November 23, 2012

Conquering Student Loan Debt: What You Need to Know about Repaying Your Loans

I recently got my Master of Business Administration (MBA) degree, which marked the highest achievement of my academic success. Awarded with a head full of business knowledge and a fancy frame-able degree, I was feeling pretty cool. But nothing rubs off that rock-star feeling quite like the letter that comes in the mail telling you it’s time to pay up. Because, if you’re like me and you took loans to finance your education, graduation doesn’t just lead to an open road, it also comes with a huge financial obligation in the form of the “D word”: debt.

I had dreaded the “D word” all my life. In fact, when I pictured debt I saw images of a ball and chain, an eternity of ramen noodle soup dinners, and a closet full of white t-shirts. So when I received that letter announcing that my payments were scheduled to begin, I took it very seriously. I decided rather than fearing the “D word,” I was going to conquer it. I sat down, researched my options, and figured out a plan. If you’re considering taking a student loan, keep reading to learn what you’ll need to know about taking a student loan and repaying your debt.

1. Post-Grad Life. If you’re thinking about taking a student loan you might want to sit down and do a cost-benefit analysis of what the degree will give you and what it will cost you. Consider things like the amount of interest you’ll be charged on your loans, your potential salary post-graduation, and what the job market looks like (now and after you graduate) in your field. From there, you can get a clearer picture of your post-grad life.

2. Grace Periods. If you take a Stafford loan (one popular type of federal student loan), you’ll have a 6-month grace period after you graduate, leave school, or drop below half-time enrollment status before you’ll need to begin repaying what you owe. Keep in mind that this is not the same for private loans (like the ones that are issued by lenders such as banks and credit unions), which often have no grace period at all. If you take a private loan to finance your education, you may be required to begin repayment during school or immediately after you graduate. Check with your lender to learn the exact terms of your loan.

I decided rather than fearing the ‘D word,’ I was going to conquer it.
3. Loan Consolidation. Loan consolidation allows you to combine your federal student loans into a single loan with one monthly payment that’s often lower than the standard payment option. However, this option usually means stretching out the payment term, which could end up costing you more in the end. But if you’re strapped for cash or think you may be in the future, this may be a viable option. To learn more about loan consolidation, visit the Federal Student Aid website.

4. Interest Rates. Federal loans (i.e., those given out by the government) often have lower interest rates than private ones (i.e., those given out by a bank). For this reason, it may make sense to dedicate more money to paying off your private loans (and thus chipping away at the more expensive debt) in the beginning.

5. Repayment Plans. Unless you say otherwise, your provider will automatically enroll you in their standard re-payment plan. This is a payment option that requires equal monthly payments over a specified period of time. If you opt for a different re-payment plan, be sure to read the fine print. There are plans such as a Graduated Repayment Plan which may be beneficial to you if your salary is low now and you expect it to jump in a few years (of course, you will pay for this in interest in the latter years). Remember, all of these different options usually have caveats, so read them carefully and figure out what makes the most sense for you. You can learn more about the different repayment plan options on the Federal Student Aid website.

6. Overpayment. If you can afford it, you might want to consider paying a bit more than the agreed upon amount each month. But when you do, be sure to specify in writing that you want the extra amount applied to the principal, thereby reducing the balance of your loan.

Once I researched all the basics of student loan repayment, I created a spreadsheet. I input my salary, monthly expenses, and the amount I put towards savings each month. From there I landed on an amount that I was going to devote to my student loan payments every month. For me, this amount was more than required, but I chose this because I wanted to take an aggressive-but-manageable approach to paying back my student loans. In the end I decided I still wanted to be able to do the things that I love—dinner, shopping, trips—but less extravagantly so that I could prioritize my debt. Once I had my plan in place, the “D word” didn’t seem so bad.

Want to take a step towards conquering your own student loan debt? Track down your loans on the National Student Loan Data System and then learn all about repaying your student loans on the Federal Student Aid website.

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The above statements do not represent those of Weston Legal or Michael Weston and they have not been reviewed for accuracy. The statements have been published by a third party and are being linked to by our website only because they contain information relating to debt. Nothing in this article should be construed as legal advice given by Weston Legal or Michael Weston. To view the source of the article, please following the link to the website that published the article. Articles written by Michael W. Weston can be viewed here: To report any problem with this article please email studentloan@westonlegal.com