This article is from the Financial Aid, Scholarships, and Fellowships FAQ, by Mark Kantrowitz with numerous contributions by others.
When repaying your educational loans, try to make as large a
payment as possible. The longer you take to repay the loan, the
more interest you will pay. A shorter loan period will save you
money in the long run. There is also never a prepayment penalty
for paying off a loan early.
If you are having trouble repaying your loan under the standard
10-year repayment plan for FFELP loans, consider consolidating
the loan with a longer term. You may want to consolidate your
loans anyway, to reduce the amount of paperwork associated with
servicing several loans. Some graduates have found it necessary
to consolidate their loans in order to qualify for a
mortgage. There are other repayment options that may also help.
If your loans are unsubsidized (i.e., the government does NOT pay
the interest while you are in school), try to avoid capitalizing
the interest. This can significantly increase the size of the
loan, especially if you are in school for an extended period
(e.g., for a graduate degree).
Talk to your bank about setting up an automatic payment plan,
where a fixed amount of money is withdrawn from your checking
account each month to pay for your loan. This may help you manage
the repayment, if you find it difficult to avoid spending money
while it is in your checking account.
Remember, your student loans will show up on your credit report.
Defaulting on your student loans can have serious consequences
for your ability to get credit for purchasing a home. Contact the
lender *before* you stop making payments, not after, since you
may be eligible for a deferment or a forbearance.