Paying Student Loans

Exit Interview

If you have taken student loans, your school is required by law to give you an exit interview. This is simply a time to meet with a financial aid advisor to discuss your repayment obligations and options. Make sure not to miss the opportunity.

Grace Periods

Because most college students don't get jobs immediately after graduation, lenders usually offer a grace period of about six months before you need to start repaying your student loans. Take time during your grace period to organize your finances and evaluate your options.

Repayment Options

There are many different ways you can arrange your payment schedule, depending on what you can afford:

• The standard payment plan, if you can afford it, will offer you the lowest total loan cost.
• A graduated payment plan will start you out with lower payments that increase as time goes on.
• With income-related payment plans, your monthly payment amounts are tied directly to your income instead of rising gradually no matter what your income.
• Extended repayment allows you to make smaller payments for a much longer period of time.

Loan Forgiveness

As an unemployed recent college graduate, you may have much more time than you have money. You can get help paying off your loan by volunteering for certain government projects. Some will forgive your debt entirely.

• Peace Corps not only allows you to visit exotic locations (Third World countries) and challenge yourself (endure difficult conditions) but you can cancel a substantial portion of your Perkins loans in return for service. You can receive a 15% cancellation on each of your first two years and 20% on your third and fourth years. That's a 70% reduction for four years of service. You do have to contact your lender in advance of your term of service to receive your cancellation credit.
• Americorps If you like the idea of the Peace Corps but don't want to leave the country, Americorps is for you. You can receive up to $7,400 for living expenses and, after a year of satisfactory service, $4,725 to be used toward education. The education award can be used for future education or to pay off previous education debt (your student loans). The work itself can be reward enough: cleaning up the environment, helping at-risk children and other positive community-building services.
• Military Service The Army, Air Force, Navy, Marines and the National Guard all offer education assistance programs. Check with your local recruiter to find out how these programs can help you.
• Teaching Depending on where and how long you teach, you can receive complete loan cancellation or at least a deferment of some loans by filling some understaffed teaching positions, including teaching in schools serving low-income students or teaching certain subjects in which there is a shortage of teachers.
• Legal and Medical Service If you choose to study medicine or law you can rack up some hefty education loans. But there are programs that offer partial cancellation of loans for public service.

If a lender can offer you a lower interest rate and consolidate all of your loan payments into one convenient payment, you could save a lot of money over the life of your loan.

Job Paperwork

With everything that happens after college, it's easy to see why recent graduates forget to make timely payments on their loans. But if you don't pay your loans for six months, you will face collectors, your credit rating will suffer and your likelihood of being approved for car loans, mortgages and credit cards in the future will be greatly reduced. Staying on top of your loans from the get-go is one of the smartest financial decisions you can make.