Graduation Season: Paying Off Student Loans


It’s graduation season and while the accomplishment is new and celebrations are still fresh for many for you, it’s never too early to start thinking about paying off  student loans. In fact, if you have already secured a job, consider making a repayment plan while you are still within your grace period. The student loan grace period is typically a six-month time frame between graduation and when your first student loan payment is due. Small loans of a couple thousand can be wiped out completely in six months if you can afford to pay them aggressively along with your other expenses and it can be a great way to save on interest charges.

Consider Consolidating

It can be difficult to keep track of individual loans and payments. If you are unable to pay off your loans within the grace period and have three or more loans to pay, consider consolidating. Cindy Wilson, director, field consulting group at TIAA says, “A consolidation loan combines all of your student loans into one monthly payment. One loan means only one due date and one check to write. A consolidated loan may have a lower interest rate. While there are benefits to a consolidation loan, keep in mind that you increase the length of your repayment period and you will also make more payments and may pay more in interest.”

Set Automatic Payments

The best way to never forget to make your loan payment is to set up automatic payments. This way each month your payment will be made by the due date. This method can help you maintain your credit rating and could potentially reduce your interest rate. Many loan servicers offer an interest rate reduction of ¼ of a percent if you agree to make automatic payments for one year. That adds up to a significant savings over the life of the loan.

Payoff Opportunities

If your payments are relatively high compared to your income, you should definitely consider the Income Based Repayment (IBR) option. This repayment option is designed to make your payments more manageable while your income is low and the payment amount increases as your income grows. The IBR also states that after 120 consecutive payments the remaining balances are to be cancelled. You may have heard that loan forgiveness was only available for those in public service or worked for a nonprofit, but under the IBR your remaining balance will be cancelled no matter your industry. Wilson, from TIAA also shared, “some employers offer student loan payoff programs as an employee benefit. You may have to agree to work at the company for a certain number of years to qualify.  However, if you enjoy what you do, the commitment is worth it.”

Is it too soon to start thinking about student loans? What’s your repayment plan?


×