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4 tips before you start paying your student loans

Avoid anxiety by preparing before your first payment is due.

Your first payment is only one in a long series you'll make over your loan term. But starting out on the right foot can give you the confidence you need to tackle your student debt.

Tip 1: Know where and when to make payments

The federal government doesn't handle its own loans — instead a loan servicer is assigned to you. This is a rep for the company you'll pay each month, and who you'll contact if you have any questions or run into any problems.

If you took out a private loan, you may be paying your lender directly — or it could also work through a servicer. So before you graduate, or during your grace period, check to see where your loan payments need to be sent.

Either way, you should know when your first payment is due. And if your lender offers it — and your finances are stable enough to use it — take advantage of autopay. Monthly repayments will be drawn directly from your account each month, and you may even receive a discount on your APR.

Tip 2: Consider making more payments to save on interest

Student loans often have a six-month grace period before you need to make your first payment. The clock starts ticking after you graduate, drop to half-time status or are no longer enrolled in classes. And while it does give you the opportunity to find a job and get your financial life in order, interest will continue accruing on most loans.

In addition, you'll pay more toward interest with your first repayments than your repayments a few years out. You can limit the amount you pay in interest through two methods:

  • Early payments. You don't have to wait until the end of your grace period to start paying your loan. You can make monthly payments ahead of schedule, but remember: Your grace period ends when you start paying. So unless you have a steady stream of income, don't be afraid to hold off.
  • Extra monthly payments. Rather than making one large monthly payment, split it into two. It may not seem like much, but you'll end up making 13 payments in a year rather than 12. This reduces the interest you owe and cuts 10 months off of a 10-year loan term.

Tip 3: Switch payment plans when necessary

You can change your federal repayment plan whenever you need. If you know you won't be able to afford your bill, there are a few options that might be worth looking into.

You'll be able to choose a longer loan term, payments that increase over time or payments based on your income. Whichever you settle on, you can lower your monthly payment.

Your options are more limited with private student loans. However, you can still contact your lender and ask if there are any ways you can reduce your monthly repayments to make your loan more affordable.

Tip 4: Look into loan forgiveness

Not everyone is eligible for loan forgiveness — and even if you are, it's a long 120-payment road toward it. But if you work at a government job or with a nonprofit, you may be eligible for Public Service Loan Forgiveness (PSLF). To start out on the right track, follow these steps:

  1. Confirm your loans qualify. Only Federal Direct student loans qualify for forgiveness. If you have other types of loans, you can consolidate them into a Direct loan for free.
  2. Certify your employment. Every year, you'll need to submit the Employment Certification Form to confirm your employer qualifies. From here, your servicer will change to FedLoan. And if you change jobs, you'll need to certify your new employer.
  3. Switch to an income-driven repayment plan. While payments made on the standard repayment plan count, for many people, they can be pricey. Switching to an income-driven repayment plan means you'll pay less each month — and your payments could potentially be $0.

These steps will ensure you have your paperwork in order so that you have the best chance of getting that PSLF.

Bottom line

Once you've started paying your student loans and increased your confidence, consider refinancing with a private lender to grab a better interest rate or extend your loan term. But only refinance if you're in a place where you can stand to lose the benefits that come with federal loans.

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