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You’ve put in your years, studied tirelessly (or pretended to), accepted your diploma, and tossed your cap alongside hundreds of other graduates.  It’s liberating to be free of mundane homework and ancient professors who preferred the strange relic known as a chalkboard to PowerPoint.  The excitement quickly dissipates, however, when you open the mailbox to find the envelope that changes everything.  No, I’m not talking about the mass-mailing from Publisher’s Clearinghouse that says, “Congratulations, You’ve Won a Million Dollars!” It’s your very first student loan payment, and it’s time to cough up the dough.  What now?

First things first: how much do you owe?  And to whom are you repaying your loans?  Just like you have a budget for your general expenses, it’s always awesome to have a plan for paying off your student loans.  Along with your handy-dandy budget, keep a written record of each payment made to track your progress.  It will also be beneficial in the event a dispute arises.

After you do that, pin down what kind of loan you’re paying on in case you forgot or just straight up don’t know.  Generally, there are two types: government and private.  Yes, it’s pretty self-explanatory, but what style of loan you have can make a difference in how long it takes to pay off and the amount of interest you’ll accrue.  If you’ve got both types of student loans, it’s wise to eventually consolidate them.  Furthermore, you’ll want to make paying off the private payments your first priority even if the interest on government ones are higher.  Why?  Most private student loans are associated with adjustable rates, making them ticking time bombs in terms of amount owed and interest accumulated.  You don’t need Tom Cruise to diffuse this mission, and it’s not impossible.  You’re armed with the information, so all you need is your checkbook.

Just like you’ve got choices when ordering from the endless menu of possibilities at Taco Bell, you’ve got options as far as repaying your student loans.  A great option is the graduated method: repay your loan at a low amount initially, and increase it every two years.  Many students boldly choose the 10-year repayment plan, while others stick with it for the long haul and select to pay back their Alma Mater over 20 years.  While I’ve recommended saving small chunks at a time for your piggy bank during a lengthy period, paying off your student loan is slightly different.  Remember how I said you’ll want to pay off private loans first to avoid massive amounts of interest building up?  If you go with the 20-year route, it will likely increase the total amount you’ll end up paying by one-third.  I guess repaying student loans is essentially like ripping off a Band-Aid: it hurts much less to tear it off quickly instead of making it a slow and agonizing process!

Okay, so you might not be able to pay off your loan this month because you spent all your money flying across the world to see Justin Bieber’s world tour from the front row.  What should you do in such a crisis?  First, call your lender and explain the situation.  In this case, the person on the other end probably won’t care that you were whisked onto the stage and serenaded by the Biebs.  The claim must be something along the lines of re-enrollment in school, unemployment, or economic hardship.  If the lender finds it fitting, he or she will likely either defer your payment (a temporary suspension) or create forbearance (temporary postponement or reduction of payments).  If you pay late, it can severely affect your credit score and make it difficult (or near impossible) to take out other loans.  Besides, you don’t want to have to call one of the credit companies that sing and dance in medieval costumes in their commercials, right?

There is some good news. There are a few bonuses in paying off your student loans!  If you’re in the 25% tax bracket, deduct your loan from your tax forms to possibly save as much as $625 per year!  You might also qualify for loan forgiveness if you’re in the teaching profession or volunteer for select organizations.

Don’t start contemplating the worth of the one credit water ballet class you took or throw a fit about the money you’ll have to repay quite yet.  President Barack Obama announced on Tuesday that he’s taking steps to ease the burden of paying on student loans in this deflated market.  The plan unfolds in 2012, when payments will be capped at 10 percent of a borrower’s income.  It might seem like small potatoes if your loan is the size of a Guinness World Record-worthy russet, but it’ll make a difference as the nation continues to rebuild its economy and create jobs.

How are you tackling paying off your student loans?  We’d love to hear your plan!

Stephanie Koske is a writer for Quicken Loans, an amazing place to work. Find out more about being a part of our team at Quicken Loans and learn how we Amaze our clients.

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