Whether you've recently graduated from college or completed a master's or professional degree, chances are good that you have student loans to repay. But student loan repayment isn't as simple as picking a plan and writing that first check - the decisions you make today can impact how much interest you pay in the long run. Our guide shows you how to create a smart student loan repayment strategy, so you can efficiently deal with your debt without spending a penny more than necessary.

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How to Save Money and Conquer Student Loan Debt From Day One
THE SMART GRAD’S GUIDE TO
STUDENT LOAN REPAYMENT

2. May your life after graduation be a reflection of
everything you’ve worked hard for – a fulfilling
career, stable finances, happy life and much more.
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CONGRATULATIONS NEW GRADUATE!

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And if you’re one of the
7 in 10 people graduating with student loan debt,
may your student loan repayment strategy set
you up for success right from the start.
Because make no mistake –
student loan repayment
does require a strategy.
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. . . and can hold you back from achieving
other financial goals - like buying a home,
starting a family and traveling the world.
It may seem as simple as picking a student
loan repayment plan, but the decisions
you make today impact how much interest
you’ll end up paying in the long run . . .

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A smart student loan repayment
strategy ensures you don’t spend
a penny more than is necessary.

6. To start your student loan repayment
strategy on the right track, follow
these six important steps.
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1
5
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For federal student loans:
National Student Loan Data System (NSLDS)
For private student loans:
§ Gather paper statements
§ Ask your school’s financial aid office
§ Pull your credit report
§ Check the Clearinghouse Meteor Network
§ Contact your servicer
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KNOW WHAT YOU OWE

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Make a list of your loans’ attributes, including:
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WRITE IT DOWN
Type (e.g., federal vs. private, subsidized vs.
unsubsidized, fixed-rate vs. variable-rate)
Balance
Interest rate
Term

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Most federal and some private loans offer a grace period
between the time you graduate and the time you're
required to make your first payment.
In many cases, interest continues to accrue during the
grace period and is capitalized, or added to the loan's
principal, when repayment begins. If you don't make
payments during the grace period, you can end up paying
more in interest over the life of the loan.
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UNDERSTAND THE
GRACE PERIOD

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120
110
100
104
108
112
116
120
124
No payments during grace
period
Regular payments during grace
period ($555/month)
LOAN TERM (in months)
Her minimum monthly payment will
be about $555 after grace period
ends. Here’s how paying $555/
month during grace period affects
her bottom line.
EXAMPLE:
$16,612
$13,964
$12,000
$13,000
$14,000
$15,000
$16,000
$17,000
No payments during grace
period
Regular payments during
grace period ($555/month)
TOTAL INTEREST COST
A college grad finishes school with
$50,000 in student loans at a
weighted average interest rate of 6%
and a 10-year term.

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BOTTOM LINE:
Use the grace period if you need it, but if
not, consider making at least interest-only
payments during this timeframe in order to
minimize interest costs.

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Federal student loans offer a choice of repayment plans, including:4
PERUSE THE PLANS
A private loan’s repayment plan is based the terms of the loan (e.g., 10- vs. 20-year
term, fixed vs. variable interest rate).
STANDARD
10-year term; generally the highest monthly payment but lower lifetime interest
GRADUATED
10-year term; payments start low and increase over time
EXTENDED
Up to 25-year term; lower payments at a fixed or graduated amount
INCOME-DRIVEN
Including Pay As You Earn or PAYE and Income-Based Repayment or IBR;
20-25-year term; lower payments based on income

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While it’s tempting to choose the repayment option
with the lowest monthly payments, the long-term
repercussions can be costly.
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DO THE MATH
Generally speaking, the longer the repayment term, the
more you'll spend on interest over the life of the loan.

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Here’s how his bottom line is
affected by choosing a standard
versus extended repayment plan.
EXAMPLE:
An MBA grad finishes school with
$100,000 in student loans at a
weighted average interest rate of 7%.
$1,161
$706
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
Standard Plan (10-Year
Term)
Extended Plan (25-Year
Term)
MONTHLY PAYMENT
$39,330
$112,035
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
Standard Plan (10-Year
Term)
Extended Plan (25-Year
Term)
TOTAL INTEREST COST

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BOTTOM LINE:
Go for the lower payment if you need to,
but be sure to revisit your repayment plan
on at least an annual basis. The sooner you
switch to a more aggressive plan, the more
you’ll save – and the sooner you’ll be done
with your loans.

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If you have high interest rate student loans,
you may consider refinancing those loans
at a lower interest rate. Refinancing student
loans can potentially allow you to:
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CONSIDER REFINANCING
ü Save money on total interest
ü Make lower monthly payments
ü Pay off loans sooner
ü Simplify monthly bill through loan
consolidation

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Here’s how her bottom line is
affected by refinancing and
reducing the interest rate to 5%
and keeping the 10-year term.
EXAMPLE:
A doctor finishes med school with
$100,000 in student loans at a
weighted average interest rate of
7% and a 10-year term.
$1,161
$1,060
$1,000
$1,040
$1,080
$1,120
$1,160
$1,200
Before Refinancing (7%
Interest Rate)
After Refinancing (5%
Interest Rate)
MONTHLY PAYMENT
$39,330
$27,278
$0
$10,000
$20,000
$30,000
$40,000
$50,000
Before Refinancing (7%
Interest Rate)
After Refinancing (5% Interest
Rate)
TOTAL INTEREST COST

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The better shape your finances are in, the more likely you are to
qualify for a lower rate. Most private lenders require:
Completion of undergraduate degree
In good standing with current student loan
Strong monthly cash flow
Good credit score (typically 700 or higher)
WHO CAN REFINANCE
STUDENT LOANS?

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When you refinance federal student loans with a private lender,
you give up federal loan benefits such as:
§ Loan forgiveness programs (for public service, teaching and
military professions)
§ Loan deferment and forbearance (although some private
lenders do offer the latter)
§ Graduated, extended and income-driven repayment plans
BEFORE REFINANCING
FEDERAL STUDENT LOANS. . .
If you need these benefits, think twice before
refinancing federal student loans.

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BOTTOM LINE:
Refinancing can be a great way to save money
and efficiently deal with student loan debt,
and there are no fees to apply. Even if you
don’t qualify for a better rate today, make sure
to check back periodically – especially if your
credit score and income improve over time.

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Which repayment plan will you choose?
Will you make payments during grace period?
Should you consider refinancing any of your loans?
PUTTING IT ALL TOGETHER
Revisit your list of loans from step two
and decide on a plan of attack:

22. ü Consider signing up for automatic payments (usually comes with a 0.25%
reduction in interest rate)
ü Call your student loan servicer with questions
ü Set a reminder to revisit your repayment strategy on an annual basis
FINAL TIPS
§ Can you switch to a more aggressive repayment plan?
§ Are you now eligible to refinance loans at a lower rate?

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This piece is intended to provide useful information on the subject of student loans, but does not purport to provide legal or tax advice.
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