Navigating Your Student Loan Repayment: Strategies for Success

After three years of most federal student loans being paused, the student loan repayment process is set to restart soon. Whether you’re reading this now or months from now, many graduates will find themselves facing the daunting task of managing their loan repayments. It is crucial for you to proactively plan and budget your finances to ensure a smooth repayment process. This will help to set yourself up for long-term financial success by utilizing key strategies that allow you to take control of your financial future.

Understand the Restart of Student Loans

The student loan moratorium has provided relief to most federal student loan borrowers since March 2020 as a response to the COVID-19 pandemic where monthly payments and interest accrual were suspended. However, the statutory language in recent legislation has ended the ability of the executive brand to extend the current student loan pause. As a result, over 40 million borrowers will soon see payment due dates restart.

Federal student loans typically come with a grace period, which provides a short break after graduation before repayment begins. However, this grace period eventually comes to an end, signaling the restart of loan repayments. For graduates, it's vital to mark this date on their calendars and prepare for the financial responsibility ahead. As of now, interest resumes on September 1, 2023, and payments restart in October 2023.

Finding Out How Much You Owe

Before crafting a repayment plan, it's essential to have a clear understanding of the total amount owed. Graduates can visit the National Student Loan Data System (NSLDS) website to access a comprehensive summary of their federal loans, including the total outstanding balance, interest rates, and the loan servicer's contact information. Private loan holders should refer to their respective loan providers for similar information.

Budgeting Monthly Loan Repayment Totals

Budgeting is the cornerstone of effective loan repayment. To set yourself up for long-term financial success, graduates must assess their current financial situation and expenses to determine how much they can realistically allocate toward loan payments each month. 

Here are some steps to create a manageable repayment budget:

• Evaluate Income and Expenses: Calculate your monthly income after taxes and deduct essential expenses like rent, utilities, groceries, and transportation. This will give you an idea of how much disposable income you have to put toward loan repayment.
• Prioritize High-Interest Loans: If you have multiple loans, focus on repaying high-interest ones first. Designate a larger portion of your budget to these loans to reduce the overall interest accrued.
• Consider Income-Driven Repayment (IDR) Plans: Federal loan borrowers may explore IDR plans that adjust monthly payments based on their income and family size. These plans can offer relief to graduates facing financial hardship.
• Avoid Lifestyle Inflation: As you begin your professional journey and potentially earn a higher salary, resist the urge to inflate your lifestyle. Staying frugal and dedicating more money to loan repayments will expedite the process and ensure you have more opportunities later to enjoy the things that come with higher salaries and more income flexibility.

Strategies for Saving Money During Loan Repayment

Paying off student loans can be financially challenging, but there are several strategies to save money and accelerate the repayment process:

• Automate Payments: Set up automatic payments to avoid missing due dates and potential late fees. Many loan servicers offer interest rate reductions as an incentive for enrolling in automatic payment programs.
• Employer Student Loan Repayment Programs: Some employers offer student loan assistance as part of their benefits package. Inquire with your employer about any available programs or opportunities for loan repayment assistance.
• Refinancing and Consolidation: Graduates with multiple loans and varying interest rates might consider refinancing or consolidating their loans. This process can simplify repayments and potentially secure a lower interest rate, reducing the overall cost of the loan.
• Utilize Windfalls Wisely: If you receive a tax refund, bonus, or any unexpected fortunes, consider using a portion of that money to make extra loan payments. This can significantly reduce the principal amount, leading to savings on future interest.

By implementing these strategies and adhering to a well-planned budget, graduates can take charge of their student loan repayment journey. Remember, being proactive and disciplined in managing your finances will not only help you become debt-free faster but also set a strong foundation for your financial future.

Herzing University is committed to supporting your educational journey and beyond. We understand the importance of financial literacy and responsible loan management. That's why we offer various resources, including financial aid counseling and loan repayment guidance, to help our students navigate the loan repayment process successfully. You can also reach out to Herzing’s Alumni Support Financial Services (ASFS) Center to help you. Whether you graduate or leave before finishing your program, the Alumni Support Center can assist you with choosing a federal repayment plan that is right for you.