The years of stressing over exams and research papers might be over for college graduates, but there’s still some anxiety to deal with for the 70% who left school with student loan debt: How are you going pay it back?
The average 2016 college graduate owes $37,172 in student loans. Their six-month grace period is over, so it’s time to find an affordable plan that suits their income. The choices are plentiful, but so are the consequences if you make the wrong choice.
The most popular choice – often by default – is called the Standard Repayment Plan. That’s a 10-year program in which borrowers make 120 equal monthly payments. If you don’t enroll in any other plan, you default to the Standard Repayment Plan.
According to LendEDU, a marketplace for student loans, more than 11.2 million borrowers use the Standard Repayment Plan, making it by far the most popular choice (or default) among student borrowers. The second most-popular is the Income Based Repayment Plan, with 3.1 million borrowers.
The Standard Repayment Plan suits a lot of graduates, but if you don’t have a decent-paying job coming out of college, the monthly payments may be too high the first few years out of school. There are plenty of alternatives, but it takes a little research and planning to find the one right for you.
The first step is to create a monthly budget of income and expenses to help find out what you can afford. Subtract the expenses from your income and whatever is left is how much you have available to pay your loans.
It might be a lot if you’re among those receiving the average salary for 2016 graduates of $50,556. It might not be much – or even zero! – if you’re a teacher, whose average starting salary is just $34,891, or worse than that, haven’t found a job yet.
Whatever it is, take that figure and go to the Repayment Estimator at www.studentloans.gov. Fill out the questionnaire and the site will tell you which of the many repayment plans you qualify for and even give you a chart for the monthly payment for each plan.
Student loan counseling services can help you choose the right repayment plan that fits your budget. We understand the ins and outs of each of the repayment plans and can offer additional help if you are struggling with mortgage or credit card payments as well. We may recommend a debt management plan that would put you back on top of your finances.
When you were in college, an advisor would help you choose your courses in order to map out a clear path to graduation. Think of us as your financial advisors mapping out a clear path to becoming debt free.
If you don’t have the time to wander into the maze of choices available on the government site, you can click get student loan help for a small fee, an analysis of your options so you can make the right decision about which repayment program is best for you and your budget.
The federal government offers seven alternatives to the Standard Repayment Plan and divides them into two categories: income-driven repayment plans and basic repayment plans.