Graduation is a major milestone—but for most students, it also marks the beginning of a new responsibility: repaying student loans. With the average federal student loan debt balance hovering around $39,000 and total average balances potentially exceeding $42,000 , figuring out how to manage these payments can feel overwhelming. The good news is that borrowers have more options than ever to make repayment manageable. Here’s a comprehensive guide to handling your student loans after graduation.
Know Your Grace Period
First, take a deep breath. You don’t have to start paying immediately. Most federal student loans include a six-month grace period after graduation, dropping below half-time enrollment, or leaving school before payments begin . Some private lenders offer similar grace periods, typically ranging from six to nine months .
This grace period isn’t just a break—it’s an opportunity. Use this time to get financially settled, find a job, and create a repayment strategy. However, be aware that while federal subsidized loans don’t accrue interest during grace, interest continues to accumulate on unsubsidized and most private loans . If you can afford even small payments during this period, you can reduce your long-term interest costs significantly .
Understand What You Owe
Before you can create a repayment plan, you need a complete picture of your debt. Many graduates have multiple loans with different servicers, interest rates, and terms.
For federal loans: Log into your account at StudentAid.gov. This will show you all your federal loans, current balances, and assigned loan servicers . The National Student Loan Data System (NSLDS) is the central database for federal student aid .
For private loans: Check your credit report at AnnualCreditReport.com, where you can request a free report weekly through April 2026 . You can also contact your original lenders directly.
Create a spreadsheet listing each loan’s:
- Balance
- Interest rate
- Loan servicer contact information
- Monthly payment amount (once repayment begins)
- Repayment term length
Choose the Right Repayment Plan
Federal Loan Repayment Options
Federal student loans default to the Standard Repayment Plan, which sets fixed monthly payments over 10 years . While this is typically the fastest way to repay debt with the least total interest, it may not fit every budget.
If you need lower payments, consider these alternatives:
Graduated Repayment Plan: Payments start low and increase every two years, typically over a 10-year term. This suits borrowers who expect their incomes to rise steadily .
Extended Repayment Plan: Stretches payments over 25 years, lowering monthly obligations. To qualify, you must have more than $30,000 in outstanding Direct Loans . Remember that longer terms mean more interest paid overall .
Income-Driven Repayment (IDR) Plans: These cap monthly payments at a percentage of your discretionary income and offer forgiveness after 20-25 years of qualifying payments . Current options include:
| Plan | Payment Amount | Forgiveness Term |
|---|---|---|
| PAYE | 10% of discretionary income | 20 years |
| IBR | 10-15% of discretionary income | 20-25 years |
| ICR | 20% of discretionary income or fixed 12-year amount | 25 years |
Note: The SAVE Plan (formerly REPAYE) is currently on hold due to legal challenges. Enrolled borrowers have been placed in administrative forbearance with no payments due and no interest accruing . Borrowers with loans taken out after July 1, 2026, will be enrolled in a new IDR plan called the “Repayment Assistance Plan” (RAP) .
To explore options, use the Loan Simulator tool at StudentAid.gov, which shows how different plans affect monthly payments, repayment periods, and total interest .
Private Loan Repayment Options
Private lenders offer fewer protections, but options may include:
- Immediate repayment (full payments during school)
- Interest-only payments during school
- Full deferment until after graduationÂ
Contact your private lender directly to discuss available plans. Some may offer temporary hardship options if needed .
Explore Loan Forgiveness Programs
If you work in public service, you may qualify for Public Service Loan Forgiveness (PSLF) . This program forgives the remaining balance on federal Direct Loans after 120 qualifying monthly payments (approximately 10 years) while working full-time for a government agency or qualifying nonprofit organization .
Key requirements:
- Work for a qualifying employer (federal, state, local, tribal government, or tax-exempt nonprofit)
- Make 120 on-time payments under an income-driven repayment plan
- Certify your employment annually using the PSLF Help ToolÂ
Other forgiveness options include:
- Teacher Loan Forgiveness: Up to $17,500 for teachers working five consecutive years at low-income schoolsÂ
- IDR forgiveness: Remaining balance forgiven after 20-25 years of qualifying paymentsÂ
Consider Consolidation or Refinancing
Federal Loan Consolidation
A Direct Consolidation Loan combines multiple federal loans into one, simplifying repayment with a single monthly bill . However, this may extend your repayment term and doesn’t lower your interest rate—it averages existing rates .
Private Refinancing
Refinancing involves taking out a new private loan to pay off existing loans (federal, private, or both) at a potentially lower interest rate . This can save money and shorten repayment timelines.
Pros:
Cons:
- Loss of federal protections: If you refinance federal loans privately, you lose access to IDR plans, PSLF, deferment, forbearance, and other benefitsÂ
- May require excellent credit to qualify for best ratesÂ
Becky Blake, a graduate who refinanced Parent PLUS Loans with rates as high as 9.08% down to 3.94%, paid off approximately $68,000 in under two years by combining refinancing with aggressive repayment strategies .
Create a Budget That Works
Building a realistic budget is essential. Start by tracking your monthly income after taxes, then list all fixed expenses (rent, utilities, food, minimum loan payments) . Look for areas to reduce discretionary spending and direct those savings toward loans .
Taylor Hayes, a JMU graduate who paid off over $60,000 in 4.5 years, advises continuing to live on a “college student budget” after graduation . She temporarily lived with parents and avoided discretionary spending to accelerate repayment .
Use Smart Payoff Strategies
Avalanche vs. Snowball Method
Make Extra Principal Payments
Any extra money—whether from side hustles, tax refunds, bonuses, or gifts—can be applied directly to principal . Always specify in writing that the extra payment should go toward principal, not future payments .
Set Up Autopay
Most federal and private lenders offer a 0.25% interest rate reduction for enrolling in automatic payments . This also helps avoid missed or late payments.
Use “Found Money” Wisely
Unexpected funds—inheritances, dormant account discoveries, or cash gifts—can make significant dents in principal when applied strategically .
Leverage Employer Benefits
More employers now offer student loan repayment assistance as a recruitment and retention tool . Some even match student loan payments with 401(k) contributions, allowing you to build retirement savings while paying down debt .
Ask your HR department about available benefits—you might be surprised.
Don’t Ignore Hardship—Communicate
If you struggle to make payments, contact your loan servicer immediately. Ignoring payments leads to default, which occurs after 270 days of nonpayment for federal loans . Consequences include damaged credit, wage garnishment, and tax refund seizures .
Options include:
- Deferment: Temporarily suspends payments; interest doesn’t accrue on subsidized federal loansÂ
- Forbearance: Reduces or suspends payments, but interest continues accruing on all loansÂ
- Income-driven repayment: Can lower payments to $0 for qualifying borrowersÂ
- Loan rehabilitation: For defaulted loans, make 9 on-time payments within 10 months to remove default from credit historyÂ
Take Advantage of Tax Benefits
You may qualify for the Student Loan Interest Deduction, which allows you to deduct up to $2,500 of interest paid annually on federal or private student loans .
2025 income limits:
- Single filers: MAGI under $85,000 (full deduction); phase-out up to $100,000
- Joint filers: MAGI under $170,000 (full deduction); phase-out up to $200,000Â
You’ll receive Form 1098-E from your lender if you paid $600 or more in interest .
Consider Using 529 Plan Funds
If you have leftover 529 plan funds, you can use them for student loan repayment—up to a $10,000 lifetime limit per beneficiary and another $10,000 for siblings . However, interest paid with tax-free 529 funds isn’t eligible for the student loan interest deduction .
Balance Loan Payments with Other Financial Goals
While paying off debt is important, don’t neglect other priorities:
- Emergency fund: Aim for 3-6 months of expenses before making extra loan paymentsÂ
- Retirement savings: Contribute enough to get employer match—some plans now match student loan payments directlyÂ
- High-interest debt: Prioritize credit cards or payday loans with rates exceeding student loan interest
For borrowers on IDR plans, contributing to pre-tax retirement accounts lowers adjusted gross income, potentially reducing next year’s payment .
Stay Organized
Maintain a file for each loan containing:
Bottom Line
Managing student loans after graduation doesn’t have to be overwhelming. Start by understanding what you owe, explore your repayment options, and create a budget that works for your lifestyle. Whether you pursue forgiveness, refinancing, or aggressive payoff strategies, the key is taking proactive steps rather than ignoring the debt.
As Taylor Hayes advises: “If you don’t start making payments toward your debt, you will never become debt-free. The earlier you start, the better. The sooner you start, the sooner you will be out of debt.