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Back to School: Bills, Bills, Bills

Student loans may seem like mountains, but with planning they can be turned into mole hills

Donning a cap and gown, walking across stage and grabbing that diploma—college is over. Stepping into the “real world” can bring out a lot of emotions: Excitement, anxiety, eagerness.

Then, a few months later, the first student loan bill shows up, and a new feeling creeps in: panic.

“The amount we as a nation owe for our education has now officially topped what we owe on our credit cards,” says Martha White, a writer for, a site dedicated to personal money management. Using statistics from, she highlights that Americans currently owe $829.8 billion in student loan debt, $3.3 billion more than the number put out by the Federal Reserve for credit card debt.


Repaying a college loan takes patience and planning, but it’s not impossible, and a wide range of options at your disposal means there’s a plan to fit every situation.

The Federal Stafford Loan (Direct Loan Program or Federal Family Education Loan—FFEL Program) gives a student a six-month grace period after they graduate, leave school, or drop below the half-time enrollment status to first begin repaying their loans. If a student is granted a Federal Perkins Loan, they are given nine months before they have to begin repaying.

When it’s time to start repaying, be sure to watch your interest rate. Loans under the same name have a different rate depending on the status of the student. For instance, the Direct FFEL Subsidized Loan for undergraduate students has a fixed rate at 4.5 percent, but for graduate students it’s 6.8 percent.

Know your options for repaying the loans if you run into trouble, instead of failing to make the payments. One option is to change the repayment plans, which will give you more time or a different amount to pay back each month. If you are receiving Federal Student Aid, you already have a standard 10 years to repay the loans.

If you find yourself running into trouble, consider the Extended Repayment plan. It requires you pay a fixed annual or graduated repayment over a period of 25 years. However, if you have less than $30,000 in outstanding Direct Loans, or FFEL Program Loans, this is not an option.

Graduated Repayments start low and increases every two years. This plan is spread out over a decade, and while increasing, no single payment will be more than three times greater than any other payment.

Since July 1 of last year, a plan called Income Based Repayment has been in effect. Essentially, under the IBR, the required monthly payment is capped at an amount that is based on income and family size.

Another option is Income Contingent Repayment for Direct Loans Only, which will calculate monthly payments based on adjusted gross income, family size and the totally amount of the loan.

And just because you’ve long since packed your dorm room away doesn’t mean all ties to your alma mater have to be severed. Colleges offer a wealth of services post-graduation as well.

“Student loan borrowing is increasing. However, there is also a trend of more financial education on campus,” says Reyna Gobel, author of Graduation Debt: How to Manage Student Loans and Live Your Life. “Students can greatly benefit from attending seminars on campus, or seeing a peer financial counselor.”

All detailed information on these plans, as well as a calculator to figure out how much you would potentially owe, can be found on

More articles filed under College Guide,Special Series

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