Managing Your Student Loans
Your Guide to Managing Student Loans
Frequently Asked Questions
How do I manage my student loans?
Once you graduate, drop below half-time enrollment, or leave school early, your federal student loan will go into repayment. Student loans (both public and private) can take years to pay back, and there are various ways to do so. The first step in managing your student loans is to know where your loan came from, who your lender is so you can appropriately pay the funds, and what amount you owe. You will then have a grace period that typically lasts about six months after graduation until you have to make student loan payments. From there, you can choose the repayment plan that best works for you. Everyone’s student loan repayment plan will look different, so it is important to do your research and be prepared for all possible options that best fit your personal circumstances.
How do student loans work?
A student loan is a loan designed to help individuals pay for some or all of the costs of higher education, as well as associated fees. It is a debt you have to pay back, even if you do not complete school. To be eligible for a student loan, you must first fill out the Free Application for Federal Student Aid (FAFSA). There are two types of categories student loans fall into: federal loans and private loans. Federal loans are issued by the U.S. Department of Education, and private loans are offered by private lenders like banks and credit unions. Once you graduate, drop below half-time enrollment, or leave school early, your grace period will start, giving you the chance to organize a repayment plan that works for you. In most cases, the repayment process will go into effect six months after the grace period begins.
How do you get student loans forgiven?
With federal student loans, there are certain circumstances where you can have your loans forgiven, meaning a portion or all of your debt can be erased from your lender’s books. There are many student loan forgiveness programs available, most of which have to do with the career you choose. For example, depending on the circumstances, you may have your loans forgiven if you are employed by the government or a nonprofit organization, if you are a teacher, if you are a medical professional, or if you work in law. Plus, if you have a federal loan and you're on an income-based repayment (IBR) plan, you can have the balance of your student loan forgiven after 20 or 25 years, depending on when you took out your loan.
How long does it take to pay off student loans?
How long it takes to pay off your student loans will depend on the type of loan you have and the repayment plan you set up with your loan servicer. With a standard repayment plan and private loans, it will generally take about 10 years to repay your student loans. If you pay under an income-driven repayment plan, on the other hand, you may be eligible for forgiveness after 20 or 25 years of making payments.
Student Loan Servicer
A student loan servicer is a company that manages your federal student loans. It is responsible for all loan-related administration, including responding to questions, processing payments, and facilitating changes to your repayment plan.
When you borrow money with a subsidized loan, you can avoid paying interest on your loan balance—at least temporarily. That feature makes it less expensive to borrow, and it can reduce the total cost of whatever you’re borrowing for.
MOHELA, the Missouri Higher Education Loan Authority, is a nonprofit student loan servicer that works with the U.S. Department of Education to manage billing and payments for federal student loans. The Missouri-based company is a legitimate student loan servicer that is contracted to handle nearly 25% of the Department of Education's accounts.
An unsubsidized loan is a type of federal student loan that requires the recipient to pay interest on the loan as soon as it is funded. The student receives no grace period in which they can accept funds without paying interest.
Navient is a corporation based in Delaware that provides educational loan management and business processing services at the federal, state, and local levels for clients in the education, health care, and government sectors. But it is perhaps best known as one of 10 student loan servicers that the U.S. Department of Education works with to manage federal student loans.
Student Loan Deferment
A student loan deferment is an arrangement allowing you to postpone or reduce loan payments temporarily without damaging your credit scores. Any student loan payments you skip during deferment must be made up later, which means a longer repayment period than originally planned.
In-school deferment is a temporary postponement of repayment of federal student loans that students can obtain while enrolled in school, and in some cases, for six additional months after they cease to be enrolled. It allows you to ease your financial burden while you're in school and focus on your education.
Great Lakes Student Loans
Great Lakes Student Loans is a student loan servicer that contracts with the U.S. Department of Education. As a servicer, the company is responsible for helping borrowers manage billing and payments for federal student loans. Great Lakes Student Loans handles nearly 18% of all federal student loan accounts.
Nelnet is primarily a student loan servicer. In this capacity, Nelnet student loan servicing works directly with borrowers to manage and repay their loans. While these loans are owned by the federal government, Nelnet contracts with the U.S. Department of Education to handle federal student loans in repayment.
Debt consolidation is using one loan or credit card to pay off multiple loans or credit cards so you can simplify your debt repayment. With one balance instead of many, it should be easier to pay off your debt and, in some cases, secure a lower interest rate from the lender. Student loan consolidation is available for private and federal loans.
Income-Driven Repayment Plan
Income-driven repayment plans cap student loan payments at a percentage of your discretionary income—the amount remaining after you deduct taxes, other mandatory charges, and expenditure on necessary items. An income-driven repayment plan allows you to make payments based on your earnings for 20 to 25 years, depending on your plan. At the end of your required payment period, as long as you’ve fulfilled all of the requirements of your program, any remaining balance will be forgiven.
Student Loan Garnishment
Student loan garnishment happens when your employer pays money you owe to a student loan lender. When you default on a loan, lenders can gain the right to demand a portion of your pay, and your employer is generally required to cooperate. Both private lenders and the federal government can and will garnish wages on defaulted loans.
Federal Student Aid. "Student Loan Repayment."
Federal Student Aid. "Student Loan Forgiveness."
Federal Student Aid. "Repayment Plans."
Federal Student Aid. "Servicer Performance Metrics and Allocation: Quarter Ending 06/30/2021," Download "Federal Servicer (TIVAS and NFP) Allocations."
Federal Student Aid. "Student Loan Deferment."