What to know about student loan repayment and the SAVE plan

Graduating college is a fantastic feeling. Having to pay off student loans after you graduate? Not so much. Yet have no fear. There are ways of doing it that make it more comfortable (ok, maybe less painful). Here’s what you should know about paying off your college debt.

Timing

Let’s get to the good news first: You have six months after you graduate before you have to start making payments on your student loan. This break is designed to give you a chance to get a good-paying job and figure out what repayment plan you can afford.

Get On It

If you are financially able, you can make payments on your loan during your grace period. This is a great way to get ahead of things. The more you pay, the less interest you’ll get stuck with over time.

Payments

Before you pick a payment plan, you should first figure out the following:

• The total you owe
• Your student loan servicer
• The minimum payment
• The interest rate

Once you know all of that info, look into repayment plans. Consider your finances and your financial goals. Perhaps you’d like to wait until you make a bit more money to hammer down the debt. If that’s the case, there are payment plans tied to your income — the more you earn, the more you pay per month. Maybe you’re already feeling financially stable and just want to get rid of the debt as fast as possible. If so, the 10-year repayment plan is right for you. Whatever you choose, make sure the plan fits your budget. You don’t want to start missing payments, as the interest will start to pile up and your credit score could take a hit. If you are struggling, talk to the loan servicer. They will be willing to work with you.

The New SAVE (Saving on a Valuable Education) Plan

The Biden-Harris Administration recently announced the launch of SAVE (Saving on a Valuable Education) Plan. According to Whitehouse.gov the SAVE Plan is “an income-driven repayment (IDR) plan that calculates payments based on a borrower’s income and family size – not their loan balance – and forgives remaining balances after a certain number of years. The SAVE plan will cut many borrowers’ monthly payments to zero, will save other borrowers around $1,000 per year, will prevent balances from growing because of unpaid interest, and will get more borrowers closer to forgiveness faster.” It is estimated that over 20 million borrowers could benefit from the SAVE Plan. Borrowers can learn more or sign up by visiting StudentAid.gov/SAVE.

Original article by Chris O'Shea and adapted in partnership with SavvyMoney.