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Ambitious, educated, yet jobless—that’s the story for many newly minted grads and unfortunately the student loan statements aren’t stalling along with the hiring managers. If you haven’t quite landed a job, and are taking on volunteer positions, internships, or revisiting that oh-so-faithful summer job, the thought of making your first payment is likely taking you back to the stress of finals week. The good news is, you have options and there is help available.
After you cross the stage and receive that well-deserved diploma, you’ll have a grace period where no payments are due— this is the perfect time to create a budget and start (or continue) saving money in anticipation for your first payment. Be sure to check your loan’s terms to determine how much time you have between graduation and your first loan payment’s due date.
While missing a payment might not seem like a big deal right now, it’ll take a toll on your credit and cause some big problems down the road making it very difficult to get a credit card, a car lease, or even a cell phone contract. If you’re worried about your ability to repay, here’s a look at some options:
- Income-Based Repayment
- Public Service Loan Forgiveness
- Graduated Repayment
Income-Based Repayment- This program went into effect this past July to make repaying student loans more manageable for those in lower-paying jobs. Basically, your lender will cap your monthly payments at 15% of your discretionary income and after 25 years of payments, your loans may be forgiven. Although your lender will have to verify that you are officially eligible, you can use the IBR calculator to estimate whether you will benefit.
Here’s an example: Lets say you are a single college graduate with an annual gross income of $30,000 and your student debt is $25,000. According to the IBR calculator, you would be able to comfortably pay about $170 per month.
Under a 10-year standard plan with an interest rate of 6.8%, you would be required to pay $288. Because the $170 IBR calculated amount is less than the standard 10-year plan amount of $288/month, you would most likely be eligible for the program and would have a monthly payment of about $170.
Borrowers who take out their first federal loan after 2014 will have their payments capped at 10% of their discretionary income and the remaining debt will be forgiven after 20 years. Visit Federal Student Aid or IBRinfo.org for more details and to see if this program is right for you.
Public Service Loan Forgiveness- This program was created to encourage individuals to work full-time in public service jobs. If you’re eligible for this program, you could qualify for loan-forgiveness after making 120 payments. Check out FinAid.org for more details and to see if you are eligible.
Graduated Repayment- If you expect to climb the corporate ladder quickly and be raking in the big bucks within a few years, you can opt for a graduated repayment option. Essentially, this allows you to make smaller payments for the first two years, and then gradually increase your payments. One thing to keep in mind is, the amount of interest you need to pay on your loan will increase because your initial payments will be lower. Check out the Graduated Repayment Calculator to see if this could be a good option for you.
Other Options for Loan Forgiveness- If you have a passion for volunteer and service work but your debt is holding you back, visit FinAid.org for a comprehensive list of paths you could pursue including AmeriCorps, Peace Corps, Military, and others. These programs make doing good deeds financially possible, despite your debt load.
Still uneasy about that first payment? Even if you’ve graduated, financial aid officers at your alma mater can help. As soon as you run into a financial roadblock, contact your lender—DO NOT wait because you’ll become ineligible for certain options if you default.
Here are some helpful resources to help you navigate your repayment options:
By: Erinn Carey
Comments
my daughter is in major trouble it has been a year now that she has graduated and still cannot find a job she has to pay sallie mae 150dollars for forebarance for three months she has done this three times already and is coming up on the fourth time they will not defferher loans because they are private we need some help she is 24 years old and she owes 150,000.00 to sallie mae pleaese help.
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