How to Manage Student Loans After Graduation

Student loans are a great way to pay for college, but they must be repaid at some point. Student loans are a unique product in the world of finance, so you should know how to handle them. Here is the information you need to stay out of trouble when it comes to your student loans.

Tax Deduction and Bankruptcy

Student loan interest is a deduction on your federal income tax, allowing you to save more money if you itemize. If you don’t receive a statement of interest, request one from your lender. Government-backed student loans are not eligible for bankruptcy. To complicate matters further, the payments you make on your student loans aren’t taken into account when a bankruptcy plan is created. This makes it essential that you take care with the money you borrow, and don’t take out more for student loans than you actually need.

Postponements and Deferments

If you are unable to pay your loans, you can take a deferment or postponement. You are allowed up to five years of forbearance if you are unemployed or underemployed. It’s tempting to take advantage of this postponement period, but it will cost you thousands of dollars in the end. Even though the loan repayment can be deferred, the interest will continue to accrue at a steady rate. However, there are options that will help you make the payments without having to live on peanut butter and jelly sandwiches.

Income-Based Repayment

It’s normal to have lower earnings in the early stages of your career. That’s why lenders now offer income-based repayment plans. The payments will be lower in the early years, and they will gradually rise with time to match your income. If you are struggling with the payment for your student loans, call the lender to find out if you qualify for this type of program.

Make Every Payment

The government backs these loans, and they have ways to ensure that you don’t default. They can garnish up to 15 percent of your wages, and they can even go after Social Security benefit payments. The government will also keep any federal or state income tax refunds you have coming your way, so make sure you don’t miss any student loan payments.


If you currently have separate loans, consider rolling them into one. Wait until your post-graduation six-month grace period is nearly over before having the loans consolidated, and then choose the lender with the most attractive package. If someone with excellent credit is willing to co-sign for you, then you should be able to net a more attractive rate.

Payment Plans

Payment plans are great because they will help you save money on interest and avoid any missed payments. Payments are made automatically from your checking account, so you won’t have to worry about forgetting to mail a check. Look for lenders who will offer a slight reduction in interest rate when you sign up for such a program. It can help you save 0.25 to 0.50 percent on your interest rate.

Interest Rates

If you have separate loans and choose not to consolidate them, look closely at the associated interest rates. If you are going to may extra payments, put them towards the loans with the highest interest rates. This will help you save money in the long run and pay the loans off faster.

Student loans can be the best way to pay for college, but they must be paid back at some point. They can’t be discharged in a bankruptcy, and the government will not have a problem garnishing wages, so these loans cannot be ignored. Talk to the lender about a payment plan that works for you, and then sign up for automatic payments to stay current on the loan and get them paid off in a timely manner.

Nicole Morgan is a career counselor, and blogs for where you can find information about accredited mba programs.

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