type of loan and, in some cases, when the money was borrowed.
INTERACTIVE GRAPHIC
Student Loan Calculator
A guide to student loans at various universities, and what it takes after graduation to repay that debt.
Borrowers can go to the Education Department’s online student loan estimator and have the system calculate the lowest monthly payment for which they qualify. “Tools and options for borrowers have gotten better,” Ms. Asher said.
If tracking multiple payments is confusing, one option is consolidating the loans — but consider the pros and cons carefully, Mr. Kantrowitz said. It often makes financial sense to pay down the loan with the highest interest rate first. But if you consolidate, you will lose the option of targeting specific loans for extra payments. (Combining federal loans will result in a new loan with an interest rate that is a weighted average of the individual loans.) So borrowers may want to keep the loan with the highest rate separate and combine the rest.
And never consolidate federal loans into a private loan, the institute’s Project on Student Debt says. You may lose important federal protections, like the option to temporarily postpone payments if you lose your job.
The Student Loan Borrower Assistance program can help borrowers weigh the trade-offs involved with consolidation.
Here are some questions and answers about student loan repayment:
■ Can I get a discount if I make automatic loan payments?
If you have your monthly payment electronically debited from your bank account, you may receive a discounted interest rate on your federal loans, and on some private loans, too. Automatic deductions can also help you avoid late payments. Just make sure your balance is sufficient to cover the payments, to avoid overdraft fees.
■ I’m going to graduate school. Do I have to start repaying my undergraduate loans?
You can request an in-school deferment, which lets you postpone payment on your undergraduate loans. But interest on some loans may accrue while you’re in school, which could increase your total debt.
■ Can I change my repayment plan after I start making payments?
Yes. If your initial payment plan isn’t working for you, you can select another one, according to the Education Department.
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