When Brenda Manea received a letter stating that her first student loan payment was due in a month, she thought it was a mistake.
“I didn’t actually know that I took a loan out,” says Manea, who graduated from San Diego State University in May 2015. She’d paid for college largely through government grants, and had overlooked a $4,000 loan she’d taken out her freshman year.
But luckily, her monthly payments were relatively small — around $50 — and she’d started her first full-time job at a public relations firm about a week after graduating. So despite the surprise, Manea could manage the monthly payments.
Although the first student loan bill certainly doesn’t come as a surprise to every recent graduate, the reality of entering repayment can be jarring after a six-month grace period.
If you graduated in 2015 and have student loans, you probably started making payments on them at the end of last year. Rather than freak out about this new obligation, here are five things you can do to get on top of your loan payments in 2016.
1. Know what you owe.
It may sound obvious, but you need to know what type of loans you have: federal, private or a combination of both. The types of loans you have determine your options for repaying, consolidating and refinancing your loans. We’ll discuss each of these in more detail below.
You can find a list of your federal loans by logging into the Federal Student Aid website. You may also have private student loans from lenders such as Sallie Mae, Discover and Wells Fargo.
[Read more: Private vs. federal student loans]
2. Make an online account with your loan servicer.
Your servicer is the company in charge of collecting your federal loan payments, managing your balance and helping you choose the best repayment plan. If you haven’t already, find out who your loan servicer is on the Federal Student Aid website, and then create an online account with that company. There are several federal loan servicers, but four main ones: FedLoan Servicing, Great Lakes,Navient and Nelnet.
3. Automate your payments.
Consider signing up for automatic payments, which will allow your servicer to deduct monthly payments directly from your bank account. Many servicers will reduce the interest rate on your federal Direct Loans by 0.25% when you sign up for automatic debit. Plus, automating your minimum monthly payment will help prevent you from accidentally missing a payment.
“It’s a great way to have peace of mind that you’ll always be on time,” says Patricia Nash Christel, a spokeswoman for Navient.
If you set up automatic debit, make sure you always have enough money in your account to cover the minimum monthly payment, or you could be hit with an overdraft fee.
4. Choose a repayment plan.
Your federal student loan payments are automatically set on a standard repayment plan, which means you’ll make equal monthly payments for 10 years. But there are six other student loan repayment plans you can select through your loan servicer to lower your payments. The standard, graduated and extended plans are open to everyone, but others — including the newest plan,Revised Pay as You Earn (REPAYE) — are based on your income and family size. You can see which repayment plans you’re eligible for by entering your loan information on the Department of Education’s Repayment Estimator tool.
5. Keep consolidation and refinancing in mind.
You may be able to simplify your payments, access certain repayment plans and potentially save on interest by consolidating or refinancing your loans. They’re often used synonymously, but consolidation and refinancing are two distinct options.
Consolidating your student loans means combining multiple federal loans into one. It’s a good option if you want to access a repayment plan that you can’t get with your current loan. For example, most income-driven repayment plans require that you consolidate to a Direct Loan to be eligible. So if you have another federal loan, such as a Perkins or Stafford loan, it makes sense to consolidate in that case.
Refinancing refers to taking out a new private loan to pay off your outstanding private or federal student loans. The goal of refinancing is to get a lower interest rate. To find out how much you could save, check out this student loan refinancing toolthrough our partnership with student loan refinancing marketplace Credible.
However, there are reasons to wait before refinancing. For one thing, refinancing your federal loans will turn them into private loans, which will make you ineligible for federal loan considerations including income-driven repayment plans and forgiveness, deferment and forbearance programs. Second, your credit score will likely be higher once you’ve spent a few years making on-time payments, says Betsy Mayotte, director of regulatory compliance at American Student Assistance, a nonprofit focused on helping students pay for college. A higher credit score could mean lower interest rates, so refinancing might be more beneficial if you wait a few years.
The bottom line
Making your first few student loan payments can be overwhelming, but the more you understand your loans, the better. To learn more about your repayment options and what to do if you can’t make payments, check out NerdWallet Student Loan Central.