A student’s approach to debt management is often very individualized, and no one solution will fit everyone. The Office of Financial aid recommends that students with detailed questions set up an appointment to meet with a counselor in person. Such sessions will typically last around an hour, and you should bring documentation of your loan history (from NSLDS.ed.gov) and a list of your questions. Students are often most concerned with how the different options available for paying back federal loans.
Saving Money Over the Long Run = Higher Payments Now
The repayment plan that will cost you the least amount over time is the Standard 120 Payment Plan. Making extra payments towards your loans will lower your balance faster, and allow you to complete repayment in less time, thereby accruing less interest.
Lower Payment Now = Paying More Over the Life of the Loan
Students who are not earning much income are eligible to apply for a forbearance from their lender. This is the equivalent of claiming an income-hardship, and not being able to pay. This will result in the lowest monthly payment, but interest still accrues even though payments are not required. This will only increase the amount you pay over the long run.
Finding a Happy Medium
There are other repayment plans available like Income Based Repayment, Extended Repayment, and Graduated Repayment plans. These plans typically fall somewhere between the Standard Repayment and Forbearance options. The longer it takes you to repay a loan, the more interest you will accrue, and the more you will pay in the long run. You must reconcile this fact with your own ability to pay. Students must be aware of their expected financial lifestyle and their future goals. Paying loans off quickly is an advantage, but financial counselors will often recommend maintaining at least a small savings account for emergencies. In the end, the student must prioritize their financial goals, and pick a repayment option that fits all their needs.