Student Loan Repayment: 5 Key Things to Know

Congratulations to all new college graduates! Your accomplishment is significant and wonderful!

Once you've had a chance to celebrate your accomplishment, the next step is to figure out how you plan to repay your student loans. Even if you can't repay now, you need to take steps so that you don't unknowingly default on a loan. Here are some key things to know:

Credit History: Yes, your student loan repayment history will affect your credit report and scores. If you default (fail to repay) on a student loan, this information never leaves your credit report.

Know How Much You Owe: Take time to figure out how much you owe and to whom. If all your loans were from the federal government, go to the National Student Loan Data System to see all your loan information: dollar amounts owed, interest rates of loans, and who to pay.

Different Repayment Options: Depending on your financial situation, you may want to explore different repayment options such as the Income-Based Repayment Plan. This options ties your monthly payment to your income level and family size. To explore different repayment options go to the Consumer Federal Protection Bureau's website and look under Paying for College. As you answer simple questions, the website's interactive tool will direct you to the repayment option(s) that fit your situation best.

Deferment: In some situations – for example, if you're unemployed – you may not be able to immediately repay your loan. However, you may qualify to have it deferred. When a loan is deferred you don't have to pay money back, although interest likely will still accrue. While interest will add up, a loan deferment mean you won't default on your loan or hurt your credit history. Learn more about student loan deferments at the Federal Student Loan website.

Loan Forgiveness: In some situations, federal student loans may be forgiven, in part or totally. You may qualify for this if you:

  • work for a volunteer program such as AmeriCorps,
  • are in the Army National Guard,
  • teach low-income children,
  • or work to serve public interest in some other way.

Go to the website, for a good article (with lots of links) for more details.

Paying back your student loans may seem overwhelming at first. But once you have a plan it will seem much more doable. So, don't ignore your student loans. Take the steps that you need to do to either start repaying them now or defer payments until you're fully employed. Congratulations on taking the next steps to the next phase of your life!