Here’s What You Need to Know About Your Student Loans After Graduation

By Rachel Slifka
August 31, 2018

If you’re a new college graduate, you’re likely in a transitional stage.

You may be searching for or starting a job, moving to a new city, or unsure of your next steps. Graduation also means you need to re-evaluate your finances, especially if this is the first time you’ve had a significant income. With that higher income, you’ll need to budget for rent, groceries, and other expenses. You’ll also want to get a jump-start on saving as much money as you can.

While you have time to figure out the details, there’s one thing you can’t ignore: your student loans. Making student loan mistakes early on can cost you in the long-run. So, don’t wait – here’s everything you need to know about your student loans after graduation.

Learn how to access your student loans

If you don’t already know where your loans are, the first step is to find them. You can’t create a plan to get out of debt if you don’t know exactly how much debt you have. Hopefully you have received some correspondence from your student loan providers with information on how to access your accounts. But, this isn’t always the case.

If you have private student loans through a bank or other source, you will need to contact them directly to find out more information regarding your balance. If you have federal student loans, there is a step-by-step process for how to find them.

To find your federal student loans, you will need to access the National Student Loan Data System, or NSLDS for short. This is a central database which keeps track of all your federal student loan debt. You can log in at anytime to find out about your accounts, including whether your loans are subsidized or unsubsidized and what the interest rate is on each loan.

To get started, visit the NSLDS website and have your social security number on hand to log in. Once you’re on the website, click “Financial Aid Review” and then click on the link that says “Create an FSA ID.” This is a unique identifier you will need to remember, so write it down and store in a secure place.

Once you are logged in, you should be able to see a snapshot of all your student loans. You can set up automatic payments and create a plan after seeing your loan information. Your account will update with every payment you make, so you will want to check it frequently to keep track of your progress.

Understand when your grace period ends

If you have federal student loans, you will have a six month grace period after you graduate to start making payments.

Just be aware: graduates with unsubsidized federal student loans accrue interest during the grace period. In fact, unsubsidized loans accrue interest throughout your college career, and will continue to do so until they are paid off.

On unsubsidized student loans, the interest is added to the principal balance of your loan. Not only does this mean your principal balance is getting larger, but you have to pay more in interest because your principal balance is increasing. Ouch – that’s a double whammy.

On the other hand, if you have subsidized loans from the federal government, your loans will not accrue interest while you are in school or when you enter your grace period after graduation. Uncle Sam sets the interest rates on Direct Subsidized Loans, and those rates are fixed.

In order to qualify for a Direct Subsidized Loan, students must submit the Free Application for Student Aid, otherwise known as FAFSA. Eligibility is determined based on each individual student’s financial needs. While Direct Unsubsidized Loans don’t accrue interest during your grace period, it’s still a good idea to make payments during this time frame before interest starts accruing.

Know your repayment options

With federal student loans, you have a few repayment options. You will automatically be put on the Standard Repayment Plan, which assumes you will be able to pay back your student loans over a 10-year repayment period.

Even if you can afford to pay the monthly payment on the Standard Repayment Plan, it is worth considering other options that may be a better fit for your needs. Depending on your situation, you may be eligible to change to one of the following repayment plans:

Income-Based Repayment Plan (IBR) keeps your monthly student loan payment at 10 to 15 percent of your discretionary income at the maximum. To qualify for the IBR plan, you need to submit an application. Typically, you need to owe more on your student loans than what you are making in a year.

Pay As You Earn (PAYE) extends your repayment period, but it keeps your monthly payments at 10 percent of your discretionary income. If your income increases, your monthly payment will also increase, but it won’t ever be more than it would have been on the Standard Repayment Plan.

Revised Pay As You Earn (REPAYE) is similar to PAYE, but it allows more eligibility. Payments are capped at 10 percent of your discretionary income, but unlike the PAYE, your payments can increase past the amount it would have been on the Standard Repayment Plan if your income increases.

Income-Contingent Repayment (ICR) allows borrowers to cap their student loan payments at the lesser of two options: either a fixed 12-year payment plan based on your income or 20 percent of your discretionary income.

Graduated Repayment starts you off with a low monthly payment, but as time goes on, your monthly payment will increase. This is a great option for someone who expects an increasing income or someone with high earning potential.

Extended Repayment allows borrowers to extend their repayment schedule for up to 25 years. During that time, you can make either fixed or graduated payments. The pitfall of this plan is that you will pay significantly more in interest over the lifetime of the loan due to the extended repayment period.

With so many options, you can work with your student loan provider to find the best fit for you and your financial situation. The worst thing you can do is simply not pay your student loans because of financial struggles.

Know what happens if you miss a payment

Missing or being late on a student loan payment may not seem like a big deal, but it can have serious consequences in the long-run.

After you miss a payment, your loan is officially considered delinquent and will remain that way until you make a payment or until you request deferment or forbearance. You may also receive a late fee and see a mark on your credit. After 270 days of a missed payment, your loan is then considered to be in default.

One of the easiest ways to avoid missing a scheduled student loan payment is to set up automatic withdrawals from your savings account. This way, you don’t have to worry about paying yet another bill – it will be taken care of without a second thought.

All in all

No matter what your financial situation is, you have options to figure out how to repay your student loans. The important thing is to create a financial plan so you can ensure you are making as much progress as possible on repaying your debt.

Rachel Slifka, MBA, is a millennial personal finance expert and HR pro. She started a freelance writing side hustle in college to pay off $90k of student loans. Her work has been featured in TaxAct, Wise Bread, Chime, LendingTree, Young Adult Money, and more. She now lives (student loan debt free) in Seattle with her husband and a house full of pets.

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