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6 Ways to Stay on Top of Your Student Loans

6 Ways to Stay on Top of Your Student Loans

By Lauren Bayne Anderson

May 20, 2011

Graduating means it’s almost time to start paying your student loans. As much as thinking about it probably dashes your elation over finally being done with school, unfortunately, they’re not going away.

And, if you still haven’t found a job, the thought of loans is no doubt a source of even more stress.

But as much as you may hate to think about them, dealing with your student loans is essential to maintaining a good credit score. Student loans cannot be forgiven even through bankruptcy, and if it gets too out of control, lenders in some cases can actually garnish your wages.

So, staying on top of them from the start is a good idea.

Here are a few tips on how to do just that:

  1. Sign up for automatic payment. According to Fastweb, 25 percent to 33 percent of borrowers are late or delinquent with their first loan payment. What’s more, some borrowers will lower your interest rate if you: A: sign up for automatic withdrawals and/or B: paid on time every month for a certain number of months. If you do both, you can get up to two interest deductions. Plus, you won’t have to worry about late fees – or the lender calling up your cosigners (read: tattling to your parents) for the cash.
  2. Repay your student loans automatically: Missing payments can get you into financial trouble, but it’s very common. Setting up payments automatically through your bank account should dramatically reduce the chances of late or missing checks.
  3. Aim to repay your loans in 10 years. Here’s an example: Let’s say you owe $24,000 in federal Stafford Loans at 6.8 percent interest. If you pay over 10 years, you will shell out $9,143 in interest. If you take 20 years to repay your loan, your interest paid increases to $19,969. At 30 years, your interest jumps to $32,328! WOW.
  4. Check out what options your lender offers. It will be different for private and federal loans. Different lenders may offer lower monthly payments, for example, the federal Income-Based Repayment program, which caps the amount you must pay every month at 15 percent of your discretionary income.
  5. Pay off the loans with the highest interest rates first. This is also great advice for credit card debt as well!
  6. If all else fails, and you can’t make the payments, contact your lender to see what can be done about it. There are hardship forbearances, unemployment forbearances, interest only payments – all options you may want to consider if you’re really having trouble making ends meet. Working something out with the lender is always better than defaulting on a loan, which will negatively affect your credit when it comes time to do things like buy a house, getting a car loan, or getting a lower rate on a credit card. (It generally takes 7 years for negative items to fall off your credit report).

Things can change when it comes to laws concerning student loans. Keep up to date on student loan issues by checking the websites of the Project on Student Debt and the National Consumer Law Center’s Student Loan Borrower Assistance Project, every so often. And, if you have an issue with federal student aid, you can contact the Federal Student Aid Ombudsman at

Information compiled largely from US News & World Reports.