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Budgeting for Student Loan Repayment

The average student leaves college with about $25,000 in student loan debt. The monthly payment on a $25,000 student loan is approximately $280 (assuming 6.8% interest and a 10-year repayment plan), which can cause financial strain if you’re not prepared for it. If you’ve borrowed more than $25,000, your payments will be even higher. There are also different repayment options that can change your monthly payment amount. If you don’t feel that you’ll be able to make the standard 10-year term payments, you can contact your lender to ask about other payment plans.
Fortunately, most student loans offer a six-month grace period after you leave college, before you have to start repaying your loan.  Those six months are the perfect time to prepare your budget to make your loan payments.

Step 1: Establish a Budget
It’s hard to know if your student loan payments are going to jeopardize your budget if you don’t have a budget.  If you haven’t already done so, take the time to sit down and figure out your monthly income and expenses.  Your budget doesn’t have to be fancy; you can write it long-hand if that’s easiest.  You can also use a post-college budgeting worksheet.  

If you get stuck, check out 10 Tips for Budgeting Success.

Step 2: Determine Your Monthly Payment Amount
You can find information on your federal student loans, including your balance, at

Student loan calculators let you input your total student loan obligation, and the calculator gives you an idea of your monthly payment.  (The Department of Education’s website offers calculators for standard repayment as well as other repayment plan options.)
Don’t forget to calculate the payments on any private student loans you may have as well.  You may have to contact your private lender for this information. If you don’t know who your private lender is, ask the financial aid office at your college, university, or trade school.

Step 3: Refigure Your Budget
Once you know the amount you will be paying toward your student loans each month, take another look at your budget and see where you stand.  If adding in the student loan payments puts you in the red at the end of the month, then you have two options:

  1. Figure out a way to earn more money; and/or
  2. Contact your lender to discuss options for lowering your monthly loan payments.

There are a variety of repayment options for student loans, so don’t despair. The federal government even offers an income based repayment plan (IBR), which could dramatically reduce your payment amount.  Depending on what you studied or the career you’ll be going into, you may even qualify for loan forgiveness. And as a last resort, if you find yourself in economic hardship due to lack/loss of a job or a medical problem, there are also options that could put your loan payments (but not necessarily your interest accrual) on “hold” for a few months. Contact your lender for more information about these options.

See these related articles on student loans:
Student Loans: What To Do If You’re Behind On Payments
Student Loan Forgiveness
Student Loans And Hardship

©2012, Money 101. Money 101 is sponsored by CollegeInvest, a division of the Colorado Department of Higher Education. We have articles, resources, tools, and worksheets related to paying for higher education (including trade schools, technical schools, vocational schools, community colleges, colleges, universities, and graduate school programs).


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