What to Do With Your Student Loans
Not sure what to do with your student loans? You’re not alone, many college students and graduates feel the same way.
Whether you are unsure of what repayment plan to choose, need help understanding your loan or just need some extra guidance, St. Cloud Financial Credit Union is here to help break down the process!
Step 1: Know your Loan
The first and most important step is understanding your loan and its details. Let’s start with the loan type and whether you have a Federal Loan or a Private Loan.
What’s the difference?
Federal Loans: issued by the government
Private Loans: offered by banks, credit unions, or other private lenders
Whether you have a Federal or Private loan determines repayment options, forgiveness programs, and protections.
Don’t know who your student loan servicer is? Visit “Who’s My Student Loan Servicer?” to find out.
Next, get your loan details. Log into your loan account to find the following:
Balance — how much you owe
Interest rate(s)
Monthly payment estimate
Repayment term — how long you’ll be paying off your loan
Lastly, understand your grace period. A grace period is typically a specified timeframe between when your payment is due and when late fees or penalties begin if you haven’t paid.
Most federal student loans give you a six-month grace period after graduation or leaving school before beginning payments. This gives you time to get on your feet, but interest will usually continue to add up, so using this time to plan your repayment strategy would be a smart money move.
The type of repayment plan you have will affect how you pay back the interest. For a fixed payment repayment plan (more on what that is below), the unpaid interest might increase your monthly payment. For an income-driven repayment plan (more on that below as well), the unpaid interest might increase the time to repay your loan.
To find out your grace period, go to “Student Loan Repayment” or contact your lender directly.
Step 2: Choose a Repayment Plan
There are two major categories of repayment plans: fixed and income-driven repayment (IDR).
On fixed payment repayment plans, you pay the same amount each month for up to 10 years or until your loan is fully paid off.
Income-driven repayment (IDR) plans are determined by your income and family size. With an IDR plan, you will likely have a lower monthly payment. What you still owe after a set number of years may be forgiven.
So, on a fixed payment plan, you might pay $300 a month for 10 years. On an IDR plan, your monthly payment could drop to $100 based on your income, but you might be paying off your loan for longer.
You can compare what your payment would be for each option using our Financial Calculators or by utilizing this Loan Simulator tool.
If you don’t choose a repayment plan, you’ll automatically be put on the Standard Repayment Plan. On this plan, you’ll make fixed monthly payments over 10 years. Your payments will likely be higher than with an IDR plan, but you’ll pay less interest overall.
Step 3: Make a Payment
Making your first payment on a loan can be intimidating, but it isn’t as scary as you think. You can pay your student loans through your account.
It is extremely important to make payments on time! Doing this will avoid things like penalties and potential default. Your student loans also affect your credit score. Making on-time payments builds good credit, but missed or late payments hurt it.
To make sure you never miss a payment, you can enroll in auto pay. Auto pay will automatically deduct your monthly payment right from your bank account.
Step 4: Explore Forgiveness & Assistance Programs
You may not realize that you might qualify for forgiveness or repayment assistance programs.
The Public Service Loan Forgiveness (PSLF) program forgives remaining federal Direct Loans after 120 qualifying payments if you work full-time for a government or qualifying nonprofit employer.
If you are a full-time teacher in a low-income school, the Teacher Loan Forgiveness (TLF) Program might be worth looking into. The TLF Program forgives up to $17,500 of Direct Subsidized and Unsubsidized Loans, as well as Subsidized and Unsubsidized Federal Stafford Loans, after five complete and consecutive years of teaching at a qualifying school.
Lastly, there are State or Employer Repayment Programs, where some states and employers offer repayment assistance as part of hiring incentives. Make sure to check your HR benefits or state student aid website.
Quick reminder: forgiveness programs aren’t automatic. You’ll need to apply and recertify your employment or income every year to stay eligible.
Step 5: Refinance or Consolidate
If you have multiple loans, keeping track of different due dates and interest rates can get overwhelming. That’s where consolidation or refinancing may help:
Consolidation combines multiple federal loans into one, with a single monthly payment. This won’t lower your interest rate, but it will simplify the repayment process.
Refinancing combines private and/or federal loans into one private loan. Refinancing can reduce your interest rate, but you will lose access to federal protections like income-driven repayment and forgiveness programs. Refinancing is available through private lenders and is a good option for graduates with stable income, strong credit and no need for federal benefits.
Think of consolidation as a way of combining and simplifying your payment, while refinancing is about saving money on interest but comes with tradeoffs if you refinance federal loans into private loans.
Step 6: Ask for Help!
We understand that life happens. If you lose your job, have a medical emergency, or just can’t keep up with payments, it is important to not ignore your loans. Below are a few options:
Deferment allows you to temporarily pause payments. Depending on your loan type, interest may or may not accrue.
Forbearance will pause or reduce payments, but interest will continue to accrue.
You also could consider switching repayment plans. You might qualify for lower monthly payments under an IDR plan.
Most importantly, talking to your lender about options that will work best for you is the most important. Be open and honest about your situation so you can get the best help tailored to you and your financial needs.
Student Loan Checklist
Find out who your loan servicer is
Know your balance, interest, and grace period
Pick a repayment plan
Set up autopay
Explore forgiveness or consolidation options
Other Resources
Do you have any additional questions? Give SCFCU a call at 320-252-2634 or by visiting one of our branches.
We have also pulled together a list of resources online that may help: