How to Get Your Student Loan on Track

Taking the time to do some research can have a positive effect on your balance.

When Dianna Brawn graduated from Central Michigan University last year, she was certain about two of her current life goals that would affect her now. The first was finding an awesome job, and the second was getting her student loans paid off.

Like so many of the recent grads, Brawn is feeling the pressure of her student loan debt. For her, the total is around $35,000, and while she may have the option for a long-term repayment plan, she’s leery about stretching her payment date further into the future.

Brawn says, “If 20 years from now I will have to still be making student loan payments, the amount of interest I will be paying will be huge, and that really, really bothers me.”

Brawn is not the only student that wants to get rid of her debt burden. A poll that was recently conducted by Opens Overlay found that around 30% of millennials said their student loan payoff was their biggest financial challenge. Another research report, recently released by J.P. Morgan Asset Management, says that in the mid-1990s the average student loan balance was about 20% of a recent graduate’s median income; today it’s closer to 50%.

How a student loan works

For a great deal of students, their loans come from various sources, including federal loans like Perkins, Stafford, and PLUS loans that have a fixed interest rate and a specific time for repayment to start.

For example, a Perkins loans has a nine-month deferment period, compared to six months for Stafford and PLUS. Deferral can help some students, because it provides them with a bit of a breather from the time they earn their diploma to the time they receive their first paycheck.

Students often also have private loans which may be cosigned by their parents. Unlike subsidized federal loans where the government is paying the interest that is building up while a person is in school, private loans are generally not subsidized, which means you will be paying the interest that is building while you are attending school.

According to Heather Jarvis, a national student loan expert, step one in the repayment of your student loan is for you to understand the total amount you owe, how long your deferral period is, and the role of the interest. Jarvis frequently talks on the subject of student loans and plays a key role in affecting change to expand the student debt relief programs.

“When you know your liabilities within the context of your overall larger financial picture, that’s when you can start setting goals,” says Jarvis. “For federal student loans, there are lots of flexible repayment options. A little research goes a long way.”

Weigh your options

Before you find a place in your monthly budget for your monthly student loan payment, Jarvis suggests that you become aware of resources like these:

The U.S. Department of Education provides the online Repayment Estimator tool to estimate your initial monthly payments, interest totals, repayment plan cost comparisons, and repayment plan eligibility.

Public service loan forgiveness encourages graduates to keep public service jobs in mind, because after you have made 120 qualifying payments, this program can pay the remaining balance on some of your federal loans.

The Income-driven repayment plan is designed to establish your federal monthly student loan payment at an affordable amount for you that is based on your income and the size of your family. There are three plans offered, with repayment periods around 20 years. The monthly payment you are required to make can increase or decrease depending on your income changes over the years.

Loan repayment assistance programs are offered through universities and colleges. For example, Penny Nickelson says she graduated from Duke University Law School with around $150,000 in student loan debt. She was smart and took advantage of the program that Duke University offers to help their Graduates by repaying some of their loan balances if their income is less than $75,000 annually. Duke University says the program is there for those students whose desire is to take lower-paying government and public-interest jobs, but because of their debt, they feel like they have to seek higher-paying positions.

It can be a real value to you if you take the time to learn about the various nuances of student loans – for both paying your loans off quicker and also for your emotional well-being.

Brawn says, “The more research I do, the more optimistic I am, because I feel like I am at least in control a little bit rather than being overwhelmed by my student loan debt. When you research, it all seems a lot less scary.”