How to Kick Off Your Student Loan Repayments

For students who take out loans to finance their education, the built-in grace period most loans carry can serve as early relief on the path to repayment. For six months after graduation, loan holders can search for jobs and launch the next chapters of their lives without immediately thinking about their looming financial burdens.

For May 2011 graduates, that means the breather is already over: It’s time to start paying back your loans.

Colleges and universities are required by law to counsel loan-bearing students before they graduate, in the hopes that they leave school well informed about their financial burdens. At some schools, the programs are comprehensive and include follow-up help; Denison University in Ohio, for example, not only creates individual debt portfolios while students are enrolled, but counselors also reach out if they see any former student has sunk into delinquency.

[Consider your options to avoid default.]

But since the exit counseling process varies by school, some students may not be privy to comprehensive help—or may simply be confused about their payment and refinancing options.

"[Exit counseling interviews] are designed to be awareness moments, and it’s the last physical contact the borrower has with the school—but [they took place] six months ago," notes Patrick Kandianis, cofounder of SimpleTuition. "Especially in this economy, over the last six months, a whole heck of a lot of stuff has gone on ... A lot of folks probably don’t understand what their repayment amount is, where all their loans are, and if they have federal loans and private loans, it can be especially confusing."

If you’re still unsure about how to proceed with your loan repayments, use these tips to gain some clarity:

1. Update your information: It may sound simple, but as college students move home or move out, their bills won’t get into the right hands unless their addresses are up to date. After you update your address when you move, remember to check both your mailbox and your inbox, advises Denison University Director of Financial Aid Nancy Hoover.

"A lot of correspondence does come through E-mail, but some things need to come through the mail," Hoover says. "[Students] need to be aware of that and just keep things current."

2. Consider special consolidation: It won't drastically change your interest rates or timeframe, but a new proposal by President Obama includes an option to put all your federal loans in one place. Given the changes in loan granting over the last few years, it's feasible that a student or recent graduate will have federal loans in multiple places—making this an attractive option for many, says SimpleTuition's Kandianis.

"The special consolidation was made especially for this year's class, next year's class, and maybe even last year's class, depending on how they borrowed," he says. "It came out of complaints from the school channel on the exit counseling side ... [schools] realized, "'We've got kids with debt sitting all over the place, and they're not going to be able to figure this stuff out.'" 

Instead of trying to keep track of your separate bills and making multiple monthly payments, the special consolidation option will funnel all your loans together. When you make one payment, money is disbursed among all your outstanding federal loans. (Private loans are not included, so it's still up to students to communicate directly with their private loan servicers.) 

[Read more about what Obama's student loan plan means for you.] 

3. Utilize web resources: Though navigating your repayment options can be tricky, take solace in the fact that there are ways to get help. Track your loans through the government-provided National Student Loan Data System, and navigate repayment options with easy-to-follow guides. Another free site unveiled this week, Pay Back Smarter by SimpleTuition, allows loan holders to virtually experiment with different forms of consolidation and repayment. 

[Find out if Income-Based Repayment is right for you.] 

4. Know whom to contact: In addition to online guidance, it's worth a try to contact your alma mater's financial aid office if you're feeling swamped or confused. At Grambling State University in Louisiana, for instance, students and graduates alike are offered in-person or telephone counseling, and they'll receive regular reminders in the mail about upcoming payments. 

"Our office is always open and available for undergraduates, graduates, and alumni," says Albert Tezeno, interim associate vice president of enrollment management at Grambling State. "We don't want them to default. It's a hurt on the university and the student, so we both lose in this situation—and there's so many [other] options." 

[Focus on the positives of student loans.] 

5. Reflect on your payments: For a typical graduate, a loan repayment that's 10 percent of your salary is usually a manageable amount, experts say. If your payments are currently too high for your budget, consider your options to refinance your loans. (Keep in mind, though, that if you extend your loans over a longer period of time, you'll ultimately end up paying more.) 

Or, if you have some wiggle room in your current budget, consider bumping up your loan payments. Chipping away from your outstanding debt when you can swing it will get you relief from your debt burden even faster. 

"If you are doing OK and you've got a decent job, start making extra payments," Kandianis recommends. "Even $50 a month extra payment on your debt ... can significantly reduce your payment obligation." 

Have more questions about student loans? Find answers in the U.S. News College Loan center.