FIND THE RIGHT REPAYMENT PLAN Your repayment goal should be to pay the least amount over time, Mayotte says. That’s because the longer you pay off the loan, more interest will accumulate. For most borrowers, the standard 10-year repayment plan is the cheapest option.
For others, that may mean pursuing a loan forgiveness program, like Public Service Loan Forgiveness, which forgives federal loan debt after making 120 payments on an income-driven plan while working full- time for the government or a qualifying nonprofit. High earners may pay off loans faster by asking their servicer to apply additional payments to their loan balance. It’s borrowers who face modest incomes or job uncertainty who have some thinking to do. “There are a lot of options, and borrowers tend to get confused or distracted because there are so many options that aren’t that drastically different,” says Abril Hunt, outreach manager for ECMC, a nonprofit organization focused on student success. Hunt recommends that borrowers who can’t make payments on the standard plan try Revised Pay As You Earn, or REPAYE. It’s the income- driven repayment plan that all graduates with federal loan borrowers can enroll in.
Just because you don’t get a bill doesn’t mean you don’t owe the money.
An income-driven repayment plan, like REPAYE, sets payments at a portion of your income, which can help fit them into your budget. You’ll need to recertify your income each year. If you lose your job or don’t have one yet, your payments could be as little as $0. If you’re not sure which plan to choose, use the Department of Education’s loan simulator to find out your payment on each plan.
AUTOMATE REPAYMENTS
Once you’ve selected a plan, make sure you never miss a payment. Enroll in autopay, but be sure to have enough money in your bank account to cover those direct payments. Autopay can save you money, too: All federal student loan servicers and most private lenders will reduce your interest rate by 0.25 percentage points when you enroll. HAVE A PLAN IF YOU RUN INTO TROUBLE If the worst happens — a costly medical emergency or job loss, for example — contact your servicer or lender as soon as possible. They can help you work out a short-term reduced payment plan, sign up for income-driven repayment or apply for a temporary postponement.
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