The Ultimate 10-Step Guide to Student Loan Payments

Whether you recently graduated college or completed your degree several years ago, you may have taken out one or more student loans to help finance your degree. In recent years, the path to pay off this debt has gotten less clear. Pandemic-related payment pauses gave borrowers temporary relief, and legal battles surrounding the Biden administration’s student loan forgiveness plan put the prospect of one-time forgiveness in limbo. Recently, the Supreme Court came to a decision that ultimately struck down the administration’s widespread plan. 

Since then, the administration announced they will pursue other avenues, including an action set to impact over 800,000 borrowers as part of reforms to the student loan system’s income-driven repayment plans.¹ Despite this, nearly 37 million borrowers will need to restart monthly payments in October.² If you’re one of them, it’s important to have a plan. Use this time to develop a budget and secure payoff strategies that work for you. 

10 tips for student loan debt payoff 

1. Create a budget

Before you start paying down your debts, it’s important to create a monthly budget to fully understand your current financial picture. First, take your monthly income after taxes and subtract monthly expenses, such as: rent, insurance, utilities, and groceries. Then evaluate your student loan debts so you know how much you owe in total. You can reference this budget to determine how much you can afford to pay toward debt each month. 

2. Identify your loan servicer

Starting in October, you may be submitting payments to a company you’ve never heard of! A few major companies, including Navient and Granite State, stopped administering federal student loans during the pandemic. As a result, four in 10 borrowers will have to make payments to a new company.³ You can confirm who your servicer is by logging into your profile at: StudentAid.gov. 

3. Pay off high-interest loans first

If you have several student loans, prioritize and pay off the loan with the highest interest rate first. The quicker you can pay down the higher rate loans, the less interest you will accumulate which will save you more money in the long run.

4. Make payments during the grace period

Many student loan lenders offer a “grace period,” which usually lasts six months from the time you graduate. During this time, you are not required to make student loan payments. The purpose behind the grace period is to give recent graduates time to find a secure paying job and to select a repayment plan. 

This grace period can vary based on the loan type, any military activity, or if you consolidated any of your loans. If you can begin making payments right way, you’ll be ahead of the game in the long run. Essentially, the longer it takes you to pay off your student loans, the more you’ll accumulate in interest and the more you’ll pay during the lifetime of the loan.

Note that past payment pauses do not impact these grace periods. For example, if your grace period started during one of the pandemic payment pauses, it won’t reset in October. As well, you can also breathe easier knowing that missed or partial payments won’t be reported to credit agencies or debt collectors for the first 12 months after payments restart, according to the Department of Education.  

5. Submit more than the minimum payment 

During your repayment period, you’ll be billed monthly, but in most cases, you can make larger payments than the amount due. By paying more than the amount due when possible, you’ll not only shorten your repayment period, but also the amount of money you’ll pay in interest. Because interest is compounded, even paying an additional $100 toward your monthly payment could save you hundreds down the road.

6. Split your bill into two monthly payments

If you have larger monthly payments, try breaking the payments into two payments instead. This can be helpful when managing your monthly budget, so you don’t spend money in other places. Plus, with bi-weekly payments you’ll end up making one extra payment a year, shaving months and years off your loan term.

7. Set up automatic payments

To avoid missed payments and stay on track with your repayment plan, considering setting up automatic payments. By doing so, you’ll avoid paying late fees and retain a good credit score. Additionally, some lenders offer rebates or interest rate reduction options for setting up automatic payments.

8. Refinance if conditions are right

If you have a steady income with a good credit score, you could be eligible to refinance your student loans. When you refinance, you essentially take out a new loan and use the funds to pay off the old loan. Refinancing makes sense if you’re able to get a shorter-term length, a lower interest rate, or both. You may also want to consider consolidating your student loans when you refinance to combine multiple student loans into a new, single loan for convenience.

9. Check if your company offers repayment assistance

As an employee benefit, some employers help pay back their employees’ student loans. The amount compensated can vary, nonetheless, it’s still a great option to consider. Talk to your Human Resources department to see if your organization offers this perk.

10. Deduct student loan interest from your taxes

As you pay off your student loans, you’re also paying student loan interest. When it comes time to pay your taxes in April, take advantage of the Student Loan Interest Deduction on your federal tax return. You can deduct as much as $2,500 in total interest on federal and private student loans, which can greatly reduce your tax liability by several hundred dollars.⁴ Even better, use this money from your tax return to make an extra payment to your student loans.

When you develop your student loan payoff plan early on, you’ll set yourself up for success from the beginning. It may seem overwhelming but take it month by month and you’ll see the total amount you owe dwindle overtime and even shorten the time it takes to pay back.

Make debt payoff more affordable

According to a report from the Consumer Financial Protection Bureau, 1 in 5 borrowers have risk factors suggesting they may struggle to make payments once they resume in October.⁵ One of these risk factors is having multiple student loan servicers. Consolidating high-interest student loan debt into one low-rate personal loan at General Electric Credit Union will streamline the payoff process and make it less expensive in the long run. Schedule an appointment at a GECU location near you to talk through your options with a dedicated team member.