Repayment Advice

Student- and parent-borrowers can save money by following these tips for selecting an education-loan repayment plan.

• Choose a plan that provides an affordable monthly payment but repays the loan in the shortest possible term. Extending the repayment period increases total interest costs.
• In general, monthly student-loan payments should not exceed 8 to 10 percent of a borrower's gross monthly income. Borrowers whose monthly payments exceed this level should explore a flexible repayment option or loan consolidation.
• Borrowers may prepay loan principal without penalty, thus reducing the total interest costs of their loans.
• Many student-loan borrowers may reduce loan costs by having their monthly payments deducted automatically from their bank account and by consistently making their payments on time. Many lenders offer interest-rate discounts to borrowers who allow automatic debit of their payments and who have a history of on-time payment.