Terry's Tips for Student Loan Repayment

05/26/2015 12:05 pm ET | Updated May 26, 2016

It is the season for commencement addresses, telling new college grads how to look forward to their lives and careers. It is also the season to start dealing with repaying student loans.

As a reminder, you have 6 months after graduation to set up a loan repayment plan. Grads, the clock starts now. This is not the time for procrastination, which can be very costly. Here are five tips about repaying student loans.

1. Know your loan balances. You likely have taken out different loans, with different interest rates and perhaps different loan "servicers" - the companies that process your payments. So the first step is to "know what you owe." To get a list of all your Federal student loans, go to the National Student Loan Data System at - the central database for all Federal student loan programs. However, you may have private loans - made directly from banks. Those will appear on your credit report, which you can get free at Your school should also have a record of those loans.

2. Compare loan rates and payments. You'll find a handy pdf form to print out to list all your loans and their terms at Or there's a similar form at This process will help you to decide which loans to pay down more aggressively, targeting those with the highest interest rates.

3. Contact your lender now. Don't wait for the lender to contact you. They may have your old student address on file, so any reminders or offers may go astray. Set up an automatic payment program, which might get you a 0.25 percent interest rate reduction (or more, on private loans). Then be sure to check any emails or mail you receive from the servicer.

4. Consider consolidating some loans. A federal consolidation loan can combine two or more loans into one payment, simplifying your life. But, the consolidated loan will reflect an average of the interest rates on the combined loans, so if you have a very low rate loan, you won't want to consolidate it. You'll find that private lenders have little incentive to help your repayment plan easier, unless you can demonstrate a few years of always on-time payments. And those loans are likely to have the highest rates!

5. Make any extra or pre-payments very carefully. Student loan expert Mark Kantrowitz at points out that there are no set rules for applying extra lump sum payments or even an extra payment when you get a job signing bonus or a raise! So you must specify which loan (if you have several) should reflect the payment, and specify that it go towards the principal balance of the loan.

There's a great article on about "Strategies for Paying Off Student Loans Faster."

If you don't have a job, don't have savings, and can't imagine how you will repay your student loans, don't panic - and don't hide. You can put your loan into "deferment" or ask for forbearance. With a deferment, the government pays the interest on federally subsidized loans, but not on unsubsidized loans. With a forbearance, the government does not pay the interest. Any unpaid interest will be capitalized, increasing the size of the debt.

Or, you can set up an "income based repayment plan" - that will let your payments start small and grow as your income grows. Go to for more on how that works. Either way, take action now.

In the long run your college degree will help you earn more money. But over that long run, you must still pay attention to repaying your loan in the shortest time possible, saving a small fortune in interest. And that's The Savage Truth.