Graduating With Student Loans? Prepare for Your Financial Future

College graduation season is underway, and nearly 3.2 million students are slated to pick up their associate or bachelor’s degree diplomas this spring, according to the National Center for Education Statistics. When the cap tosses and festivities wrap up, it’ll be time for job applications, apartment leases — and student loan payments.

It can be challenging to navigate major bills and student debt repayment. This year, new payment plans may complicate matters further. 

Investing time now to research repayment options can pay off, says Emma Crawford, a certified financial planner and student loans expert at Perk Planning, a registered financial advisory firm in Madison, Wisconsin: “It's not easy, but it's worth it because it can save them a lot of money in the long run.”

If you’re leaving campus this year and starting your first full-time job, here’s how to prepare for impending student loan bills and a new financial reality.

Complete student loan exit counseling

If you have federal loans, you must complete mandatory student loan exit counseling when you leave school. The process takes about 30 minutes and can be done online at StudentAid.gov. Exit counseling will ask you to update your contact information, walk you through how much you owe and explain the basics of student loan repayment.

Many universities require students to complete loan exit counseling before they will post their official diplomas, Crawford says.

Private student loans won’t appear on StudentAid.gov. To check your loan amount and terms, including any exit counseling requirements, refer to the documents you signed when you took out the loan and reach out to your lender.

Get to know your servicer or lender

Federal student loan servicers act as intermediaries between borrowers and the Education Department. You were assigned a servicer when you first took out your loans. Your servicer’s customer service department can help you with individual questions about your loans and repayment options.

Your federal student loan servicer is listed on the right side of your StudentAid.gov dashboard. You’ll have to set up a separate account on your servicer’s website to manage your bills.

“Understanding who your servicer is is really important, because a lot of people don't know that they're not going to be paying on StudentAid.gov. They have to pay their servicer,” Crawford says.

Spend a few minutes logging into your servicer account and updating your contact information. Here, you can also enroll in autopay, so you don’t have to manually pay your student loan bill each month. Autopay also gives you a 0.25 percentage point interest rate deduction on your bills.

Choose a repayment plan

If you don’t pick a specific student loan repayment plan, your servicer will automatically place you on the standard repayment plan. This splits your total debt into 10 years' worth of monthly payments, plus interest.

The Education Department’s loan simulator will give you estimates for how much you could pay on various repayment plans, including how much forgiveness you could get. Take some time to go through the pros and cons of each repayment plan, and learn about how monthly payments are calculated, Crawford says.

The new income-driven SAVE repayment plan is a good fit for many recent graduates, who tend to earn lower salaries as they start their careers. Beginning in July, SAVE will cap undergraduate student loan payments at 5% of discretionary income.

If you’re unemployed or earn less than $32,800 (roughly $15 an hour) as a single household, you’ll qualify for $0 monthly payments and interest won’t build under SAVE — while also making progress toward loan forgiveness. However, this plan could extend your repayment period from 10 years to up to 25 years, depending on how much you owe.

Reach out to your servicer to switch repayment plans. You can also sign up for an income-driven plan like SAVE on StudentAid.gov/IDR.

Repayment options for private student loans vary by lender.

Prepare for your first bill

You have a six-month student loan “grace period” after graduation or dropping below half-time enrollment, during which you don’t have to make federal student loan payments. After the grace period ends, your first bill is due.

If you start a job before the grace period ends and your federal loans are unsubsidized, consider starting repayment anyway. Interest will accrue during the grace period, which could increase the total amount you’ll repay over time. But if you have need-based subsidized loans, there’s no downside to taking advantage of the grace period — interest won’t start building until after the six months end.

“Take advantage of that grace period to try and get your career up and running,” says Scott Stark, a financial coach and certified financial planner at Financial Finesse, a workplace financial wellness company. “Until you have a job and some income, it's just all about trying to keep your expenses as low as you can, trying to avoid getting into debt or getting into situations that you're going to be digging out of a hole.”

Some private student loan lenders offer grace periods after leaving school. Check with your lender for the specifics.

Plan your financial future

Student loan bills might be a major part of your financial life for the next decade or longer. But as a recent graduate, you should also check in with other parts of your financial life to set yourself up for present and future success.

During your grace period, try to save at least $1,000 for emergencies — and once you start your first full-time job, aim to put 10% to 15% of your income into a workplace retirement account, like a 401(k), Stark says.

“Your future self will be so thankful, because of the benefit of how much time you've got for that to compound,” Stark says. “That is an amazing opportunity to get things started on the right foot.”