How to Start Paying Off Your Student Loans

Long gone are the days when our parents paid their way through college with just a part-time job. Life was good in 1975 — tuition at Duke University, for instance, was $2,780 per year— but times have changed: the Soviet Union collapsed, Snooki had two kids and college tuition is ridiculously expensive. But paying off loans doesn’t have to leave you in a world of financial hurt, as long as you think ahead and find ways to pay them off early. We have some tips to get you started.

1. Know thyself.
You’re not expected to have your financial aid plan memorized, but even if you have the world’s most photographic memory, you should double check it before developing a payment plan. “The biggest mistake [students make] is not being aware of how much they have borrowed and not being prepared when the loans go into repayment,” says Kevin Paskvan, senior associate director of financial aid at Kenyon College. The first step is to compile all the personal information you’ll need; Paskvan suggests creating an account with the U.S. Department of Education’s National Student Loan Data SystemSM (NSLDSSM). As for privately funded loans, visit or contact your school’s financial aid office to stay up to date with your payment status. It’s also a good idea to visit [link:] to see where your school stands with respect to fine print, like no-loan policies and tuition freezes and cuts.

2. Get organized.
Make a comprehensive list of all of your loans, including terms, deadlines, and interest rates for each. Visualizing your loans increases your efficiency and eliminates the possibility of accidentally late payments, which can exacerbate your debt substantially. Clueless about what all those numbers mean? Try organizing your loans on the criteria of cost (the amount you have to pay) and deadlines (the time you have to pay it); those numbers will determine your priorities for you. CBS News suggests that students begin paying off their largest loans first, presumably to reduce the burden early on. “The quicker you pay off any interest-bearing loan, the less you will pay in interest in the long run,” explains Paskvan. “If a student has debt with higher interest rates (e.g., credit card debt), it might be better [for her] to pay off higher debts before lower-debt loans.” This may or may not apply to your situation, so personalize your payment plan by first calculating the monthly interest on your loans.

3. Consider consolidating your loans.
If you have several federal loans to keep track of and you’re worried about meeting deadlines, combine all of them into one monthly payment to simplify matters. There are two types of consolidation loans: traditional direct and special direct, the latter of which has different eligibility requirements and benefits. Get on top of this early and you may save yourself a hassle down the road.

4. Don’t be afraid to ask questions! Most college graduates aren’t finance and economics majors, and understanding financial jargon can be difficult, so take advantage of the information and services available to you. If you’re confused about the terms of a loan, communicate with your loan servicer (in other words, the guys who bill you for your loan). The numbers and analyses you see on your tuition bill and the NSLDSSM may be computer-generated, but ultimately, your finances are in the hands of mere mortal humans who can help you through the process. There’s no excuse — stay informed by either talking to a financial advisor or managing an online account, both of which are convenient and invaluable resources.

5. Keep in touch with your financial managers.
Your loan servicer is capable of more than interpreting complicated terms and conditions, so contact the organization managing your loans in times of trouble, as well. It’s always better to meet your deadlines (see number 1), for example, but you should still call your loan servicer if you know you’ll miss a payment. Do not assume that they won’t notice that you’ve missed the deadline or that the reason you’ve defaulted on your loan is inexcusable — on the contrary, your lender may cut you some slack. And even if your credit rating ultimately suffers, your loan servicer will appreciate the fact that you’ve shown genuine concern.