HESC's tips for federal student loan repayment

The federal student loan grace period for spring 2010 college graduates is ending and repayment will begin as soon as this month.

The New York State Higher Education Services Corporation reminds recent grads to review their loan repayment options and understand their rights and responsibilities as borrowers.

HESC, the state's financial aid agency that helps people pay for college, offers online tools and guidance in preparation for repayment at HESC.org, along with tips to help recent grads start off on sound financial footing:

• Know your lender or servicer

The National Student Loan Data System can provide you with a history of your federal student loans, including the name of your loan servicer and the amount you owe.

• Choose a repayment plan

Select a repayment plan that's right for your financial situation. You'll have from 10 to 25 years to repay your loan, depending on the repayment plan you choose. Generally speaking, the longer the loan term, the more interest you will pay. Use our calculator to evaluate which of these plans may offer the best option for you:

Standard repayment -- A fixed payment amount each month of at least $50, or more if necessary to meet the 10-year repayment requirement. This is the most cost-effective plan, as it minimizes the total amount of interest you will have to pay over the life of the loan.

Income-Based Repayment -- Available for Stafford, Grad PLUS and consolidation loans. It is not available for loans that are currently in default, Parent PLUS loans, or consolidation loans that were used to pay off a parent PLUS loan. Under IBR, the required monthly payment is capped at an amount that is intended to be affordable based on your income and family size.

You are eligible for IBR if the monthly repayment amount under IBR will be less than the monthly amount calculated under a 10-year standard repayment plan (see interactive IBR calculator).

If you repay under the IBR plan for 25 years and meet other requirements you may be able to have any remaining balance of your loan(s) cancelled.

Extended Repayment -- Available to borrowers who owe more than $30,000 in federal student loan debt. Payment amounts can be fixed or graduated and have a maximum repayment period of 25 years.

Graduated Repayment -- Payments start out low and increase every two years, with full payment required within 10 years. Your minimum monthly payment must cover the amount of interest that accrues between payments. If you expect your income to increase steadily over time, this plan may be right for you.

Income-Sensitive Repayment -- Only for FFEL loans, the income-sensitive repayment plan is based on your annual income at the time you begin repayment and must be repaid within 10 years. As your income increases or decreases, so do your payments.

• Start Repayment

An electronic debit account allows online payments or automatic deductions from your checking account and may offer an interest discount. Not only will you save time, but also you won't have to remember to write a check every month. Check with your servicer for details.

• Create and stick to a budget

Creating a budget will help you live within your income and manage your payments. Meet your "needs" first, then your "wants" as you can afford. Revisit your budget regularly to make adjustments as necessary.

• Keep in touch

Remember to notify your servicer in writing if you change your name, address or phone number. Keep copies of all correspondence in your financial aid file, which should include all paperwork relating to your loan.

• What if You Can't Pay?

Help is available if you are unemployed or have other extenuating circumstances that make it difficult for you to repay your student loan. Ignoring your student loans will create a more serious situation later. Don't let payment problems get out-of-hand -- work with your servicer at the first sign of difficulty. You may be eligible for a deferment, which delays payment, or a forbearance, which may temporarily suspend or reduce your payment.

Managing your student loan intelligently is an important step in meeting your student loan obligations, establishing a good credit history and safeguarding your financial future.