How to Manage Student Loan Repayments

International student loans can help you fill your funding gap for pursuing a degree abroad. Unlike scholarships and grants, however, you will have to repay the money you get from loans – plus interest. That’s what’s known as student loan repayments. 

Since many international students may not be able to hold significant employment while they study abroad, lenders consider repayments an extremely important feature for an international student loan. 

Before you begin the loan application process, make sure you understand the lender’s repayment options. Consider how much the monthly bills will be when payments begin, how long you’ll be able to defer payments and the length of the repayment period. 

Developing a plan to manage your student loan repayment is important for your long-term financial health. Let’s explore 10 steps to help you manage student loan repayment as an international student.

Find Out How Much You Owe

Figuring out exactly how much you owe is the first step in managing student loan repayments. When you have the figure at your fingertips, you can then start exploring the best loan repayment plan for you. 

Make a list of how much you owe and to whom, and do the math. Once this is done, it will be easier for you to build a strategy for the best loan repayment plan. This information will also enable you to determine how much you are able to pay the lenders each month and how to explore other useful options. 

Review Your Loan Terms

The next step in managing your student loans is to itemize the terms of each loan. Review the different loan terms. What are the interest rates? What are the penalties? How long are the repayment periods? Which discounts are you eligible for? How long are the grace and forbearance periods?

The goal is to have an excellent understanding of each of your loans. Use this information to come up with a plan on which loans to pay first or which loans to consolidate. Reviewing your loan terms will also help you avoid penalties that might make your international student loans even more costly. 

Consider Your Student Loan Repayments Options

Most lenders offer borrowers different repayment options to choose from. The best loan repayment option for you is usually determined by the type of loan, the amount you owe, your current financial situation, and your expected financial situation after graduation. 

Understand the lender’s repayment options. How many types of repayment options does the lender have? It is also important to understand that not all repayment plan options will work for you. Considering your current financial situation, figure out which plan is best suited for your needs.

Review Your Loan’s Grace Period

A grace period is the amount of time you have after graduation before you are required to start making student loan payments. For most international student loans, the grace period lasts a period of six months after graduation. 

The grace period allows you time to find a job after graduation before you are obligated to start making loan payments. It also allows you to work out a budget for making monthly repayments for your student loan. 

Reviewing your loan grace period can also help you determine whether you’ll need to discuss the possibility of a different repayment plan with the lender.

Consider Loan Consolidation

Loan consolidation is when you take out a new, larger loan to pay off your smaller loans. In the case of student loans, multiple student loans are combined into a single, larger debt or loan, usually with more favorable payoff terms such as a lower interest rate, lower monthly payments, or both. 

The greatest advantage of student loan consolidation is that it reduces the burden of monthly payments, and lengthens your payment period. On the downside, it adds to your interest payments. 

You can apply for debt consolidation through a bank, credit union, or credit card company. This is the best option especially if you have a good relationship and payment history with the institution. Loan consolidation options are offered by financial institutions but there are other debt consolidation service companies that also offer this service.

Pay Down the Principal

The loan principal refers to the original sum of money borrowed. It’s the amount of money you actually receive – well, minus costs. The amount that you end up paying for a loan is higher than what you took because you’ll also have to pay interest accrued over your loan period.

Paying down the principal on your student loan is the best loan repayment plan option. That’s because just making payments on the accrued interests will not get rid of your loan. The faster you cut down on the principal amount of the loan, the less interest you will pay during the life of the loan.

Enable Automatic Student Loan Repayments

With the stress of work and life in general, it’s easy to forget to make payments on your student loans on time each month. That’s why automatic payments can be a lifesaver. 

Setting up automatic loan payments allows for deductions to be made from your checking account each month. It eliminates the need to remember and manually make payments each month. Missed payments can lead to penalties and damage your credit score. 

In addition, lenders often offer discounts on interest rates for automatic loan repayment plans. No matter the percentage discount you get, it makes a big difference in the overall cost of your student loan.

Target High-Interest Loans First 

Paying off the highest-interest loans first is a great strategy. It helps you avoid your loan getting even bigger due to high interest rates. 

Set aside a certain amount over and above the total monthly required payments, then apply the excess to the debt with the highest interest rate. Once that’s paid off, apply the total monthly amount owed on that loan to the debt with the second-highest interest rate. Continue this debt avalanche until you’re debt-free. This strategy is very effective for all kinds of debt.

Seek Loan Forbearance 

Having trouble making payments either due to unemployment or illness? You may qualify for loan forbearance. 

Student loan forbearance allows you to temporarily stop making payments on your loan. To be considered, you must submit a request to your student loan servicer. In some cases, you’ll also be asked to provide documentation to show that you qualify for the request.

Ask for Loan Forgiveness

You are required to fully pay off your student loan but in certain circumstances, the loan may be forgiven. Loan forgiveness means that you are no longer required to repay some or all of your loan.  

You are eligible for loan forgiveness if your institution of learning closed before you completed your degree, you have become permanently disabled or if paying the debt will lead to bankruptcy.

Now You Know Exactly What to Do…

Armed with the information above, you should be able to figure out the best loan repayment plan for you. Bear in mind that some tips might not work for you – figure out what works for you and go for it. 

Frequently Asked Questions

When does student loan repayment start?

Private loans don’t have a standardized rule as to when repayments begin. Usually, repayments kick in six months after graduation or being less than a half-time student. Check your loan terms to find when your loan repayments start. 

What is the best student loan repayment plan?

The best loan repayment plan for you is determined by factors such as the type of loan, the amount you owe, your current financial situation, and your expected financial situation after graduation.

What are the repayment terms for private student loans?

Repayment periods/terms for private student loans are typically between 7 to 15 years – although some lenders may offer extended repayment periods of up to 30 years. 

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