Saturday, July 13, 2024

Mastering Your Student Loan Repayment Strategy

Get on the fast-track toward becoming debt-free.

Student loan repayment can be a real headache, especially since it can take a decade for a college student to clear around $39,000 of debt. But hey, there’s no need to worry. We’ve got your back with nine strategies to crush that student loan repayment and fast-track your debt-free future. 🤩

What Is Student Loan Debt?

A stressed woman checking and calculating student loan repayments on the kitchen table
Read and understand the terms and conditions of student loan contracts to avoid unnecessary stress about bills and payments for the next 10 or so years after graduation. Photo: wayhomestudio/Freepik

Student loan debt is money borrowed to pay for college and must be repaid with interest after graduation, leaving school (yup, even if you dropped out), or dropping below half-time enrollment. 

To apply for federal student loans, fill out the Free Application for Federal Student Aid (FAFSA). Government offerings typically have lower interest rates, income-driven repayment plans, and the potential for loan forgiveness. Meanwhile, you could also apply directly to a lending company for private student loans, which may provide higher loan amounts and variable interest rates but often require a credit check and co-signer. 

READ MORE: 11 Things to Know About Student Loans Before Going Into Debt

Student Loan Repayment 101

When is the student loan grace period? Generally, students have a six-month grace period after college graduation or leaving school before being required to start repaying student loans. Federal student loan borrowers are initially enrolled in the Standard Repayment Plan (discussed below), but they can sign up for other plans once the grace period is up and they cannot afford full monthly payments. 

READ MORE: How to Pay for College: 12 Surefire Strategies

An Asian female college student calculates her debt to prepare her student loan repayment strategy
Build funds for loan repayment as early as your freshman year instead of preparing them during the short student loan grace period. Photo: tirachardz/Freepik

Common Types of Student Loan Repayment Plans

Standard Repayment Plan

This is the most basic repayment plan. Under it, you pay a fixed amount every month for 10 years and less interest over time. Federal student loan borrowers are automatically enrolled in this plan. 

Graduated Repayment Plan

This plan for federal student loans starts with lower monthly payments that increase every two years for a total of 10 years. You can choose this if you’re confident your income will grow steadily over time. 

Extended Repayment Plan

As the name suggests, this plan allows you to repay your federal student loans in 10 years or up to 25 years if you owe more than $30,000. Your monthly payments are lowered compared to the standard plan, but you’ll pay more in interest.

Income-Driven Repayment Plans

These plans usually have affordable monthly payments based on five to 20 percent of your discretionary income and family size. Also, your remaining loan balance will be forgiven after 20 to 25 years of repayment.

This comes in four types:

  • Saving on a Valuable Education or SAVE (formerly known as the Revised Pay As You Earn or REPAYE): Available for most loans, with $0 monthly payments for individual incomes below $32,800 or less than $67,500 for a family of four. Meanwhile, remaining balances from loans worth $12,000 or less will be forgiven after a decade of payments.
  • Pay As You Earn or PAYE: Monthly payments are based on 10 percent of your discretionary income for 20 years. To be eligible, you must either have taken out your first federal student loan after October 1, 2007 or received a Direct Loan or Direct Consolidation Loan on or after October 1, 2011.
  • Income-Based Repayment or IBR: Your monthly payments will depend on when you borrowed student loans. If your loans are pre-July 1, 2014, expect 15 percent of your discretionary income to go towards payments. For loans after that date, it’s typically 10 percent.
  • Income-contingent repayment or ICR: Got a Direct Loan? You may be eligible for the ICR plan, which calculates monthly payments on your federal student loans based on either 20 percent of your discretionary income for 25 years or the amount you’d pay on a fixed 12-year plan adjusted for income, whichever is lower.

Note: These plans require you to recertify every year to give updates on your job status, income, and family size. However, you can also update at any time. 

Graduated Repayment Period (GRP)

If you cannot afford full student loan repayment after graduation, enroll in the GRP. Federal student loans taken out on or after July 1, 2013, can make you eligible for interest-only payments one year after the end of the grace period.

Note: Different private lenders may have various loan modification programs and repayment plans on offer, so always inquire about the best options for your situation. 

Student Loan Repayment Strategies for US College Students

With the different repayment plans done and dusted, let’s explore some strategies for repaying your student loans:

A brunette female college student works on her freelance graphic design work to earn extra cash for faster student loan repayment
Keep track of your income from work and gigs and your student loan payment schedule to stay organized. Photo: lookstudio/Freepik

1. Start Repaying Your Loans During the Grace Period 

If you’re working part-time or doing side hustles, allocate a sizeable portion of your earnings to repaying your student loans during the grace period. This will help you save on interest and pay off your student loans early. 

READ MORE: These 17 College Degrees Have the Highest Starting Salaries

Inform your loan provider about your plan to pay more than the minimum, which will be applied to the principal balance instead of the next month’s payment. You could also opt to pay biweekly instead of monthly to make a total of 13 full payments annually instead of only 12. 

Note: Always inquire about how your money will be distributed. Some lenders may allocate a portion of your principal payment to pay off the required interest. 

2. Refinance Your Student Loans

Let’s say you have a good credit score (at least 650) and a stable income in your twenties. Good news: You can refinance existing student loans (private, federal, or both) to get a new one with lower interest rates or monthly payments. 

Your lender will pay off your student loans and replace them with a new loan under different conditions. However, when refinancing federal student loans with a private lender, you may be ineligible for government benefits like loan forgiveness

Good to know: Students with poor credit can still qualify if they apply with a co-signer with a good credit score, but make sure you can repay your debts as your co-signer is equally liable.

3. Consolidate Your Student Loans 

A curly-haired male college student fills up the online application for student loan consolidation for repayment
Do you have a lot of federal student loan payment schedules to remember? Consolidating them may be a good student loan repayment strategy to ease the mental burden. Photo: Freepik

Applying for a direct consolidation loan allows you to simplify multiple federal student loans with varying terms. The government combines your existing federal loans into one single loan with a fixed interest rate. 

While this doesn’t typically save on interest rates as it uses the weighted average of your loans’ interest rates rounded up to the nearest one-eighth of one percent, you can qualify for federal perks such as loan forgiveness and income-driven repayment plans

Note: Private student loans cannot be consolidated with federal student loans. If you have both loan types, you’ll have to consolidate them separately: go to a private lender for private loans and the government for federal loans.

4. Take Advantage of Loan Forgiveness Programs 

Did you know there are more than 10 loan forgiveness programs for federal student loans in the US? This strategy is best for borrowers who work in certain public service fields, such as nurses, teachers, and military personnel. 

For example, government employees and those in qualifying non-profits with 120 loan payments can have the remaining balance forgiven through the Public Service Loan Forgiveness. Similar programs are also available to students who have become disabled or attended colleges that have closed down. 

5. Enroll in Autopay 

Graduating college, moving apartments, or dealing with daily expenses can make it easy to lose track of student loan payments unless you’ve set up automated payments. 

Assess your budget first to allocate funds for student loan repayment, then enroll in your loan service provider’s autopayment program to allow them to withdraw monthly payments from your bank account. This can help avoid unintentional overspending, missing due dates, and incurring late fees.

Good to know: Lenders may offer a discount, typically a 0.25 percent interest rate, for setting up autopay. If you apply this to a $30,000 debt over 10 years at a 5.50 percent interest rate, you can save $750 in total interest. 

6. Consider Income-Driven Repayment Plans 

Federal student loan borrowers with financial trouble can apply for income-driven repayment plans. These plans allow you to pay off your debt based on a percentage of your discretionary income and family size

Provide documentation of your income status to set up or renew your plan annually. When approved, expect to pay as low as $0 but with an increased total interest paid over the life of the loan due to extended repayment periods.

7. Apply Windfalls to Loan Balances 

Received a tax refund, a salary bonus, or a cash gift? These might be better used to pay off your loan balance, especially prioritizing those with higher interest. 

Similar to changes like making extra payments, notify your loan provider that this is a windfall you want to apply to your principal balance. This form of financial discipline can get you to pay less and finish off your debts earlier. 

8. Seek Employer Assistance 

Check whether a potential job offers student loan assistance, such as matching contributions or repayment assistance, in their benefits package. This might be advertised on the job posting or can be specified with HR during your interview.

Companies may require you to stay with them for a certain period in exchange for this. The US government and huge private companies like Google and Aetna are known to provide these to retain talent. 

9. Go for Deferment or Forbearance

Losing a job or coping with a huge medical bill affects your ability to pay off student loans. Thankfully, you can do a short-term temporary pause on payments to avoid default or ruining your credit score when you apply for deferment or forbearance from your lender.

Students with subsidized federal student loans and Perkins loans can go for deferment as interest doesn’t accrue. It also applies to specific qualifications, such as unemployment, active-duty military, or cancer treatment, to name a few.

If you don’t qualify for the former, apply for forbearance. However, interest continues to accrue on all loans, even during your forbearance period of up to a year, which can be renewed for three years. 

Making Your Student Loan Payments

You can typically choose between online payments, direct bank transfers, or checks to make your student loan payments. Make sure to keep accurate records of all transactions and regularly check your loan account to ensure your payments are being applied correctly.


Mastering student loan repayment strategies requires knowing all available options from where you can make informed decisions and pave the way toward financial freedom. 

Don’t hesitate to consult with a financial advisor to tailor these strategies to your personal circumstances to get the best outcome. 

Student Loan Repayment Strategies: Frequently Asked Questions

When does student loan repayment start?

Student loan repayment generally starts six months after you graduate or leave college. However, you can start repaying your loans during the grace period to save money on interest.

How to pay student loans?

What are the available student loan repayment options?

Which student loan repayment plan is best?

Can you change your student loan repayment plan?

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