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The First Steps to Take When Your Student Loans Enter Repayment

Whether you consolidate loans or stay in forbearance, you need a debt repayment plan.

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It may seem like a tremendous burden, but it's easier to pay off student loans now when you don't have the constraints of a house, spouse or kids.

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You’re freshly graduated from college, holding a degree in your hand and ready to enter the workforce.  Unfortunately, along the way, you accumulated a bunch of debt to pay for your education.

It’s a big number – so big that you don’t want to even think about it. Still, those loans are about to enter repayment, and you’re going to be facing some hefty bills soon.

What's the best way to tackle your student loan debt? Here are six key steps you should take.

1. If you’re not yet employed, make sure the loans stay in forbearance. Many student loans allow you to avoid repayment until you’re employed. If you don’t have a job upon graduation, contact each of your student loan companies and ask about their forbearance policies. 

These loans will enter repayment when you get a job, but this keeps you from defaulting while you’re still searching for work.

2. Be smart about consolidation. Your loans have different interest rates, and the purpose of consolidation, above all else, is to lock in the lowest interest rates you can.

Generally, you can consolidate public loans with other public loans and private loans with other private loans. Your best approach is to contact each lender and find out about their consolidation program, particularly their interest rates and fees (if any). 

It is a good idea to consolidate with whichever organization offers the lowest interest rate without high fees. That way, you minimize the total amount you’ll have to repay.

3. Investigate opportunities for loan forgiveness. Many businesses and organizations offer student loan forgiveness programs where, if you choose to work in a more challenging situation for a certain period of time, they’ll pay off the remainder of your loans.

For example, school districts often have plans like this available to teachers, and they're also offered in some medical and technical fields.

4. Build a debt repayment planA debt repayment plan is a tool to help you figure out which debts should have the highest priority.  When you have extra money to contribute to a debt, you should always contribute it to the debt that’s on top of your debt repayment plan.

The easiest way to do this is to list your debts in order of interest rate with the highest rate on top. The debt on top of the list should always be your focus after making minimum payments on all your debts. 

A debt repayment plan doesn’t just include student loans. It should include other debts such as car loans and credit cards.

5. Commit to intense repayment when you’re young and without major expenses. If you’re not married, don’t have children and don’t own a house, you’re in a position where you should be making very large debt payments. Commit as much as you possibly can to eliminating your debts before those constraints come into your life.

The possibility of marriage, children, a house of your own, entrepreneurship, career freedom or any other goals become easier to achieve if you are debt-free (or close to it).

6. If you’re struggling to make payments, be proactive and contact your lender. Lenders are far more likely to work with you if you come to them when you see trouble on the horizon. When you hear horror stories about debt collectors or disastrous credit reports, you’re hearing about the aftermath of someone who wasn’t proactive.

As soon as you see trouble coming, contact your lenders. Talk to them about your situation, and find a plan that will work for both of you. It will protect your credit, keep debt collectors away and enable you to continue repayment in a safe way.

The bottom line: Student loans are often the first major financial hurdle people face in life. They can feel like a tremendous burden, but they also offer an opportunity to get your life off on the right foot.

Take advantage of this situation: Manage your student loans through lower interest rates, loan forgiveness programs, consolidation, prompt payments, extra payments and proactive behavior when you’re struggling. The benefits of handling these loans correctly will have a positive impact for the rest of your financial life.