When Student Loans Come Due: A 7-Step Plan for Recent College Grads

Attention, Class of 2010: the clock is ticking. If you graduated college in May and have federal Stafford loans (subsidized, unsubsidized, or both), your six-month grace period before student loan payments start ends this month.

Have you carved out a space in your budget for your student loan payment? Don’t panic. Follow the seven steps in this article, and you can secure an affordable payment on any budget. You’ll also learn how to postpone payments if you need it.

Gather a List of All Your Servicers

Knowing how much you owe and to whom is the first step towards repaying student loan debt. That sounds simpler than it really is. As of July 1, 2010, all federal student loans are issued by the federal government’s direct loan program.

But if you borrowed before that — and if you graduated college this year, then you did — you could also borrow federal student loans through other lenders, via the Federal Family Education Loan program (FFEL). The rates and the majority of the contract terms on these loans were the same as those of the federal government’s program.  But there is the logistical hassle of borrowing through different lenders each semester or academic year.

The good news is, you can find the contact information, total amounts borrowed and interest accrued for any federal student loan relatively easy: just log into the National Student Loan Data System.

Look for the numbers of the loan servicers instead of lenders on your Student Loan Data System report. Think of the servicers as the customer service representatives for lenders.

Determine Timing

According to the Department of Education, your first payment can start anytime after your grace period ends. Before you start comparing repayment plans, find out when your first payment(s) are due. You don’t want a late payment on your credit report because you were analyzing various repayment plans long after your due date. If you haven’t received a letter with your due date and the amount of your payment, call your servicers immediately and ask for your due date information. Also ask about current processing time if you decide to change this payment plan to a more affordable one.

Use Calculators and Review Payment Plan Options

Now that you know how much you owe and to whom, you can calculate your payments with different payment options. You can find calculators for the three main types of loans on the Articles and Resources page of Graduationdebt.org. To learn about the major types of repayment plans, take a look at “Take Charge of Your Student Loans: Choosing the Best Repayment Plan” at Mint.com.

If you can’t afford to pay off your loan in 10 years, pick a different plan. Don’t worry about the length of the payment plan. You can pay off your loan early if you can afford it a later date, but having a monthly payment that’s too high for your budget can prevent saving money for emergencies or even push you further in debt.

Budget with Your Student Loan Payment Included

If you use Mint.com, add in a category in your budget for your student loan payment before it’s due.   See where you stand by different payment plans. You can also do this with your paper budget as well. Since you won’t have months to review your budget, you’ll have to take the speediest route to reviewing and tweaking your budget.

Choose a Repayment Plan

Once you’ve run the numbers on your repayment plan options, it’s time to pick a plan. Call your servicer at least five days prior to the due date to choose a plan: the sooner, the better. Processing time and form requirements vary depending on your servicer. You always have to fill out an online or paper form for consolidation, but not always for changing to an extended payment plan. For instance, Sallie Mae (SLM) currently doesn’t require paperwork for extending the length of your loan repayment, but Direct Loans does.

Temporary Payment Reprieves

If your budget isn’t ready for your student loan payment just yet or the student loan repayment option change you request will not be completed before your first payment is due, you still have forbearance and deferment when you need it – temporary payment reprieves.  Talk to your servicer about the best option for your situation.

Follow Up

Follow up with your servicer before your first payment to insure any repayment plan changes are processed. Periodically review your budget goals to see when you may need a payment reprieve or a new payment plan. How well you self-monitor your loans determines how stressful paying off your student loans will be.

Reyna Gobel is a freelance journalist who specializes in financial fitness. She is also the author of Graduation Debt: How To Manage Student Loans and Live Your Life.