7 Tips for Repaying Your Student Loans

Many college seniors, who are on the verge of graduating, probably thought this day would never arrive.

I'm not talking about their graduation day. I'm referring to the time when they would have to start repaying their student loans. With the economy still in a funk and unemployment remaining high, this is a scary time to be contemplating all that student debt.

The typical student who graduated in 2009 and borrowed for college finished school with an average debt of $24,000, according to a report from the Project on Student Debt. I'd argue that this amount isn't bad when you consider that, in return, the borrower has received a college degree.

[Read 6 savings tips for college graduates.]

Regardless of how much graduates owe, they need to make sure they play it smart when they begin repaying their loans. Here are seven things they need to keep in mind:

1. Repay your student loans automatically: Missing payments can get you into financial trouble, but it's very common. According to Fastweb, 25 percent to 33 percent of borrowers are late or delinquent with their first loan payment. Setting up payments automatically through your bank account should dramatically reduce the chances of late or missing checks.

2. Aim for 10 years: The traditional repayment period for student loans is 10 years and ideally you'll be able to pay off all your debt within that time period. If you end up struggling with your monthly payments, however, you could stretch out your loans to 20 or even 30 years. Your monthly payments will become more manageable, but you will end up paying a lot more in interest.

Here are examples that illustrate the extra interest you'll pay by extending your loan. Let's say you owe $24,000 in federal Stafford Loans at 6.8 percent interest. If you pay over 10 years, you will cover $9,143 in interest. Lengthen the loan to 20 years and the interest tab will jump to $19,969. And if stretch your loan out 30 years, you will face interest of $32,328.

You can do your own math with a loan calculator, such as this one from FinAid.

[Get tips and tools for managing student loans.]

3. Stay organized: If you have multiple student loans it can be a challenge to keep track of them. It's easy, however, if you use the government's National Student Loan Data System, which tracks all your federal student loans.

4. Pay off the loans with the highest interest rates first: Luckily, you won't get penalized for speeding up the repayment of a student loan. Consequently, you'll want to use any extra cash to pay off the loan with the highest interest rate first.

5. Consider IBR: If you're struggling with your loans, a potential option is the federal Income-Based Repayment program. Essentially, the IBR program allows a borrower to repay his or her federal loans based on what's affordable rather than what is owed. This option allows your monthly payment to be capped at 15 percent of your discretionary income.

6. Keep abreast of student loan developments: I'd recommend that you occasionally visit two websites devoted college debt issues that could directly impact you: Project on Student Debt and the National Consumer Law Center's Student Loan Borrower Assistance Project.

7. Contact the Federal Student Aid Ombudsman: If you end up in a dispute with your lender, the Federal Student Aid Ombudsman may be able to help resolve the problem. You can reach the ombudsman by E-mail at fsaombudsmanoffice@ed.gov.