4 things you need to know before you start paying your student loans

Posted at 4:46 AM, Oct 30, 2015
and last updated 2015-10-30 05:46:35-04

The grace period on the student loans of thousands of recent college grads is about to expire. While paying off a student loan might seem like an insurmountable task, arming yourself with the right knowledge can help make the process go a bit easier. So, with that in mind, here are some things you should know about paying off your student loans.

1. Your Repayment Options

Depending upon your financial situation after graduating, you may want to opt for a different repayment structure. While a standard repayment option might be the optimal way to avoid extra interest charges, many federal loans offer several alternatives.

For example, in the event you find yourself unable to make the minimum on your standard monthly payment, you can opt for income-based repayments (your maximum payment will be 15% of your discretionary income), an extended repayment plan (stretches your payment period out past the 10-year standard), or an income-sensitive repayment plan (your monthly payment is based upon your annual income with payments changing as your income does). To learn more about the possible payment plans available to you, check out the Education Department’s Office of Federal Student Aid’s website.

2. When You’ll Have to Start Making Payments

In most cases, student loan payments begin six months after a student has graduated, dropped below half-time or stopped attending school. However, there are some instances where you won’t have as much breathing room. The repayment period for federal Direct PLUS loans begins the day after the final disbursement is made and private studentloans may have varying grace periods. Knowing when you need to start making your payments can help you get a head start on saving so you may want to ensure you get the repayment process off on the right foot.

3. The Impact of Late or Missed Payments

It’s important to keep in mind that failing to make timely payments on your student loans is going to hurt your credit score. (You can see how your student loans are affecting your credit by checking your credit reports for free each year on or viewing your credit scores for free each month on If you find that you’re the type of person who struggles to remember due dates, it might be in your best interest to automate your contributions.

Most loan servicers, whether they be federal or private, offer some form of automated system. This can allow you to set and forget your payments. All you need to do is adjust your budget to account for the monthly deduction, make sure there’s enough money in your account to cover it and check to make sure the payment has cleared every month.

4. The Value of Budgeting

Having a well-designed budget can be a huge help when managing post-college expenses, especially when you have a sizable student loan to take care of. Tracking your expenses and weighing them against your current or expected income can help you determine how much you’ll comfortably be able to allot towards an apartment, new car or any other major purchase. Not only that, but it might even reveal new ways for you to cut back on unnecessary expenses, enabling you to make greater contributions towards your student loan debt. A well-constructed budget could mean the difference between being stuck with student loans for five years instead of 10!

Chances are, your college will have some sort of student loan exit counseling. Paying close attention to this lesson can provide you with even more helpful information regarding your student loans and how you’ll need to go about repaying them. Taking the time to absorb this information, as well as keeping in mind the other points I’ve shared, could help to alleviate some of your student loan stress.

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