Student loans can feel like a deep dark secret that no one wants to talk about. Maybe you’re an expert in recycling that monthly loan statement without even opening it, or you’ve set your loan payments on autopay and hope to never think about them again.
But ignoring your student loans doesn’t mean they go away. No one wants to be in debt, and the prospect of paying off a large student loan can feel daunting. Here are a few tips and strategies that could help you when it comes time to start paying back federal student loans.
When Do You Have To Pay Back Federal Student Loans?
If you just graduated or left school, you may have some time before you’re required to start paying back your student loans. New grads generally have a grace period of six months before they are required to start throwing their hard-earned cash at their federal student loans.
The exact length of the grace period depends on the type of loan and your specific circumstances. Direct Subsidized Loans, Direct Unsubsidized Loans, Subsidized Federal Stafford Loans, and Unsubsidized Federal Stafford Loans all have a six-month grace period, which means that if you graduate in spring you may not need to make federal student loan payments until around October, depending on the date you graduate. If you’re a winter grad, you can expect to start repayment around June.
Unfortunately for graduate students, Direct PLUS Loans don’t have a grace period, which means that you’re on the hook for making payments 60 days after your final loan disbursement. You may also lose your grace period if you consolidate your federal student loans with the government during your grace period. One caveat—if you’re a member of the armed forces on active duty, you may be eligible to extend your grace period during a deployment.
Private student loans are a different storyーthese are loans from private lenders that set their own terms when it comes to loan grace periods. This means that private student loans may not offer a grace period at all, or that it may be shorter or longer than the federal student loan grace period.
How Do I Pay Back My Federal Student Loans?
Even though you may not be required to start paying off your student loans while they’re in a grace period, you might want to think about starting payments early.
Why start making payments before they’re due? During a grace period, some loans may still be accruing interest. That means that every month you wait to start making payments is another month that the total loan amount grows larger. Starting loan payback as soon as possible may help save on those capitalizing interest costs.
Figuring out how to pay federal student loans can be confusing. Paying back federal student loans starts with getting to know your loan servicer. There are several different loan servicers throughout the country who are responsible for managing federal student loans. Luckily, most loan servicers have robust websites where you can manage your student loan payments.
Your loan servicer’s website should allow you to view your loans, choose a payment plan, and set up automatic payments. Generally, you can make payments directly through the website, which means that you can avoid having to write out a check and worrying that it will get lost in the mail on the way to your loan service provider.
Choosing A Loan Repayment Plan
One integral loan repayment strategy is choosing a student loan repayment plan. If you are paying off federal loans, you may be able to choose between a few different repayment plans depending on which best fits your financial situation.
The Standard Repayment plan is the default loan repayment plan for federal student loans. Under the Standard plan, you pay a fixed amount every month for up to ten years in order to pay off the full balance of your loan.
Extended Repayment plans work similarly to the Standard Repayment plan, but the term of the loan is longer. Extended Repayment plans generally have terms between 12 and 30 years. The longer term allows for lower monthly payments, but you may end up paying more over the life of your loan thanks to additional interest charges.
For qualified applicants, there are also loan repayment options that are tied to the amount of your discretionary income . The Graduated Repayment Plans, for example, starts with lower monthly payments that increase in amount over time as you progress through your career and, presumably, earn more as you go along.
With income-driven repayment plans, the amount you owe on your student loans is tied to the amount of money you make. Income-based repayment plans are generally capped at 25 years, and any remaining balance on your loan may be forgiven after that term.
While you’ll automatically be put onto the Standard Repayment Plan if you do nothing else, you may want to consider choosing a different repayment plan depending on your financial situation.
For example, if you’re itching to pay off your student loans as soon as possible, the Standard Repayment plan may work for you, but if you’re worried about affording loan payments, you may decide that you’re more comfortable with an income-driven repayment plan. Picking the right repayment plan is one strategy to help you pay off your federal student loans.
Refinancing Student Loans
One strategy you may think about considering for paying back federal student loans is student loan refinancing. For some grads, loan refinancing may help save money over the term of your loan.
What are the benefits of refinancing with a private lender instead of just paying off the federal loans you currently owe? Student loan refinancing combines all your current federal and private student loans into one brand-spankin’ new loan from a private lender, hopefully with better terms.
This means that you may be able to snag a lower monthly payment or even a shorter repayment term, both of which could save some serious cash over the life of your loan—depending on the term you choose, of course. Loan refinancing isn’t right for everyone, however, and if you refinance your federal loans they will no longer be eligible for any federal repayment assistance, like the Public Service Loan Forgiveness program or any income-driven repayment plan.
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SoFi Student Loan Refinance
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Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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