A college education is an expense that is often financed with student loans. The cost of attending college is more than some families have the ability to plan for, so borrowing is a common occurrence. However, if you do some planning, you can minimize your overall expense.

What Are Your Options Before Borrowing

Before you apply for a loan, ask yourself, do you have to borrow the full amount of tuition? Take the time to research grants and scholarships, which may help cover some of the cost of tuition.  Here are some steps you can take today as you search for an affordable loan that will work for you:

  • You can find grants provided through your college or by researching online.
  • You may be able to qualify for a grant based on a family member’s participation in an organization.
  • You may want to consider choosing a local college to benefit from in-state tuition.
  • Other options include taking advantage of the programs offered by some corporations; programs which could reimburse much of the cost.
  • Another option for saving is to think about the repayment option offered on the loan.
  • You can avoid large monthly student loan bills and focus on future goals, if you are able to decrease your out-of-pocket costs today.

After minimizing the costs and maximizing alternative funding, you may still have to borrow. In most cases for full-time students, you will have to repay any loans that you or your family have borrowed soon after graduation. This calculator, available on the PNC Student Loan Center, can help you understand the impact and the costs of borrowing.

Once you have borrowed, it’s time to think about repayment.

What If You Have More Than One Loan?

If you have more than one loan, you may want to consider refinancing multiple loans into one loan.

Some benefits to refinancing include: potentially reducing the interest rate of the loan; changing the payment amount to better fit your budget or goals; as well as the ability to potentially release a cosigner.

How Does the Type of Loan Affect Your Repayment Options?

Before you choose to refinance, one of the first steps is figuring out if there’s a benefit to refinancing in the first place.  To fully understand and compare your refinancing and consolidation options, a first step is to assess all of your loans, as well as their terms and repayment options.

Determining the type of loan that you have and the particulars of that loan– such as the rate, repayment term and availability of deferment – are key when choosing an option that works based on your personal circumstances.

First, determine if the loan is federal or private to figure out your repayment options.

Private Loans

You might find that if you choose to refinance with a private, or non-bank, lender you could benefit from a lower interest rate. However, your loan term could change and instead of paying over 10 years in the standard repayment, your repayment period may be shorter. Private loans may offer forbearance and deferment.  If you choose to refinance the loan, it would be considered a new loan with a new rate, repayment term, and product features and benefits. 

If you choose a private lender to refinance federal loans, repayment options offered by the government could be lost.

However, if your interest rate is too high, a private lender loan refinance could be a better option. Once again, it is important to note how this could change federal loan benefits attached to the original loan.

Federal Loans

Federal loans can often include flexible repayment options such as deferment, forbearance or even choosing a new payment plan to stretch out the loan repayment.

If your student loan payment is too high for your current budget and you have a federal loan, consider a student loan repayment plan other than the standard repayment plan. Repayment plan options may vary.

There are also payment plans for federal loans such as:

  • Graduated Repayment Plan
  • Extended Repayment Plan
  • Pay-as-You-Earn Repayment Plan
  • Income-Contingent Repayment Plan, or
  • Income-Sensitive Repayment Plan.

To find out if you have federal loans, go to the National Student Loan Data System (NSLD) website, which is the U.S. Department of Education’s central database for student aid.

How Can You Create Your Own Repayment Plan?

Most, if not all, student loans do not have a pre-payment penalty. You may not have to stick to the pre-arranged payment plan if you would like to make additional payments. However, you should discuss with your lender or loan servicer to determine how additional payments are applied.

You can use a calculator to estimate your own new monthly payment. Then, simply begin making the larger payments on your existing loan.

A second option involves refinancing your student loan with a bank to decrease the interest rate and shorten the loan term. Your monthly payments may also increase with this method, but with a lower interest rate, a larger portion of the payment will go towards paying off the principal each time.

There is nothing to stop you from making payments to reduce your student loan debt load. However, you can also create a plan now to minimize the total debt that you borrow. Craft a plan so that you can borrow as little as possible, and then when it is time to repay, you will be in a better position to make or handle the payment on your loan(s) using the suggestions above. Furthermore, if you can accelerate your payments and pay off your loan sooner, you will be that much closer to additional goals like purchasing a home.