How to pay down college loans


College is over and the banks want their money back. Welcome to adulthood. Money Magazine reporter Carolyn Bigda offers practical advice for how to pay down college loans.

How to pay down college loans
  • Find out how much you owe in federally backed student loans, and to which lenders, by visiting
  • Do consolidate your student loans into one big loan. Your current interest rates will be averaged into a single rate, which may be lower.
  • You can search for a lender who will offer deferred payment programs, graduated repayment programs or income sensitive plans if you can’t afford the full payments now.
  • You can lower your interest rates by .25% to .50% by setting up automatic payments from your bank to the lender.
  • You may earn a lower interest rate on your student loans by paying on time every month for 2–4 years. Ask your lender about this.



LISA: Hi I'm Lisa Birnbach for How do you pay down a student loan? Carolyn Bigda, reporter from Money magazine, how much loans do most people graduate with?

CAROLYN:Today the average student who is graduating from a private four year college is walking away with $19,500 in debt. At four year public schools it's about $15,500. It's a lot.

LISA:  Is there a grace period that they have before they have to pay it all back and how slowly or quickly do they have to start? 

CAROLYN:Yes with federal loans and even with private loans you typically have a six month grace period after your graduation. So you have time to kind of get settled, hopefully find that job and figure out how you're going to tackle this debt. 

LISA: What's the first thing a young graduate should do to tackle it, to handle it and not feel overwhelmed by it?

CAROLYN: First you have to face facts. You have to see how much you actually owe. There's a website online that's offered through the Department of Education's website where you can basically type in your personal information and it will shoot out all the different loans that you have with the federal government and which lenders actually hold them now. 

LISA:  And will it also provide you with a schedule for repayment? 

CAROLYN: No you'll have to go to your lender for that information. But at least that way you'll know how much you owe because over four years it's very easy to lose track of where your loans are and how much you've taken out. So it's good to get a sense of exactly where you stand after graduation.

LISA:  I'm wondering how the loans can be consolidated into one package to make it easier to repay while you're learning how to be a grown-up.

CAROLYN:Absolutely it's a very popular thing to do when consolidating your loans because every year students are taking out a different loan. And it's easier when you do consolidate them to have them all packaged into one big loan so you'll have one monthly payment. Oftentimes the consolidation loan, the interest for it is an average of all of your different loans so you may actually end up with a lower interest rate depending on where your loans stand right now. 

LISA:  I'm wondering how this all affects people's choice of job.

CAROLYN:It is daunting for a lot of graduates to face such high debt levels, to now at this point manage rent payments, other bills. It's a lot of juggling of their cash flow, so what the federal government have step up are certain repayment options for students. You can elect to defer payment for a while if you need to. You can also elect other programs such as graduated repayment programs. At the beginning maybe you're only paying interest or a lower amount; over time you start paying more of the loan back. Then there are also income sensitive repayment programs. You want to check with your lender and see what options are available to you. 

LISA:  And finally is there anything a student can do to lower his or her interest rate while they are repaying?

CAROLYN:Absolutely, right off the back you can lower your interest rate by about a quarter of a point to half a point, in some cases as much as two percentage points if you sign up for automatic payments. That's you bank automatically sending a payment to the lender each month. So right there that's an easy way to get a break. Also if you make on time payments over several years, it's usually two to four years, your lender will typically give you another rate discount. 

LISA:  That is good to know. Thank you so much Carolyn Bigda from Money magazine for I'm Lisa Birnbach. 

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  • Carolyn Bigda

    Carolyn Bigda Money Magazine Carolyn Bigda is a reporter at Money Magazine, covering credit, savings and debt. She writes a weekly syndicated column for the Chicago Tribune, tackling personal finance issues for twenty-somethings. She's been featured in interviews on ABC, CNN and many others, as well as several radio stations. more about this expert »

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