Things you should know about paying off student loans

Most college graduates have some kind of student loan debt and

they wonder how they are going to pay it off. After graduation there is a six-month grace period before you have to start repaying the loans, but for a majority of graduates this is not enough time. Here is what you should know about paying off student loans:

Keep track of lenders and how much you owe

You need to know who your lenders are and the amounts you owe them, because it makes repayment easier, and you will need this information in the event you have to apply for forbearance or deferral of payments. If you've forgotten who your lenders are, you can visit www.nslds.ed.gov for more details. You can also look over your recent loan statements to get the information you need.

Choose the best repayment option that is flexible for you

The traditional student repayment plan lasts ten years, but you don't have to stick to it, because other options are available. There is an income-based repayment plan if you want to make payments within the confines of your weekly salary. You can also talk to the lender about an interest-only repayment plan. Consider loan consolidation to simplify payments if you have loans from the same lender.

Start off with the high-cost loans first

It makes sense to pay off the high-interest loans first, because once those payments are completed, you can focus on the ones that do not carry a lot of interest and your loan burden will not be too bad.

Set a five-year plan for loan repayment

This strategy promotes self-discipline when paying off student loans. Set small goals each month that will help you achieve this task. You can start by seeking creative ways to earn extra income and opening a savings account specifically for paying off student loans. Cut back on unnecessary spending and make loan repayments a top priority in your budget.

About student loan deferment and forbearance

This option is only available to those with loans from the federal government. Deferment allows graduates to suspend loan repayments for up to three years because of financial difficulty. Under a deferment, interest will not accrue on your subsidized loans. Forbearance allows you to suspend payments for at least a year if the amount you owe is at least 20% of your salary. With forbearance, the interest still accrues.

Dangers of defaulting on loans

You should make every effort to repay loans on time each month because if you go a long time without making payments, your student loans go into default and there are consequences. These include seizure of your tax refunds, negative marks on your credit report, and possibly wage garnishment. Also remember that it is nearly impossible to include student loan debt in your bankruptcy filing, because generally you will not be cleared of this debt, unlike other debts that can be forgiven.

Student loans help you afford college, but you will need discipline and maturity to repay them and live debt-free as you begin your new career.