Congratulations, College Graduate – Now Pay Back Your Loans

Young female graduate in cap and gown. Photo courtesy of Shutterstock.

Congratulations, you’ve just graduated from college. If you’re one of the lucky few, you’ve secured a job and a place to live and bought a new car. You’re living the dream, right? Oh yes, about that debt you incurred to secure the education that landed you the job that afforded you the home, the car, the dream—you have to pay that back.

Pay High-Interest Debt First

Most likely, your student loan debt is at a lower interest rate than your consumer debt (credit cards) or your auto loan, so focus on the higher-interest debt first. Look into ways you can generate a decent chunk of money to pay down this debt. If you receive regular payments from a structured settlement or annuity, consider contacting a company that can buy your future payments for a lump sum of cash now. Other college grads with substantial student loan debt have used this method of debt relief with good results.

Pay as You Earn

Pay as You Earn is a government program designed to give you an affordable payment plan based on your income and family size. Only student loans under the Direct Loan Program are eligible for this plan. You must be a new borrower (no loan balance prior to October 1, 2007), and your federal loan debt must be high relative to your income. You can use the U.S. Department of Education’s Pay as You Earn calculator to see if you qualify for the program.

Graduated Payments

If you don’t qualify for the Pay As You Earn plan, consider contacting your lender for a graduated payment plan. Typically, you begin with low payments and increase your payments by $50 every two years, until the debt is paid in full. This type of repayment plan could help if you are in a growth industry where you expect an increase in your salary year over year. Visit FinAid.com for a calculator that will show how changing your payment plans would help.

Didn’t Finish?

If you didn’t graduate from college, but you’re paying for the first couple of years you did attend, consider returning. Fastweb, an online education scholarship and loan finder, may be able to assist you in securing scholarships to complete your degree. The loan payments you’re making now can be postponed, as long as you are registered as a full-time student and in good standing.

Loan Forgiveness

In 2012, the U.S. Department of Education established the Public Service Loan Forgiveness Program. Several types of employment enable you to be forgiven on your student loan debt. Under this program, borrowers may qualify for forgiveness on remaining student loan debt after they’ve paid 120 qualifying payments.

By James Torres

Journalist, finance geek, bookworm