How do I pay back my student loans?

Young woman considers how to pay back her student loans.

Find out ways to manage student debt.

Repaying your student loans may be easier than you think. With a little organization and planning, you can set yourself up to successfully repay your loans. Here are some tips to consider.

1. Know how much you owe.

Gather all your student loan documents (federal and private) and make sure you know the terms of each loan, including payment amounts, payment due dates, whom you pay, and when you need to start repaying (typically six months after you leave school).

Look at the payment due dates and see where they fall in the month. Are they spread out or close together? If the latter, you might try spreading the payment dates out to make monthly cash flow easier. Or, conversely, you might prefer to have all your payments due on the same day to help you avoid forgetting one. Speak with your lender to see if either of these options is possible. Then be sure to factor the payments into your monthly budget.

About two in three college seniors who graduated from public and private nonprofit colleges in 2017 had student loan debt. They owed an average of $28,650.

— Source: The Institute for College Access & Success

2. Make it automatic.

Setting up automatic payments from your personal checking account can help you manage your monthly student loan payments. You won’t have to worry about making individual payments, and you may also be able to save money, as some lenders provide a lower interest rate if you sign up for automatic payments.

3. Pay off debt with higher interest rates first.

The interest rates you have on your loans probably vary. If you have extra funds each month, apply them to the loans with higher interest rates first to reduce the total interest you’ll have to pay. Also, since student loans don’t have prepayment penalties, you won’t be penalized if you choose to put extra money toward repaying your loans.1

As of spring 2019, undergraduate Direct Subsidized Loans and Direct Unsubsidized Loans had a fixed interest rate of 5.05%.

— Source: Federal Student Aid, DOE

4. Consider refinancing and consolidation.

When you refinance and consolidate your student loans, you may be able to simplify your monthly payments. So what’s the difference between refinancing and consolidation?

Refinancing your student loans allows you to refinance a single loan or combine multiple student loans. Both options are appealing because they can offer lower rates and term adjustments as well as lower your monthly payments — all of which can help you pay off your loan(s) sooner. Student loan consolidation allows you to combine multiple outstanding student loan balances under a single loan with a single interest rate and single monthly payment. This can be more convenient than tracking multiple loans because there’s one payment per month to one lender.

Federal and private student loans can be refinanced and consolidated, either through a Direct Consolidation Loan offered by the U.S. Department of Education or through private lenders. It’s important to fully understand the benefits specific to some federal student loans — benefits that may be lost when refinancing and consolidating. And be aware that if you refinance and extend your loan term, you could end up paying more in interest over the life of the loan.

Almost 30% of student loan borrowers have consolidated or refinanced student loan debt.

— Source: USNews

5. Know when to ask for help.

If you’re facing financial hardship and finding it difficult to make your private student loan payments, you might be able to apply for forbearance. There are different situations that can qualify you for forbearance — such as if you lose your job or if you’re in medical school and completing a residency program, for example. Forbearance isn’t forgiveness — you’ll ultimately have to pay the loan in full. But it may allow you to postpone your payments and ease a current cash crunch. Be aware that interest will continue to accrue, so in the long run you might end up paying more interest over the life of your loan. Federal loans offer deferment options for certain circumstances, such as military service, in addition to several repayment options, so check with your loan servicer or the U.S. Department of Education to learn more.

In addition, your lender may have resources available to you that you aren’t aware of. For example, Wells Fargo student loan consultants can work with you, one on one, to help answer questions during each step of refinancing and consolidation. Or, watch our webinar about strategies for managing student debt.

Setting up a plan and paying off your student loans as soon as possible may help you free up valuable cash for life’s other necessities.

With a Wells Fargo Private ConsolidationSM loan, you may be able to combine multiple federal or private student loans into a single loan or refinance a single loan.2

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