The starting of a new journey as a graduate and entering into the sphere of working life requires a series of decisions and actions to take to prevent yourself from the failure. First of all, you should choose the repayment plan for your student loans. Usually, it takes much more time than we expect. However, by choosing the repayment plan, which is the most optimal, one can increase his/her chances to become successful.
First of all, you should not rely on the automatic enrollment in the Standard Repayment Plan because it will bring you some unnecessary troubles. The fixed plan is supposed to last for ten years, providing you with the clear deadlines and quite high monthly payments. If you have enough money to pay this amount in addition to buying some food, then go for it. However, this repayment plan is not suitable for you in case something changes in your life.
If you do not think that your salary is enough for repaying your student debt, then you should choose some flexible payment plan such as Income-Driven Repayment (IDR). The plans, such as SAVE, PAYE, and IBR, are calculated taking into account your discretionary income and the number of family members. In other words, you are supposed to pay the sum, which you can actually afford in order to save some money for emergency or investing. However, the drawback of this repayment plan is its length.
– Review Your AGI: In order to calculate your monthly payment under the IDR plan, you should find out your Adjusted Gross Income from the tax return form.
– Certify Annually: You should recertify your income on an annual basis.
– Consider the Interest: In some cases, the subsidized interest pauses, but the unsubsidized one does not. Thus, in case you choose such plans, the capitalization may take place.
Moreover, you should think about the opportunity to refinance your federal loans with the private ones. Some organizations like SoFi or Earnest can provide you with the lower interest rate. However, by refinancing the loans, you will lose all the protection offered by the government loans, including the PSLF, forgiveness programs, and IDR. In order to make the deal with refinancing, you should have the stable job and a good credit score.
You should think about your future prospects and select the repayment plan according to your plans. For instance, the career in the public sector or the non-profit organization requires from you trying the Public Service Loan Forgiveness (PSLF) program. After making the qualifying payments during ten years, the remainder will be forgiven in a tax-free manner.
Use the Loan Simulator on StudentAid.gov to see the possibilities and to estimate the costs of your repayments with different repayment plans. It allows you to compare the cost of the standard plan and the extended repayment plan.
In general, the selection of the repayment plan should correspond to your actual life circumstances and allow you to repay the debt, having enough money for traveling and investing in the property or retirement. Therefore, you should set up the auto-pay reducing the interest rate for you by 0.25% from most servicers.