Congratulations! You’ve finished your bachelor’s degree and are about to begin your career. If you borrowed for college, you’ll soon wonder how much you’ll need to spend each month to repay your student loans.
The answer is . . . it depends! It depends on how much you’ll owe when your grace period ends, the combined interest rates on your loans, the student loan repayment plan you select and, under some plans, your earnings and family size. Consider, for example, a new bachelor’s degree recipient who borrowed the annual maximum in Federal Direct Loans during each of his 4 years in college which, when his grace period ends, will amount to a $28,187 debt at a combined interest rate of 4.2%. He just accepted a new $40,000 per year job:
Repayment Plan Monthly Payment Number of Payments Total Amount Paid
Standard $276 120 $33,086
Graduated $155 155 $34,696
Extended This Borrower Not Eligible for This Repayment Plan
Income-Based $274 121 $33,097
income-Contingent $202 165 $35,787
Pay As You Earn $183 142 $36,849
Revised Pay As You Earn $183 133 $34,193
Want a precise projections of your monthly payment amounts? Open the government’s Federal Student Loan Estimator with your Federal Student Aid ID to get them. Different federal repayment plans have different eligibility criteria, so this’ll also help you identify plans for which you do and don’t qualify.
Such research will help you evaluate the repayment plans for which you’re eligible in preparation for the day you tell your student loan servicer the plan under which you want to begin repaying your loans. It’ll also help you know how much you’ll need to budget for your monthly student loan payments — at least during your first year of repayment.
It’s important to remember two things about loan repayment. In general, the longer your repayment period, the lower your monthly payments will be. But also, the longer your repayment period and lower your monthly payments, the more you pay on your college debt in the long run. So it’s usually best to pick the plan requiring the highest monthly payments you can afford.
Also remember — for federal student loans, you may change your repayment plan as necessary. So if your situation changes and the plan you’re using no longer fits your needs, you may always research and pick another loan repayment plan. This makes federal student loans preferable to most, if not all, institutional, private, and state student loans.
Speaking of non-federal loans, to discover how much you owe and your repayment plan options for them, you’ll need to check your lender website(s) and, maybe, call your lender(s).
Forewarned is forearmed so, no matter what type of student loans you have, start now to research what you owe and your options for repaying it!
Want help considering your repayment plan options? Feel free to contact College Affordability Solutions at firstname.lastname@example.org or (512) 366-5354.