The Ultimate Student Loans Payback Guide

student loan payback

Whether you just graduated or have been out of school for years, as a debt relief attorney, I am often asked for a guide to how to pay off your student loans.   Following these guidelines will help you avoid being one of the millions of people who default on their student loan debt and end up being sued for non-payment.

Get to Know Your Student Loans

How many student loans do you have?  This seems simple, but many people don’t remember or realize which loans they have and from whom they were taken out. If you think you might have student loans you’ve lost track of, work to find them. Pull your free annual credit reports, then check for debts and accounts you might have missed. For student loans, you can use the National Student Loan Data System to find any educational debts that have fallen off your radar.

Know if your student loans are a private or federal student loan.  If your student loan is private, then the debt will be treated much like credit card debt.  If your student loan is federal, then you could qualify for an Income-Based Repayment Plan.

Gather all the paperwork for your student loans or obtain the login for your student loan account online.  You need access to all the information regarding your student loans.

Get to know your student loan servicer, so you can ask for help if you don’t understand your student loan repayment parameters.  Build a relationship with your student loan servicer.  If you have trouble paying the loan in the future, they might be helpful in trying to get your payment amount lowered or into a payment plan.

Find out if you have a grace period for your student loans.  Many student loans offer a grace period (or deferment) of 6 months after your graduation date to start paying back your student loans.  Oftentimes, there is an option to extend the grace period, so be sure to do your research.

Research Your Student Loan Repayment Options

If you have a federal student loan, use the Financial Student Aid resources on the Department of Education’s website to help determine which student loan repayment option is right for you.

If you have a private student loan, then you need to know who owns your debt right as of today.  Oftentimes you take out a loan with a large private student loan servicer such as Navient or National Collegiate Student Loan Trust and they later hand that debt over to another entity to collect on the debt.  Problems arise when you ignore letters or bills from this new entity, as you do still owe the student loan debt.

You can refinance your student loans to a lower interest rate. Fortunately, for many graduates, refinancing can be a great opportunity to help with loan payments.  First, you have to ask yourself why you are refinancing. Do you want to lower your interest rate, or would you like a longer term to lower your payments? Once you have determined why you want to refinance, I would recommend reviewing your credit report. You can get your credit report for free by using Credit Sesame. If there are any discrepancies on the report, dispute them. This could improve your score and, in turn, improve the terms of the loan.

What student refinancing lending company should I choose? There are hundreds of companies out there that will help you refinance your student loans, but a select few rank above the rest. The five best, as provided by Student Loan Hero, are SoFi, CommonBond, LendKey, Earnest, Laurel Road, and Citizens Bank. All of these companies offer competitive rates with a variety of term lengths, ranging from 5 years to 20 years:

Top Picks SoFi Laurel Road Common Bond Lend Key Earnest
Variable Rates 2.79% – 6.72% 3.76% – 6.42% 2.79% – 6.72% 2.66% – 6.20% 2.79% – 6.46%
Fixed Rates 3.35% – 6.74% 4.20% – 7.20% 3.35% – 6.74% 3.25% – 7.26%  3.35% – 6.49%
Terms (Years) 5, 7, 10, 15, 20  5, 7, 10, 15, 20 5, 7, 10, 15, 20 5, 7, 10, 15, 20  5 to 20
Min. Credit Score 690 680  660 680  660
Soft Credit Check Yes Yes Yes Yes Yes
Min. Annual Income No min No min No min $24k  No min
Avg. Time To Check Rate 2 Minutes 2 Minutes 2 Minutes  2 Minutes 2 Minutes
 Check Rates Visit SoFi Visit Laurel Road Visit Common Bond Visit Lend Key Visit Earnest

*The actual interest rate you will receive is based upon your credit score, income, savings, degree type, and/or presence of a co-signer. To increase your chances of getting approved and receiving the lowest interest rate, it is recommend applying with a co-signer.

If you have private and federal loans, SoFi may be your best bet, as they will refinance both loan types together. It is important to apply to several different lenders. Odds are not all of them will offer the same interest rate and terms, so shop around and get the best deal you can find. You can check your rate in under 3 minutes.

Organize a Payment Plan for your Student Loans

Make an overall budget for your monthly income and expenses to include your student loan payments.  Make sure you have all payment due dates noted.  Use a spreadsheet or an app to help you track where and how you spend your money.

Set up automatic payments for your student loans, so you don’t miss any. Some lenders often a small discount on your interest rate if you set this up.

Accelerate repayment of high interest student loans first.  You always want to tackle high-interest loans of any kind first.

What to Do if You Fall Behind on Your Student Loan Payments

Take immediate action to lower your living expenses, so you have more money to put towards your student loan payments. Some ways to do this are to find a roommate or live with your parents, quit eating out, stop buying expensive coffees, quit shopping for things you don’t need, and get a “side hustle” – another job to supplement your income.

For Federal Loans, see if you qualify for deferments, forbearances or hardship exemptions.  Call on your loan servicer and find out if your life circumstances will qualify you.  If you miss payments for 270 days, then your student loan will be considered in default and then the debt collectors will start coming after you for the debt.

If you don’t qualify and your loan is in default, there are federal loan rehabilitation programs in place to get you back on track.  I have helped many clients who have had their wages garnished for non-payment get into loan rehabilitation programs that cost as little as $5 per month over a 9-month period.  Once payments are completed, the negative marks on their credit scores are removed and the loans will be considered in good standing.

Falling behind on private student loans is like falling behind on credit card debt. If you go 3 months without making a payment, then you are in default and will be sued.  I usually recommend to my clients a debt settlement as a viable option to get out of private student loan debt.  A debt settlement is a negotiation between the student loan borrower and the lender that the borrower will pay back a (usually greatly) reduced amount of the debt over an extended period of time.  The lender would rather receive something from you than nothing if you declare bankruptcy.  Plus, the lender doesn’t want to spend the time or money on suing you and they can use the loss to offset their profits with creative bookkeeping.

Be Aware of Student Loan Debt Relief Scams

Student Loan Debt Relief Companies and Student Loan Debt Law Firms are very different.  Student loan companies are often in the news for scamming student loan borrowers.  On the other hand, debt relief attorneys are held to specific ethical and legal standards to act in their clients’ best interest.  If they don’t follow these standards, they will be dibarred.

If you are solicited by a student loan debt company – BEWARE!  This is a red flag and means they probably obtained your information from a list that they bought.  Most of these companies are just out to make a buck and don’t really care about your personal student loan debt struggle.

Conclusion

Navigating through the student loan process can be an intimidating.  I know, as I incurred student loan debt myself and have been through the repayment process.  If you find that you have trouble paying back your student loans, know that you are not alone and try not to get too discouraged.  You do have options, and you could consider all your options detailed here and refinancing your student loans. Good luck with those student loans!

Daniel R. Gamez

Daniel R. Gamez

Daniel R. Gamez, an attorney focusing exclusively in debt relief, is licensed to practice in all state and federal courts in California and Texas. Mr. Gamez owns and operates the Gamez Law Firm in San Diego, CA. For more information, please contact Daniel Gamez at www.GamezLawFirm.com. Mr. Gamez was recently interviewed by NBC regarding student loan programs.
Daniel R. Gamez

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