Graduating? Here’s what to know about your student loans

Whether the speaker at your college graduation is Apple chief executive Tim Cook (MIT) or actress Eva Longoria (Knox College), the event signals the end of your undergraduate career — and moves you that much closer to having to repay your student loans.

Most federal student loans come with at least a six-month grace period, a time during which you don’t have to make monthly payments. For spring graduates, that means repayment is likely to begin sometime in November or December. That gives new graduates some breathing room — to find a job, rent or buy an apartment, or buy a car — before starting to make payments.

But many borrowers, despite studying hard to earn a degree, are uneducated about the type of loan they have, how long it will take to repay, what their monthly payment is likely to be and other important details, according to research from Prudential Financial. So they may be caught off guard when it comes time to begin repayment.

“There’s a lot of ignorance, unfortunately, and it causes people a lot of angst,” said James Mahaney, vice president of strategic initiatives at Prudential. He suggests taking simple steps, like creating a filing system for loan documents, to help keep on top of your obligations.

To help things go smoothly, make sure your student loan servicer — the company that sends you statements, collects payments and otherwise manages your loan — has your correct contact information. That means not only your street address, but also your cellphone number and email address.

You’re responsible for making sure your servicer knows how to reach you, even if you move, said Lauren Asher, president of the Institute for College Access and Success. If statements go to an old address, you may end up making late payments — and that may cost you in late fees and added interest.

It’s important to know if you have a federal loan (borrowed from the government) or a private one (borrowed from a bank or other lender). Federal loans typically have more consumer protections, including the option of flexible repayment plans if you have trouble affording your payments.

If you don’t know whether you have federal or private loans, or both, check on the Education Department’s National Student Loan Data System, which lists federal loans. Loans not listed there are private, and you can usually get details about them from your college financial aid office or by checking your credit report.

Mark Kantrowitz, a financial-aid expert and publisher of college site Cappex.com, said that during the grace period, federal loan borrowers should choose a repayment plan, ideally with the highest monthly payment they can afford. The standard, 10-year repayment plan is usually the shortest and least expensive overall. Longer-term repayment plans lower the monthly payment but cost more in interest over the life of the loan.

The Education Department offers a payment estimator tool on its website.

For some types of federal loans, interest accrues and is added to your balance at the end of the grace period. So it may be smart to make payments on those loans during the grace period, if you can, to help keep the balance from growing. Interest doesn’t accrue during the grace period on federal “subsidized” loans, which are based on financial need.

Also, Kantrowitz suggests having payments automatically debited from your bank account. You’ll be less likely to be late with a bill, and you may qualify for a bit of a discount — 0.25 percent, or 0.50 percent — as an incentive.

— Here are some questions and answers about student loans:

What if I need more time before I begin repaying my federal student loans?

If it’s a short-term cash crunch, you can seek a deferment or forbearance allowing a temporary pause in payments. If it’s a longer-term problem, like a low-paying job, consider applying for a flexible repayment program, which ties monthly payments to your income, Asher said.

A helpful online tool for applying for such plans, the IRS Data Retrieval Tool, has been disabled since March, but is expected to become available soon. (The tool won’t be available to help borrowers complete the Free Application for Federal Student Aid, or FAFSA, an important financial aid form for those attending college, until the fall).

Do private student loans have grace periods?

Grace periods for private loans vary, so check with your lender. Sallie Mae, which services its own loans, generally has a 6-month grace period, although some of its loans can have longer ones, a spokeswoman, Martha Holler, said. Sallie Mae typically sends out notices to alert borrowers that repayment is about to start — another reason to make sure your lender knows how to reach you, she said. Sallie Mae offers an online budget work sheet to help borrowers plan for repayment.

Do employers offer student loan repayment help?

Tuition reimbursement help is more common, but some companies offer student loan repayment assistance as an employee benefit, so it’s worth asking your employer.

For more tips on repaying student loans, check the Consumer Financial Protection Bureau’s website.