Understanding and Paying Your Student Loan Bill

Most students rely on some form of financial aid to get through college, usually in the form of student loans. Student loans are easy to avoid thinking about while you are attending college.

That is because you do not have to make payments until after you graduate. Many student loans have payment options where your first payment is not due until several months after you graduate, giving you time to find a job and build up a savings before you start making payments. These plans are helpful, but even with a generous plan, receiving your first student loan bill is overwhelming.

Student loan payments can be expensive depending on how much you borrowed and the type of loan you took out. In addition, as a recent graduate you most likely have other expenses to worry about, like rent and utilities. You may not even be employed yet when the first payment is due. Paying student bills is intimidating, but it becomes manageable if you understand all the information presented on your bill. More information on paying your student loan bill is covered in the sections below.

Understanding Your Student Loan Bill

Unless you previously set up e-statements with your student loan lender, your first student loan bill arrives in the mail. Federal student loans are not actually managed by the government. Instead, your student loan is handled by a loan servicer. You can see their company name and return address on the bill, so you know which company you are dealing with. If you have several student loans, you might find they are dealt with by different servicers, so make sure you correctly file and identify which bill is associated with each loan.

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The main parts of your student loan statement include the total of your loan balance, the rate of interest and the amount you are required to pay each month. These are all clearly marked on your statement, along with the following:

  • Your Account Number. This is your unique identification number.
  • The Beginning Principal. This is the amount you borrowed originally.
  • The Amount Past Due. This shows the total unpaid amount since your last bill.
  • The Principal Amount Remaining. This details the remaining amount to be paid in total, but it does not include the interest accrued.
  • The Current Amount Due. This is what you must pay in total, including both the principal and the interest of this billing cycle.
  • The Due Date. This gives the date when your current amount is due.

Understanding Your Student Loan Payments

You need to make a payment every month. The amount you pay is dependent on the balance of your loan and the interest accrued. Generally, the interest you must pay is the smaller amount on your bill, while the principal to be paid is the larger amount. As you continue to pay the principal, the interest starts to decrease. Your interest rate was locked when you took out your loan.

You also receive a payment schedule for your student loans from each of your student loan service providers. The schedule displays the payments over a number of years. This is typically between 10 and 25 years, depending on your specific repayment plan. The schedule also shows how your payment affects the balance of your student loan.

How to Pay Your Student Loan Bill

Paying your student loan bill may be as simple as waiting for your latest statement to come through and paying the amount due. However, there are several repayment plans available, which means you can choose a plan that best fits your finances. If you do not choose a specific repayment plan, you are automatically enrolled with the standard repayment plan. The standard plan means your loan needs to be paid off within 10 years. You can change your payment plan at any time.

You can choose a monthly repayment plan based on your earnings. This is often the best plan to start off with while you are getting used to working and balancing your finances after graduation. It works by setting your monthly payment at an affordable amount, based on your salary and the size of your family. There are four types of income-driven repayment plans available:

  • Pay As You Earn Repayment Plan
  • Revised Pay As You Earn Repayment Plan
  • Income-Contingent Repayment Plan
  • Income-Based Repayment Plan

You can easily pay your student loan online with your loan service provider. By setting up automatic payments, you avoid incurring late fee penalties for missing a deadline. In addition, most federal loans reduce interest by 0.25 percent if you pay your student loan with an auto-pay service. Finally, you can also reduce the amount you pay on interest by paying more than the minimum loan payment due each month. This helps you pay down your loans faster, minimizing the amount of interest that accumulates over time.

What if you cannot afford to repay your student loan?

Are you finding it difficult to make your monthly payments? There are several options available to help you to remain in good standing, even in tight financial situations. Firstly, you may be able to change your monthly payment date. If your due date is prior to the date you get paid, changing the date can make it easier to keep up with payments. Contact your student loan service provider to see if this is possible.

Secondly, you can change your repayment plan. Since you can change your payment plan as needed, you can always evaluate whether a different plan would better suit your finances. For example, by changing to an income-driven repayment plan, you can make lower monthly payments based on your salary.

You could also consolidate your loans. If you have several student loans, you can simplify the process of repayment by combining the loans into one debt.  One direct consolidation loan means making only one monthly payment. This reduces the risk that you might miss deadlines and makes it easier to track how much you owe month to month.

If money is so tight none of those options work for you, you may be able to postpone your loan repayments. This is done through forbearance or deferment, which means you are not obligated to submit payments for a set time period. Contact your loan service provider to find out how this works and whether you are eligible.

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