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Your student loan debt can seem quite scary, especially when you’re looking for your first post- graduation job. But don’t worry – you get a six-month grace period before a payment is due, and your payment may be as low as zero.

However, the wrong repayment plan could cost you potential loan forgiveness or just too much of your paycheck to afford anything else. Here’s what you need to do when picking among your options for repayment plans.

Figure Out What You Can Afford to Pay First

When you have six months before payments begin, it’s a great time to figure out what you can afford to pay. The best way to do this is to work student loan payments into your budget now, based on what you can afford to pay. Then put this money in a savings accounts for the next six months. If you’re in the process of a job search, you may want to wait until you secure your new job first.

But what if your six-month grace period expires before payments are scheduled to begin? Don’t worry. Sign up for an income-driven repayment plan. Your payment could be as low as $0, especially if you’re unemployed.

Learn About Public Service Loan Forgiveness

Public Service Loan Forgiveness is a program from the U.S. government where your remaining balance can be forgiven, after:

  • 10 years of on-time payments on a 10-year standard repayment plan or an income-driven repayment plan, or a combination of the two
  • PLUS working for a public service employer

More than one in four Americans would qualify for this program! Check out the Public Service Loan Forgiveness employment certification form for more information.

Rarely Choose the Standard 10-year Plan

Trying to pay off your student loans in 10 years can be a very stressful way to try to avoid the stress of being weighed down by long-term student loan debt.

Instead, pay extra money when you can and use free online shopping rewards programs like UPromise.com to pay off loans faster. There is no penalty for early repayment. So, you could pay off loans in 10 years on an extended plan if you choose to and can afford it.

However, you could choose the 10-year option if you’re on income-driven repayment for some years and you qualify for Public Service Loan Forgiveness. In this case, you’d be better off taking an allowed payment break when you can’t afford 10-year payments in years.

Don’t Jump to an Income-Driven Plan

Income-driven repayment plans can be a great option if you qualify for Public Service Loan Forgiveness or if you qualify for a payment that’s much lower than a 10-year standard repayment option. Your payment could be as low as $0, but you’ll have to submit new income verification forms or other proof each year. After 20 years of payments, even $0 ones, you’ll get the remaining balance forgiven.

If you have a relatively small debt load and a career where your income may quickly escalate, you’ll want to also consider extended repayment plans. You’ll get a guaranteed smaller monthly payment than the 10-year plan for the life of your loan, and you won’t have to submit income verification forms or documents.

Talk to your servicer to ask for help choosing among and calculating repayment plan options. If you’ve just graduated, you have a bit of a reprieve before payments are due, so you’ll want to take that time to prepare for when they are due.

How do you plan on handling your student loan debt? Let us know in the comments below!

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