It is exciting. You have just graduated college, started a new career and are truly “adulting”. The days seem to fly by as your new job takes off. Flash forward 6 months and you wake up in the night in a cold sweat. Your student loan repayment is beginning soon, and you don’t know what to do. Thankfully, you think back to reading this blog and are more than prepared to handle your student loan payment.
Student Loan Repayment Basics
Student debt has become a very scary term in society today. While the price of college attendance rises it becomes easier to have a large student loan balance after graduation. However, with some planning your student loan repayment could be a very easy process. First, you need to identify your loan servicer(s). This can be done from the www.studentaid.gov. You must make an account with your servicer to make payments, manage repayment plans and give the servicer the other information that they require. Then it is important to communicate with your loan servicer as many of them will work with you if you are late on a payment or need to change repayment plans.
Once you have selected the repayment plan that is right for you, it is important to build that payment amount into your monthly budget. This will help make sure that you have enough money to make a payment every month. If you can afford it, putting more money towards your student loans every month can really reduce the total amount you will have to pay and the total amount of interest you will have to pay. Be sure to talk to your servicer before you send in an extra payment in. Servicers will often times let you select which loan you want the extra payment to go to. Paying down your highest interest rate debt first will save you a lot of money in the long run.
There are countless ways to pay down your loans. Recently, a few counselors at Powercat Financial discovered an app called ChangED, which will help you to make extra payments towards your loans. It works by rounding up your spare change from credit purchases. So if you bought something worth $9.75, ChangED would round that charge up to $10 and put the excess 25 cents into a separate account. Once your spare change total hits $100, the app will create a payment directly to your student loan servicer.
Payment Plans
Another important aspect of your student loan repayment is the payment plan that you select. There are several different options including standard, graduated, income-based repayment and Pay As You Earn (PAYE). When your repayment period begins, you’re automatically put into standard repayment, which is a flat payment across the 10-year repayment term. If you elect to change your repayment plan, you will have to talk to your servicer. A graduated repayment plan goes off of the assumption that you earn more as you progress in your career, therefore payments start at a lower amount and grow progressively throughout the 10-year term. PAYE and income-based repayments are a little trickier. They are calculated off of your salary and ability to repay. For instance, you might be required to pay 10% of you discretionary income. Keep in mind that if you pick a repayment plan with a longer term or one that you pay less early on will result in more accrued interest and therefore a larger amount you have to pay back.
Conclusion
So, as you begin your new career, don’t get blindsided by your student loan payments. With a little planning you can make your student loan balance a very manageable thing. If you have any questions regarding student loans or any other financial topic, please contact Powercat Financial or simply set up an appointment on our website at https://www.k-state.edu/powercatfinancial/.
Garrett Jackson
Peer Counselor I
Powercat Financial
