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Got student loans? Understand your repayment options.

Whether you’re still in school, a new college grad or have been out of school for several years, chances are student loan debt is taking a bite out of your monthly budget. Did you know that repayment terms and plans can vary depending on the type of student loan you have? The insights and tips below can help you understand your options — so you can get your student loan debt under control, create a plan to pay it off, and meet your financial goals.

1. Federal student loans

These government loans usually allow a six-month grace period after you leave school before payments begin. They typically offer a variety of repayment options, including:

Standard repayment plans, with a fixed monthly payment amount that pays off the debt in 10 years. All borrowers are eligible for this plan.

Graduated repayment plans start with lower monthly payments that increase every few years.

Extended payment plans feature payments that may be fixed or graduated, with a loan term of no more than 25 years.

Income-based repayment plans determine your monthly payment based on how much you earn.

Federal student loan repayment options are among the most flexible: You have the ability to change your repayment type, you may enjoy a lower interest rate compared to other types of loans, and you won’t face a prepayment penalty. Keep in mind that while extending the length of your loan may lower your monthly payments, you could end up paying more interest in the long run. Before switching plans, check out the U.S. Department of Education’s Repayment Estimator to compare what you’d owe on each plan.

2. Private student loans

Private student loans can have variable or fixed interest rates that may be higher or lower than the rates on federal loans, depending on your circumstances. Repayment options are set by the individual lender and include both in-school and deferred options. Some common repayment plans include:

Fixed repayment: You make low, fixed, monthly payments while you’re in school and start making regular principle and interest payments once you leave school.

Interest repayment: You make interest-only payments while you’re in school and start making regular principle and interest payments once you leave school.

Deferred repayment: You begin making payments approximately six months after you leave school.

Keep in mind that with private student loans, you may need to refinance the loan to change the loan terms — and the loan may continue to accrue interest during the deferment period. Contact your individual lender for more information.

Tips to reduce your student loan debt faster

Once you’ve determined the best loan repayment option for your needs and your budget, create a plan and a timeline for paying off the debt. Focus on these tips to help pay down your loan balance faster:

  • Look for ways to save. For example, temporarily cut cable, eat out less often, and look for free or low-cost entertainment options.

  • Try to pay more than the minimum amount due each month.

  • Consider refinancing your student loan if you qualify for a lower rate. You may be able to save thousands of dollars and reduce your monthly payment.

  • Consider consolidating multiple federal student loans to simplify your monthly payment. You may also be able to switch any variable rate loans to a fixed rate.

  • Pay off loans with the highest interest rates first, so you’ll pay less interest in the long run.

  • Find out if you qualify for a slight interest rate reduction by setting up automatic payments from your checking account.

  • Put any extra money (like tax refunds or bonuses) toward your student loan debt.

  • You may be eligible for loan forgiveness if you work in a specific field. Options are available for teachers, nurses, Peace Corps volunteers, and other programs.

Tackling student loan debt can feel overwhelming. With the right repayment plan in place, you can take control over your debt, pay off your student loan faster — and have more money to put toward future financial goals. To learn more about loan consolidation and other borrowing and savings options, contact your local Commerce Bank branch.

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