Making a Repayment Plan — and Sticking to it
Chances are that as an international student, you had to take out a number of student loans. Now that you’ve
graduated, you’re faced with the rather daunting task of paying them back. This can seem overwhelming, but
this article will seek to help you make a repayment plan, and stick to it.
Face your debt
The first step is to find out exactly what you’re dealing with. It can be tempting to remain in the dark
as to how much you owe, but you’ll find out that knowing is always better than not.
Contact your loan servicer
After you find out how much you owe, the next step is to find out exactly who you’ll be sending your checks
to: your student loan servicer. This person is your first point of contact for any questions or changes of
address you might have, so don’t hesitate to reach out. Building a successful repayment strategy for student
loan debt is essential for shaping your financial future.
Pick a repayment plan
You have a number of options when it comes to repayment plans. Make sure to pick the one that works best for
you and your specific needs. Possible plans include:
- Standard Repayment
- You will pay a fixed monthly amount for a loan term of up to 10 years. The loan term may be shorter than
10 years, depending on the amount of the loan. There is a $50 minimum monthly payment.
- Extended Repayment
- This is similar to the standard repayment plan, but allows a loan term of 12 to 30 years, depending on
the total amount borrowed. This reduces the size of each payment, but increases the total amount repaid
over the lifetime of the loan.
- Graduated Repayment
- This plan starts out with lower payments which gradually increase every two years. The loan term is 12
to 30 years, depending on the size of the loan.
- Payments under this plan are based on your income and total amount of debt. Payments are adjusted each
year as your income changes. The loan term is up to 25 years. At the end of 25 years, any remaining
balance on the loan will be discharged. The write-off of the remaining balance at the end of the 25
years is taxable under current law. Income-Contingent Repayment is available only for Direct Loan
- Federal Family Education Loan Programs (FFELP) which is only available to US students offer borrowers
income-sensitive repayment, which pegs the monthly payments to a percentage of gross monthly income. The
loan term for this plan is 10 years.
- This plan is available in both the Direct Loan and FFEL programs offered only to US students. It is
similar to income-contingent repayment, but caps the monthly payments at a lower percentage of a
narrower definition of discretionary income.
Stick to your budget
Once you’ve determined your monthly obligation, it’s important that you keep track of your other spending to
make sure that you can pay all of your bills. Websites such as Mint.com
can help you with your budget. Not sure how to get started, learn more on how to
budget for school.
Prioritize your loan payments
You may find that as you budget, you will have to forego activities or events to pay off your debt.
Prioritizing may mean minimizing other forms of debt, or chipping away at student loans before tackling
other types of debt, if possible. Student loans are one of the few debt obligations that are rarely forgiven
in bankruptcy filings.
Focus on the future
While scrimping or sacrificing that make your monthly student loan payments, it can help to remind yourself
exactly what you’re paying for. You’ve received a great education that has opened up a huge number of
opportunities for you. Remember that it’s all worth it in the long run.