Repayment Advice


Student and parent borrowers can save money by following these tips for selecting an education loan repayment plan:

  • Choose a plan that provides an affordable monthly payment but repays the loan in the shortest possible term. Extending the repayment period increases total interest costs.
  • In general, monthly student loan payments should not exceed 8% to 10% of your gross monthly income. Borrowers whose monthly payments exceed this level should explore a flexible repayment option or loan consolidation.
  • Prepay loan principal without penalty, thus reducing the total interest costs of your loans. Be sure to tell your lender or loan servicer that any extra payments you make should go to reduce your principal.
  • Have your monthly payments deducted automatically from your bank account, which will help ensure your payments arrive on time. Some lenders offer interest-rate discounts to borrowers who allow automatic debit of their payments and who have a history of on-time payment.
  • If you can afford to pay the accumulating interest on your loans while you are in school and during your post-school grace period, you can reduce your loan costs by hundreds and perhaps thousands of dollars.
  • You may qualify to deduct up to $2,500 of the education loan interest that you paid during the tax year, subject to income limits and other restrictions. You don't have to itemize deductions to claim the student loan interest deduction. However, you must file Form 1040 or Form 1040A. If you're married, you must file jointly to claim the deduction.

For more information, go to http://loanconsolidation.ed.gov/.
 
If you have loans from a previous college, be sure you find out when you must start repaying them. For federal loans, go to www.nslds.ed.gov/nslds_SA. For private loans, check with your lender.