Student Loan Repayment Options

Most college students dread looking at their student loan statements, and with the average student in 2008 graduating with over $23,000 in student loan debt, it’s no wonder why. Student loan payments, coupled with the expenses of everyday life and the difficulties college graduates face with today’s job market, can make the prospect of repaying your debt very overwhelming. Thankfully, you do have options when it comes to repaying your loans, and although these options do not apply to everyone or to most private loans, they could be a lifesaver if they apply to you.

Postponing Payments

When you leave college, your loans probably allow you a grace period of six months (or nine months for the Federal Perkins Loan) before you have to begin repaying your debt. If you are not able to make payments once your loans kick in, you usually have the ability to postpone them based on one of two options: First, you can request a deferment for your loans if you return to school on at least half time status, experience financial hardship, or enter the military on active duty.

If these conditions do not apply to your situation or if you get saddled with a loan from a sneaky or inflexible lender (think Sallie Mae and other lenders with a bad reputation), your second option is to request forbearance for up to 12 months. There is a limit, however, on the number of times you will be approved for forbearance of your loans.

Changing Repayment Plans

If your student loans are federal, you have five different options on how your loan repayment plan is to be calculated. If you cannot afford to make the payments dictated by the standard plan, you can opt for the extended plan. This extended plan reduces your payments and allows you to gradually pay off your debt over a period of 25 years, rather than the standard 10 years. This also means, however, that you’ll end up paying more interest on your loans.

The graduated repayment plan is another option. This plan reduces your payments at the beginning of the plan and then increases your payments gradually, working under the assumption that your salary will increase as you move forward in your career.

The income-contingent and income-based methods involve your debt holders examining how much money you make and determining (based on your income, your marital status, your number of children, etc.) how much you can reasonably afford to pay. Under the income plans, if you make payments on your debt for 25 years but still owe money at the end of that time period, the remainder of your loans will be discharged.

Loan Forgiveness Options

Believe it or not, there are also options that grant you forgiveness for a portion your student loan debt- sometimes up to 100% of it. This option is the Public Service Loan Forgiveness program, and while it sounds nice, it does come with a catch: You must be working in the public service sector in order for your loans to be forgiven.

Working in local government, public libraries, public schools, and non-profit organizations will help you to qualify for this program, but you must also make 120 payments on your loans before they are nullified or reduced. Whether these payments are based on the standard, graduated, or income sensitive plans is up to you, though.

Know your options before you start repaying your student loans. Yes, it will take time for you to pay off your debt, but if you qualify for any of these adjusted repayment plans, they could help to make your financial situation a lot less stressful.

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