Making a Repayment Plan — and Sticking to it

Chances are that as an international student, you had to take out a number of student loans. Now that you’ve graduated, you’re faced with the rather daunting task of paying them back. This can seem overwhelming, but this article will seek to help you make a repayment plan, and stick to it.

Face your debt

The first step is to find out exactly what you’re dealing with. It can be tempting to remain in the dark as to how much you owe, but you’ll find out that knowing is always better than not.

Contact your loan servicer

After you find out how much you owe, the next step is to find out exactly who you’ll be sending your checks to: your student loan servicer. This person is your first point of contact for any questions or changes of address you might have, so don’t hesitate to reach out. Building a successful repayment strategy for student loan debt is essential for shaping your financial future.

Pick a repayment plan

You have a number of options when it comes to repayment plans. Make sure to pick the one that works best for you and your specific needs. Possible plans include:

Standard Repayment

You will pay a fixed monthly amount for a loan term of up to 10 years. The loan term may be shorter than 10 years, depending on the amount of the loan. There is a $50 minimum monthly payment.

Extended Repayment

This is similar to the standard repayment plan, but allows a loan term of 12 to 30 years, depending on the total amount borrowed. This reduces the size of each payment, but increases the total amount repaid over the lifetime of the loan.

Graduated Repayment

This plan starts out with lower payments which gradually increase every two years. The loan term is 12 to 30 years, depending on the size of the loan.

Income-Contingent
Repayment

Payments under this plan are based on your income and total amount of debt. Payments are adjusted each year as your income changes. The loan term is up to 25 years. At the end of 25 years, any remaining balance on the loan will be discharged. The write-off of the remaining balance at the end of the 25 years is taxable under current law. Income-Contingent Repayment is available only for Direct Loan borrowers.

Income-Sensitive
Repayment

Federal Family Education Loan Programs (FFELP) which is only available to US students offer borrowers income-sensitive repayment, which pegs the monthly payments to a percentage of gross monthly income. The loan term for this plan is 10 years.

Income-Based
Repayment

This plan is available in both the Direct Loan and FFEL programs offered only to US students. It is similar to income-contingent repayment, but caps the monthly payments at a lower percentage of a narrower definition of discretionary income.

Stick to your budget

Once you’ve determined your monthly obligation, it’s important that you keep track of your other spending to make sure that you can pay all of your bills. Websites such as Mint.com can help you with your budget. Not sure how to get started, learn more on how to budget for school.

Prioritize your loan payments

You may find that as you budget, you will have to forego activities or events to pay off your debt. Prioritizing may mean minimizing other forms of debt, or chipping away at student loans before tackling other types of debt, if possible. Student loans are one of the few debt obligations that are rarely forgiven in bankruptcy filings.

Focus on the future

While scrimping or sacrificing that make your monthly student loan payments, it can help to remind yourself exactly what you’re paying for. You’ve received a great education that has opened up a huge number of opportunities for you. Remember that it’s all worth it in the long run.