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The first student loan bills are arriving for the Class of 2019. If the grads are able to stick to the standard plan, they’ll make payments every month for the next 10 years and be done with it.
But not all borrowers will knock out their loans so quickly. Among federal loan borrowers who began taking on debt in 2003-2004, just 1 in 4 had paid off their debt by 2015, according to the most recent data from the National Center for Education Statistics. As for the students with debt remaining, about 39% were still in repayment.
This year’s recent graduates can improve their odds by setting a plan now to pay back the debt and stay on track moving forward, no matter what obstacles pop up.
“A plan will alleviate the stress you feel when you’re unsure about what life looks like after college, and you have this debt to pay,” says Tracie Miller-Nobles, an associate professor at Austin Community College and a member of the American Institute of CPAs’ Consumer Financial Education Advocates.
Here’s how to create a strategy.
Get details on all loans
Don’t wait to find out how much money you owe. There’s a chance your bill won’t arrive before your first due date, student loans experts say.
“Just because you don’t get a bill doesn’t mean you don’t owe the money,” says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors.
For federal loans, go to the student aid website or the National Student Loan Data System. To find private debt, visit annualcreditreport.com for a credit report, which lists private loan debt and the lender.
Once you know who holds the loans, call it to check or update your contact information. You can also create an online account to track payments.
Find the right repayment plan
Your repayment goal should be to pay the least amount over time, Mayotte says. That’s because the longer you pay off the loan, more interest will accumulate. For most borrowers, the standard 10-year repayment plan is the cheapest option.
For others, that may mean pursuing a loan forgiveness program, like Public Service Loan Forgiveness, which forgives federal loan debt after making 120 payments on an income-driven plan while working full-time for the government or a qualifying nonprofit.
High earners may pay off loans faster by asking their servicer to apply additional payments to their loan balance.
It’s borrowers who face modest incomes or job uncertainty who have some thinking to do.
“There are a lot of options, and borrowers tend to get confused or distracted because there are so many options that aren’t that drastically different,” says Abril Hunt, outreach manager for ECMC, a nonprofit organization focused on student success.
Hunt recommends that borrowers who can’t make payments on the standard plan try Revised Pay As You Earn, or REPAYE. It’s the income-driven repayment plan that all graduates with federal loan borrowers can enroll in.
An income-driven repayment plan, like REPAYE, sets payments at a portion of your income, which can help fit them into your budget. You’ll need to recertify your income each year. If you lose your job or don’t have one yet, your payments could be as little as $0.
If you’re not sure which plan to choose, use the Department of Education’s repayment estimator to find out your payment on each plan.
Once you’ve selected a plan, make sure you never miss a payment. Enroll in autopay, but be sure to have enough money in your bank account to cover those direct payments.
Autopay can save you money, too: All federal student loan servicers and most private lenders will reduce your interest rate by 0.25 percentage points when you enroll.
Have a plan if you run into trouble
If the worst happens — a costly medical emergency or job loss, for example — contact your servicer or lender as soon as possible. They can help you work out a short-term reduced payment plan, sign up for income-driven repayment or apply for a temporary postponement.
Pausing payments for a short period can give you breathing room. But interest may continue to grow, so try to pay the interest during this time to avoid higher debt.
Reevaluate every year
Your knee-jerk move might be to pick a plan with the lowest payment possible, Mayotte says.
“That might be the right thing to do for your first loan payments, but as your income grows and your living situation changes you don’t want to leave it on autopilot,” she says.
Set an annual reminder to reassess your repayment strategy. That could be tax time or when you recertify your income for an income-driven plan.
This article was written by NerdWallet and was originally published by The Associated Press.