Nearly 20 million Americans attend college each year. Of those 20 million, approximately 12 million (60%) take out student loans to cover their costs.

The average amount of student loan debt for the class of 2011 was $26,600. Recent graduates may find the idea of paying back their federal or private student loan debt terrifying and may feel overwhelmed. Take a deep breath and relax- Moran Law has gathered several tips for recent graduates who may be panicking as their grace period comes to a close. These tips will point you in the right direction as you figure out a personal strategy to best manage your student loan debt and put your mind at ease. Everyone’s situation and loans are different, so tailoring your student loan payment plan to your needs is the best way to begin eliminating your federal student loan debt.

Private student loans may soon be dischargeable in bankruptcy.

1. Pick the loan repayment plan that works for you

There are a variety of loan payment plans offered by the federal government to accommodate a variety of different situations. The following are popular options:

  • The standard ten-year repayment plan calculates the amount of your payments by calculating how much your monthly payments need to be in order to pay off your debt in ten years.
  • The graduated payment plan starts off lower, but payments gradually increase over time. These payments are calculated based on the assumption that you will pay off your loans within a timeframe of ten years. This may be an option for graduates who have not gotten a job immediately, or plan to make payments on their student loans while travelling, volunteering, or doing an unpaid internship before securing a full-time, salaried position.
  • If the amount you would pay monthly looks unmanageable under the standard ten-year repayment plan, you can choose the 25 year, extended payment plan. This gives you a greater deal of time in which to pay off your loans, but be warned that you’ll pay more over time with this plan due to accumulated interest.
  • An income-based repayment plan calculates the amount of your monthly loan payments by your income- your loan payments will be 15% of your discretionary income. This might be a good option for those that haven’t secured a full-time, salaried position yet and are employed part-time.

2. Make your payments on time

Getting in the habit of making bill payments on time and budgeting to be able to do so is a good habit to get into. Making your student loan payment on time every month eliminates costly late fees.

Consider setting up a direct debit payment option, in which your monthly payments are automatically deducted from your bank account. That way, you’ll never miss a payment- just ensure you are mindful of your account balance when the day comes that your loan payments are withdrawn!

3. Make additional payments more frequently

If you are able, making extra payments more frequently will keep the interest manageable so you are able to pay down the principal balance more quickly.

4. Pay off more expensive loans first

With federal student loans, you can specify to which specific loan you would like your payment to go toward. It would be most strategic to attack the largest loans with the highest interest rates first- you’ll pay less money over time by eliminating these loans as quickly as possible.

Above all, don’t let your loans become unmanageable by making delinquent payments or being passive and not exploring each option- figuring out a plan within your grace period will help you to feel less anxious. Another thing to keep in mind is that you can make payments on your student loan at any time- you don’t have to wait until your grace period officially ends, or even until you graduate. Interest continues to accumulate even while you are not legally required to make payments. It’s best to get started as early as possible.

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If your student loan debt gets out of hand or you can’t make your payments, Moran Law is a top Michigan Bankruptcy firm that can help you to get your student debt back under control. Call (866) 473-1996 today to schedule your free initial consultation!