Did you know that 64% of undergrads at public four-year universities in the US have student loan debt? And that, on average, it takes 20 years to repay student loans.

While those figures may be eye-opening for you, what may be even more surprising is that you can still have a healthy, robust financial life when you have student loans. It’s just a matter of being smart with your money and arranging your priorities to align with your financial goals.

In this post, we’ll hook you up with all the need-to-know details to make informed choices when it comes to borrowing and paying back student loans. Keep reading — if you’re ready for Managing Student Loans 101.

Understanding Student Loans

First, let’s break down the basics of student loans. A firm grasp of these fundamentals ensures you know the impact of various factors and the obligations that come with borrowing.

Types of Loans

There are different kinds of loans available for students. Not all student loans are created equal.

Student loans fall into one of two buckets: public or private.

• Public loans are offered by the federal government and administered through the Department of Education. To apply for federal loans, you need to submit a Free Application for Federal Student Aid (FAFSA) form. The William D. Ford Federal Direct Loan Program grants four types of federal loans: 
  • Direct Subsidized Loans are for undergrads who need help paying for school. The government covers the interest portion of the loan while the student is in school. 
  • Direct Unsubsidized Loans are open to all undergraduates and graduate students. Interest, that the student must pay, accrues for the life of the loan.
  • Direct PLUS Loans are intended to help cover expenses that other financial aid doesn’t.
  • Direct Consolidation Loans enable you to combine multiple federal pans into a single loan. This can make managing your loan and repayment easier.
• Private loans are generally funded by banks, credit unions, and other financial institutions. However, private loans may also come from non-traditional sources — like a college or university itself, community organizations, or private donors and foundations. The application, funding, and administration processes will vary depending on the lender.

Additionally, one may be able to borrow money for school in other ways, too. Personal loans from a bank or credit union, credit cards, and loans from family members are examples of this.

It’s very common for a student to have more than one type of student loan (and/or other financing) over the course of their education.

Loan Terms

Terms refers to the conditions attached to a loan. These may include:

• Interest rate
• Repayment period
• Grace period
• Minimum income requirement
• Need for a co-signer
• Credit check requirement
• Loan limits
• Loan forgiveness

Loan terms can vary a great deal based on the type of loan and creditworthiness of the borrower.

In general, though, terms associated with federal loans are considered more favorable.

Federal loans often have better or more stable rates, more generous repayment schedules, and more lenient credit requirements. You’re also more likely to have access to subsidized interest, loan forgiveness, repayment deferment, and forbearance (a temporary pause or reduction of repayment) with federal loans.

Repayment Options

Speaking of repayment, you may have some alternatives here, too. Again, the kind of loan you get and the terms you agree to will dictate your repayment scheme.

Federal loans may offer more leniency and flexibility with repayment plans.

This is helpful because your personal circumstances are likely to evolve over time. Remember — most people take one to two decades to pay off their debt.

That’s a long period during which you may move, lose a job, start a family, etc. Having a payment schedule that accommodates where you are in life can be a game-changer for your financial well-being.

With private student loans you have some of the same options as with federal loans. However, there’s a lot of variability based on the lender.

Federal Loan Repayment

Here are some repayment options you may encounter as a student loan holder.

Repayment Plan	Description	Federal Loans	Private Loans
Standard	You make fixed monthly payments for a predetermined period — commonly 10 years for federal loans and 10-15 for private loans.	Yes	Yes
Income-Driven	There are a few variations on this, but basically your payments are based on your income and family size. Under some conditions, federal loans may offer forgiveness after 20-25 years of repayment.	Yes	Maybe / Some
Deferment & Forbearance	Your repayments are temporarily paused or reduced due to financial hardship.	Yes	Maybe / Some
Extended	You make fixed or graduated payments for a longer period, usually up to 25 years.	Yes	Maybe / Some
Graduated	Your payments start smaller and then increase every couple of years.	Yes	Maybe / Some
Public Service Loan Forgiveness	If you meet certain repayment and employment qualifications, part of your federal student debt is canceled after 10 years.	Yes	Unlikely
Interest-Only	You pay down the interest portion of your loan for a period before your installments start to repay both interest and principal.	No	Yes

 

 

Strategies for Effective Student Loan Management

Proactive planning and adapting to life's changes are key to fail-proof student debt management and resilient financial health. Regularly reassess your situation and explore available resources to make informed decisions about your student loans and broader financial position.

12 Student Loan Tips for a Financially-Empowered Future

1. Create a comprehensive budget (and stick to it). Develop a detailed budget that includes all monthly expenses and accounts for student loan payments.
2. Take advantage of your grace period. Utilize the “free” period after graduation to secure a job and start building an emergency fund before student loan payments begin.
3. Make payments in full and on time. Late or incomplete payments can harm your credit records.
4. Check student loan balance regularly. Stay informed about the level of outstanding debt by checking your account periodically. Many lenders provide online portals for easy access.
5. Establish an emergency fund. As soon as you can, accrue some savings to cover unexpected expenses. This can prevent reliance on credit or more loans when money’s tight.
6. Plan for life events. Anticipate major changes — like getting married, buying a house, or pursuing an advanced degree — and the financial impact they’ll have. Then, adjust your budget and repayment strategy accordingly.
7. Repay high-interest loans first. If you have multiple loans, prioritizing those with higher interest rates will minimize long-term interest costs and shrink the total cost of the loan.
8. Pay your loans off early. Shortening the repayment horizon can shave a significant amount off the overall cost of borrowing money.
9. Inquire about income-driven repayment plans. See if you can adjust your monthly payment based on your income, making it more manageable.
10. Consider refinancing and consolidation. You may be able to secure a lower interest rate and reduce overall repayment costs.
11. Explore loan forgiveness. You may be eligible for one of these programs that wipes away some of your debt, especially if you work in public service or nonprofit sectors.
12. Leverage credit union resources. Credit unions often offer financial counseling and resources on managing student loans and personal finances, budgeting, and more.

Credit Union Resources for Student Loan Management

While each credit union will have its own suite of tools, resources, and services — they generally have a wealth of information and tools to help you build your financial knowledge, skills, and well-being.

For example, at Valley Credit Union, we offer:

• Online and mobile banking. You can conveniently access your accounts and make payments anytime from anywhere.
• On-demand tools and resources. When managing student loans, our loan calculator and debt consolidation calculator are handy!
• Educational articles and guides. You’ll find blog posts on countless topics that are relevant to your lifelong financial journey.
• Financial planning services. Get professional help mapping out your personal economic future.
• Loan refinancing and consolidation. We can help you convert your existing student loan(s) into something that works better for you and your budget.
• Youth banking. Start honing your money management skills early with special accounts designed just for pre-adults.

It’s worth asking your branch what’s available to you.

Frequently Asked Questions (FAQs)

Q: What’s the difference between a federal and private loan? Which is better?

A: Federal loans are offered by the government whereas private loans are available from financial institutions like banks. Federal loans may have more favorable terms and repayment options. Private loan terms and repayment plans can vary a great deal.

Q: How long should I plan on having student loan debt? 

A: Student loans are generally a long-term commitment. The average borrower needs 20 years to pay off their student loans.

Q: How might having student loans impact my financial future?

A: You’ll need to plan for repaying your student loan debt every month for an extended period. This will affect your budgeting — especially as big life events like starting a family or losing your job occur. Good management of your student loan repayment will reflect positively on your credit score.

For more FAQs, check out our Student Loans page.

VCU, Simplifying Student Borrowing & Money Management

At Valley Credit Union, we understand that student loans can be confusing or overwhelming. There are so many aspects to consider and each decision can have lasting effects on your finances.

You need to determine which kinds of loans are right for you and apply. Then, as a student loan holder, you need to navigate fitting repayment in with the rest of your monthly financial obligations.

You don’t have to figure all this out on your own. We have a variety of resources, tools, and services to help you. If you need a little extra support, don’t hesitate to contact us with any questions or concerns.

About the Author

 Justin Roberts, Vice President of Lending

Justin Roberts is our Vice President of Lending and has been in the financial industry for over 18 years. He is an Oregon State University Graduate and has just completed Western CUNA Management School. When he is not focused on helping the members at Valley, you will find him coaching his two sons and volunteering his time to help develop the youth in our communities through sports.