Can You Afford Your New Student Loan Bill? Do This Before Choosing a Repayment Plan
At the end of September, the first wave of student loan borrowers will lose access to the Biden-era SAVE plan, and must choose a new payment plan. Fail to do so, and the government will automatically choose one for you.
By logging into your StudentAid.gov account, you can run the numbers for your own loan using the Repayment Calculator. It pulls your loan data and displays your payment plan choices with monthly payments, total repayment costs, interest and projected payoff dates
Bear in mind that not everyone has the same choices. Depending on the type of federal loan and when you borrowed it, you could see different options.
To calculate whether a monthly payment fits your budget, you need to actually calculate your budget. Unfortunately, most Americans don't have a detailed grasp of their exact spending in each category.
When in doubt, estimate much higher than you think the actual numbers are. You simply won't remember every single cost you incur every year, so give yourself some buffer for unexpected expenses.
If you can comfortably pay the Tiered Standard payment, do that. It creates a predictable monthly payment with a set payoff date.
If you absolutely can't make ends meet with the standard payment, look into the income-driven RAP. But don't choose this option simply because it lets you drive a better car or go out to dinner more often.
"It's better to delay many of life's milestones as long as possible while focusing on the paying off student loan debt," said Charles Hoff, Financial Literacy Counselor at DFCU Financial . "The exception is matching retirement contributions from your employer, find a way to take advantage of any free retirement money offered."
Hoff also said borrowers to pay off any credit card balances and then private student loans, before funneling extra money to pay off federal loans. Federal loans offer more flexibility, and usually lower interest rates.
Don't assume the Repayment Calculator got your monthly payment exactly right to the penny. Confirm the monthly payment with your loan servicer before setting up autopay.
As for the payment date, aim to schedule it the day after each of your paydays . That might mean setting up biweekly payments instead of monthly. That can actually work in your favor: if you make a half-month's payment every two weeks, you'll make 26 half-month payments for a total of 13 monthly payments a year, paying down your balance faster but painlessly.
The Department of Education announced that some borrowers who enroll in autopay by September 30, 2026 can qualify for a one-percentage-point discount on their interest through June 30, 2028.
As a final thought, make sure you keep a solid cash cushion so that unexpected bills don't derail you. Aim for at least three months' living expenses in an emergency fund, which you can gradually build up to six months over time.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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