Graduating college comes with a number of responsibilities. Many new grads feel a figurative clock ticking on tasks like finding a job or a place to live. But they also face a literal countdown on student loans.
Federal subsidized student loans require repayment six months after graduation. Before finishing school, borrowers must complete exit counseling on loan repayment. Of course, with so much else going on, students often overlook this information or forget it altogether.
[Read about student loan repayment myths that are debunked.]
In case loans haven’t been your top priority, here is a six-month plan — the same as your grace period — of steps you can take to prepare for repayment. No matter when you graduate, you can follow these steps to set yourself up for federal student loan success.
Month 1: Know What You Owe and When It’s Due
For many borrowers, the first step is the hardest: looking at the loan balance. With the grace period, it’s easy to disregard loans until you have to pay them.
Don’t fall into this trap. The sooner you know what you owe, the stronger you’ll feel when repayment starts.
Access the National Student Loan Data System to find your federal student loan totals. NSLDS is the federal government’s central database for student loan records.
Within it, you can learn how much you owe, whether your loans are subsidized or unsubsidized and more. The system will also list your servicer — the company you’ll make payments to. Now is also a smart time to contact the servicer to find out when your first payment will be due.
Month 2: Start Interest-Only Payments
In a perfect world, you would start making payments on your loans as soon as you can. But if you’re not financially ready to do this, consider at least paying off any interest that has accrued on your loans to date.
That interest will be capitalized, or added to your principal balance, when your loans enter repayment. Capitalization means you begin paying interest on top of interest. This not only increases the amount you owe each month but also how much you repay overall.
If you borrowed subsidized loans before July 1, 2012, or after June 30, 2014, they did not accrue interest while you were in school and will not during your grace period. Subsidized loans from July 1, 2012, to June 30, 2014, don’t have that grace period subsidy.
Unsubsidized loans accrue interest from the day they’re disbursed, and you will pay it sooner or later. Sooner is better, if you can.
[Learn how to reduce student loan debt by paying interest early.]
Month 3: Look at Payment Plans
A few months removed from graduation, you’ll hopefully have a job, a place to live and a good sense of your regular income and expenses. If you haven’t already, now is a great time to set up a budget.
As part of that budget, include your student loan payments — even if you’re not paying them yet. This will help you see their impact on your bottom line and any sacrifices you may need to make to accommodate them.
If the numbers won’t work, look into federal student loans’ flexible repayment plans. Eligible borrowers can shrink payments based on their income and family size, among other options. Use the U.S. Department of Education’s Repayment Estimator to model your payments under different plans.
[Discover 10 steps to develop a student loan repayment plan.]
Month 4: Review Forgiveness Programs
Depending on where you work, you may qualify for a loan forgiveness program. The most common is Public Service Loan Forgiveness, which forgives the loan balances of borrowers who make 120 eligible payments while working for 10 years at an approved employer.
If you work for a nonprofit or public sector employer, see if the organization qualifies. If so, use the PSLF Employment Certification Form to track any payments you make while working there. If it doesn’t, check out this extensive loan forgiveness e-book from the Student Loan Ranger’s parent organization, American Student Assistance®, to see if you qualify for a different program.
Month 5: Check Your Mail
At this point, you should have heard from your student loan servicer. If you haven’t — and you didn’t reach out before — contact the servicer now.
Confirm your correct contact information is on file, and check your payment due date and amount. Even if you do not hear from your servicer, you are still responsible for making all your payments on time, including the first one.
Month 6: Enroll in Auto-Pay
After taking the prior five steps, the last step in the final month of the grace period is to pay your bill — though this is actually the hardest for many borrowers.
A smart, easy way to do this is by enrolling in your servicer’s auto-pay program. This will ensure your payments are on time, and your servicer might decrease your interest rate for using this program. Check out your servicer’s website to see if it offers this benefit and to sign up for auto-pay.
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6-Month Plan to Prepare for Student Loan Repayment originally appeared on usnews.com
