For those of you who graduated from college in May the time to start paying back your federal student loans is right around the corner. This can be a confusing time and I am sure you are probably wondering what the best way to pay back your loans is. Who do I send the checks to? Should I consolidate my loans? Do I have to start paying right now? It is important to know that there is no one “right” repayment method. At this point you and your fellow graduates are probably in very different financial situations.  Your best friend’s repayment plan might be the wrong plan for you. You have to know what you individual debt obligations are what you have for options.

If you are lucky enough to have a job: If you have a job you should definitely start paying back at least the minimum amount on your loans every month. If you have the money and want to pay back more than the minimum you should work on paying down the loan with the highest interest rate. If you have consolidated your loans you might only have one payment to worry about, but consolidation is not right for everyone. Consolidation will not give you a better interest rate; it simply extends your loan term so that you have a lower monthly payment. (The new interest rate is the weighted average of all of your loans. ) If you have a lot of credit card debt from college you should work on paying that down before allocating your “extra money” to student loans. Also, make sure you are meeting all of your other financial obligations including car payments,  insurance payments, and rent or mortgage payments. Missing any of these payments can damage your credit score.

If you are unemployed: In this situation you might be eligible for economic hardship deferment. Applying for this deferment plan will allow you to hold off on paying your loans until you are employed or for a maximum of 36 months. However, economic hardship deferment does not continue unconditionally. You have to reapply every 12 months.

If you are in grad school: When you are in grad school you are eligible for in school deferment. As long as you can provide proof that you are enrolled at an eligible school at least half-time there is no maximum length for in-school deferment. However, just remember that when you are done with grad school you will have to pay back both your undergrad and your graduate loans at the same time.

If you have moved out on your own: Budgeting is key in this situation. When you live on your own you will have a lot of expenses. Your student loan payments should be high up on your list of financial priorities. Make sure you set aside the correct amount from your paycheck each month and make sure you make your payments on time. It may be helpful to setup automatic payments and have the money withdrawn from your checking account on the same day every month. If you miss a payment or two you will end up getting slammed with more interest and severely bruising your credit score.

If you are still living at home: If you are living at home with you parents hopefully your expenses are minimal. Many employed graduates choose to live at home so they can pay off their loans quickly. Living at home after college for two to three years might give you the ability to pay off your loans in full and not have to worry about them when you have rent, an electric bill, cable and internet bills, and other living expenses. This will also significantly cut down on the amount of interest you pay in the long run and for both federal student loans and alternative loans there are no penalties for early repayment.