Chapter 5. How to manage your student loan repayment?
Once you enter repayment, you will be making a monthly payment depending on which repayment plan you chose with the consideration of your present budget. You need to record this monthly payment into the fixed portion of expenses in your monthly budget.
How to
It is advisable you follow these tips:
Remember your student loan repayment becomes a major part of your credit history, report, and FICO score. You want to be sure you never default on those payments so you don't risk ruining your financial reputation. You can then use your positive history of good payments to your advantage once you are ready to purchase a car or apply for a home mortgage.
Most students chose the Standard student loan repayment plan, which is made of 120 equal payments (10 years). But if your income does not allow you to meet the obligation of the standard plan, you need to discuss other options with your loan servicer and maybe opt for the income-based repayment plans if you qualify based on your income which could stretch your payments over 240 equal payments (20 years). Always keep in mind that the longer it takes you to pay back your student loans the higher your total repayment due to accumulated interest over the life of the loan will be. You have to make a financial decision that works for your situation. You may have to incur a financial penalty over the life of the loan but protect yourself from defaulting by choosing a monthly repayment you can afford.
Do NOT assume that you can or cannot afford the standard plan. Before you make a decision, you have to think what tools (e.g., lean budget) you can afford, use the loan payment estimator, and run a loan amortization schedule with different scenarios to understand the impact of your financial decision.
Practice
Throughout the chapters, you've learned how to be a responsible borrower and manage your student loan repayment. Download this worksheet
Download this worksheet to practice and build up your own plan for loan repayment!
Congratulations! Now Test your knowledge about Student loans!
Would you like to review again? You can start over at Introduction.
To review the full module on Student loans, click here.
The Penn State Sokolov-Miller Family Financial and Life Skills Center hopes you have enjoyed this module in the MoneyCounts: A Penn State Financial Literacy Series. Please tell us how we can serve you better, leave us feedback, ask a question, or request additional information at: finlit@psu.edu