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Know your student loan repayment options

Between the increasing cost of higher education and the impact of the financial crisis, students are more reliant than ever on loans to pay for school.

With November around the corner, student loans are about to become an even bigger worry for some new graduates. Most federal student loans and many private student loans offer borrowers a six month grace period after leaving school before they must begin repaying. Since college students often graduate in May or June, many borrowers are nearing the end of that six month grace period now.

These borrowers may be asking themselves some important questions.

As I start making payments, what are the best options for me? Are there ways to reduce my payments? Am I making payments in the most reliable, cost-effective way possible? What can I do to make sure the burden of repayment is manageable?

To help answer these questions, we’ve built a simple Assistant. Answer a couple short questions, and we’ll give you suggestions about what you should ask if you need to talk to your loan servicer.

Heading back to school? In the military? You may have options, like deferments, that other people don’t.

Able to afford your payments already? There are ways to make repayment easier, and in some cases these options will save you money.

The point is to make the right choice for you, and this tool we’ve built can help point you in the right direction.

Try the Assistant.

For some of you, the assistant may recommend that you talk to your servicer (the company that collects your student loan payments) about income-based repayment. If you get that recommendation, we’ll give give you some information about next steps. There is also information available from the Department of Education, but we wanted to offer a brief word about this option here.

Income-based repayment (IBR) is a program that allows you to pay your Federal loans at a rate relative to your current income. If your federal student loan debt is high relative to your income and family size, you may enter IBR. There are other advantages, as well, and the repayment assistant will walk you through them. You can get an estimate of whether you qualify for IBR by using the Department of Education’s IBR calculator .

However, please don’t jump to conclusions about the best options for you. Answer a few questions through our Assistant, check the results, and then decide whether to contact your loan servicer to ask about your options. (And if you don’t know your servicer, don’t worry: we’ll help you find that information, too!)

The bottom line: the first payment you make on your loan could be exactly what your current agreement reads, but you may have options that will make it lower. By knowing your options and taking control, you’ll be able to figure out the best way forward for yourself.

Know anyone else who’s struggling with repayment?

Share this blog post and the tool with them.

Rohit Chopra serves as the CFPB’s Student Loan Ombudsman.

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