5 things college grads need to know about student loan repayment

Graduation season is in full swing and with all the relief, excitement and joy college seniors (and their parents) are feeling leading up to and on the big day, comes a specter looming on the horizon: In just six short months student loans will become due.

It’s no secret the amount of student loan debt is exploding. It ballooned from $914 billion in 2010 to 1.325 trillion in 2014. Today’s graduates are leaving school with an average debt amount of $32,264 and median monthly student loan payments of $238.

A survey commissioned by Michigan State University indicates today’s graduates will be entering a stronger job market than seen in the last several years, with hiring up 16 percent, which will continue the trend of Millennials surpassing Generation X in the workforce. And to make matters better, at least one-third of the survey’s respondents indicated they would be offering higher starting salaries than they had last year.

However, $238 is still a hefty minimum payment to take on every month, even if you do end up getting a good-paying position right out of college. Additionally, once you start sifting through the repayment plans and schedules and details of federally and privately subsidized loans, their requirements, deferments and penalties, you might wish you opted for that minor in finance to get you through.

To help you sort through some of the .gov webpage double speak, we’ve compiled these five tips to help you prepare for the big debt repayment.

Get help – Visit Federal Student Aid office of the U.S. Department of Education – How to Repay Your Loans. This is a good starting point to assess what types of loans you have, what the requirements are for each and if you have options for deferment, or forgiveness now or that you can work toward in the future. There are several repayment programs that you should familiarize yourself with and discuss with your loan servicer. This person can act as a “post-financial aid advisor” of sorts – he or she can assess your needs, goals, job and income prospects and career choice and advise you of the best options available to you.

Consider consolidation – Again, this is where your loan servicer can advise you of which options are available to you and help compare the benefits with the risks. For instance, you can probably save money overall by putting all your debt into one low-interest payment, but you might be sacrificing the flexibility of government repayment plans (that can usually be adjusted as your life circumstances change) or other perks that were offered when you accepted the loan. Private loans cannot be consolidated with federal loans so if you have both, perhaps you might just consolidate the private debt?

Do automatic payments – Set up an electronic debit account (EDA) with your bank. You will never have to worry about remembering due dates or sending the check in on time (however, you do need to make sure the cash to cover the payment is in your account on your debit date). You will receive a .25 percent deduction of your interest rate while you are using electronic debit.

Put them on hold – If you’re having a tough time getting a job, you may be eligible for certain deferments or forbearance. The three primary types of federal loans: Direct, FFEL and Perkins, have deferments available for up to three years and “a period of unemployment or inability to find full-time employment” is one of the situations where you can apply. Forbearance is when you don’t qualify for deferment but still can’t pay your loan payments; it has to be granted by your lender. You will continue to accrue interest during deferment and forbearance, so make your decision wisely.

Give back, get back – There are some careers, such as teaching and public service, that can be eligible for student loan forgiveness, but the requirements are stringent, so be aware of what you need to do before embarking on your career path to make sure you don’t accidentally undermine your chances. Requirements include 120 consecutive months of payment and only certain plans qualify, so know which ones before you start the repayment process. Also, you need uninterrupted periods of employment in your field, so make sure you know what these rules are before you make a job change that can potentially compromise your eligibility.