What’s the right student loan repayment plan for you?

By: Eliana Sagarin

When it comes to paying back your student loans, one size does not fit all.

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Americans currently hold $1.5 trillion in student debt – more than any other country in the world. It’s an overwhelming amount of money, and it’s rising every day. Around one in six Americans have student debt - and many are struggling to pay it back. Just six years after graduation, almost a third of student loan borrowers can’t keep up with loan repayments. No matter what your financial situation, know that you have options when paying back your student loans. We’re here to help.

1. Regular monthly payments

Making a consistent monthly payment is the default repayment option for most borrowers. A minimum monthly payment is determined based on the amount of your loan. This option works best if you have a steady job and can make more than the minimum monthly payment to avoid additional interest. If you are just out of college, job hunting or you work in a field that might not have steady, consistent work, monthly student loan payments might not make the most sense for you.

2. Income-based repayment

For entrepreneurs, people in the entertainment industry or freelancers, an income-based repayment (IBR) plan might be the right solution for you. IBR plans allows student loan borrowers to make loan payments based on a percentage of their annual salary, which is then converted into a customized monthly payment. If you make less than $50,000 a year or receive no salary at all, you are not responsible for making payments. But if this sounds too good to be true--- it isn’t. Even if you aren’t making monthly student loan repayments, interest continues to accrue annually on your student loan, potentially adding thousands of dollars to your debt. To avoid compounding interest, try to make above the monthly payments required of your IBR plan.

3. Refinancing

By refinancing student loans, borrowers combine federal and private debt and consolidate it through a private lender. Refinancing can mean lower interest rates and either lower monthly payments or a shorter repayment period. The process makes for a generally more streamlined repayment process, and you avoid having to juggle multiple loan providers and interest rates. Borrowers with good credit and a monthly income are good candidates for student loan refinancing. Refinancing means you will lose out on some benefits, like IBR plans and student loan discharge in the event of tragedy.

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