Published: Mar 10, 2009

 Education       Grad School       
There are four steps to planning for successful repayment:

  • Estimate Your Monthly Loan Payments
  • Project Your Income
  • Develop a Personal Budget
  • Prepay Your Loans

Estimate Your Monthly Loan Payments

You can estimate your monthly loan payments using the loan repayment calculator by plugging in the amount borrowed for each of your loans, or by using the "Rule of 125."

The Rule of 125 means that it will cost you approximately $125/month for every $10,000 you owe, assuming the interest rate is 8.25%, the repayment term is ten years, and you are making equal monthly payments.

To read more about estimating your monthly payments, see the article "Loan Repayment: What it Means to Your Financial Future."

Project Your Income

Next, you should realistically assess your future income. Research average starting salaries in your industry to get an idea of what your income will be when you graduate. You also should anticipate how long it will take you to obtain your first job. Visit Salary.com to estimate your future income.

Develop a Personal Budget

Keeping your education loan payments and your projected income figures in mind, you should then begin to develop your personal out-of-school budget. To make this easier for you, Access Group offers an online out-of-school budget calculator.

Evaluate Your Debt-to-Income Ratio

Once you have estimated your monthly loan payments and have determined a realistic salary projection, you are ready to evaluate your debt-to-income ratio. There are varying opinions about the amount of education debt you should incur relative to your projected annual gross income. Ultimately, it is your responsibility to determine what percentage of your future income you are willing to commit to student loan repayment.

Consider Your Lifestyle Requirements

Start by calculating an out-of-school budget. Include your estimated monthly education loan payments, taxes, and any other credit obligations, such as credit card payments. Then list your basic living expenses (transportation, food, utilities, insurance costs), personal living expenses (clothing, dependent care, household goods and furnishings), and miscellaneous expenses (recreation, entertainment, and interview expenses).

Remember, housing does not become an obligation until you've signed a lease or obtained a mortgage. What you can afford to pay for housing and other living expenses will depend upon the resources you have remaining after meeting your other financial obligations. Consequently, you may find that you cannot afford to meet your lifestyle expectations while repaying your student loans.

Prepay Your Loans

You can make more than the minimum monthly payment on your Access Group federal and private loans at any time with no penalty. By doing this, you will reduce the principle balance of your loan and thereby reduce the total amount of interest you will pay in the long run.