How to Manage a Student Loan

After-school Assignment Number One: Repay Student Loans

If you take out Stafford Loans, the first thing to do after you graduate is attend exit counseling. These meetings resemble the entrance counseling you took when you first started taking out loans except now you'll be able to see the total amount you owe and choose a method of loan repayment. Depending on the type of loan, you'll have several different repayment options available to you:

  • Standard repayment - With this plan, you'll be paying a fixed amount monthly for up to 10 years. This is a great idea for those who have taken out small loans or who find themselves in a lucrative position immediately following graduation.
  • Extended repayment - This plan functions the same as standard repayment with the exception that the payment period can be stretched out to between 12 and 30 years.
  • Graduated repayment - This plan is structured for people who anticipate a need to start out with a modest repayment fee but will be able to increase that amount over time. The payments start low and gradually increase every two years. The term is between 12 and 20 years depending on the amount borrowed.
  • Income-contingent repayment - The income-contingent plan bases monthly payments on your income in relation to the amount of debt. Monthly payments are adjusted every year to match your changing income and, after 25 years, any remaining debt is discharged. This repayment plan is only available to direct loan borrowers.
  • Income-sensitive repayment - If you didn't take out a direct loan, you may have taken out a Federal Family Education Loan (FFEL). If so, this repayment plan might be an option for you. It's structured the same as the income-contingent plan but the loan term is only 10 years.
  • Income-based repayment - This method of repayment is available to both Direct Loan and FFEL borrowers. It's structured the same as income contingent but has lower monthly payments.

These repayment options offer a versatile plan for everyone, but that doesn't mean you won't run into difficulties in repayment at some point. Luckily, lenders have acknowledged economic hardship and have options in place should the need arise. But if you figure out how to create a budget and stick to it, you might never have to find out what those options are.