Diving into repayment of your student loans may seem overwhelming. Rather than taking a backseat for the ride, do your best to get in the driver’s seat. The different steps and plans you choose along the way may affect how much you will pay overall. The sooner you do this, the better. Here is some information to help you get started.
What types of student loans do you have?
One of the first things you’ll need to know is what types of loans you have. Federal student loans are the ones you received through the Department of Education. Private or alternative student loans are through any other lender. You can access a list of your federal student loans by logging in to the National Student Loan Data System (NSLDS®) site. This list will provide the types of loans you have. It also provides the amounts and a contact for each loan, also referred to as your loan servicer. If you are unsure if you have private student loans, they may appear on your credit report along with the lender’s contact information. You can request a copy of your credit report every 12 months from each of the credit reporting companies at no cost.
Do you have a grace period?
Many student loans will offer a six-month grace period. During the grace period, payments are not required on the loan; however, interest continues to accumulate. The grace period helps you while you transition from college into your career and toward successfully repaying your student loans. Check with your loan servicer to find out if you’re eligible for a grace period after you graduate, fall below half-time enrollment or withdraw from school.
If you do have a grace period, it’s a great time to make payments–if you can–toward any interest that is outstanding on your loan. It’s also a great time to start looking into your repayment plan options.
What are your repayment plan options?
Depending on your loan type, amount and servicer, you’ll have different repayment plan options. Your loan servicer may have a plan they automatically start you on. However, you can request a different plan at any time.
- Standard Repayment Plan: This plan may automatically be assigned unless you request another one. This plan, you have a minimum monthly payment, and the loan must be repaid within 10 years.
- Graduated Repayment Plan: Under this plan, your loan must be repaid within 10 years. Your plan payments start lower and continue to increase over time, usually every two years. Compared to the standard repayment plan, you may pay more over time.
- Extended Repayment Plan: This plan allows you to extend the time you have to repay your loan from 10 years to 25 years. If you have more than $30,000 in student loans, you may be eligible for this plan. Choosing to extend your repayment term will reduce your monthly payment. However, it will cost you more in interest charges than if you repaid the loan within 10 years.
- Income-Driven Repayment: Federal student loans offer plans that are based on your income and family size. There are four different plans that you may be eligible for: Revised Pay As You Earn Repayment Plan (REPAYE Plan), Pay As You Earn Repayment Plan (PAYE Plan), Income-Based Repayment Plan (IBR Plan), and Income-Contingent Repayment Plan (ICR Plan). To repay your federal student loans under one of these plans, you must complete an application.
To find more information about repayment plan options for your loans, visit the Student Aid website for your federal student loans and contact your servicer for your private loans. Bank of North Dakota (BND) offers standard and extended repayment plans as well as a refinance option. You can also use BND’s repayment calculator to see how much a loan will cost you over time. Visit the BND’s website for more information.
Other ways to reduce the overall cost of your loans
- Make larger payments when you can. By paying more than your minimum monthly payment, you could reduce your principal balance faster. A smaller principal balance reduces the amount of interest you are charged. While BND does not charge any prepayment penalties if a borrower repays their loan sooner than the loan term, there may be some lenders that do. If you plan to repay your loan earlier than the repayment term, contact your servicer to ask if there are prepayment penalties to avoid additional charges.
- Sign up to have your payment automatically withdrawn. Many lenders and loan servicers, including BND, offer benefits, like 0.25% off your interest, if you have them automatically withdraw your payment every month. At BND, you can also choose the withdrawal date and frequency!
By researching your options and making informed decisions, you can be more in control of your student loan repayment and how much it costs you overall.