Nothing in life is quite so exciting as heading off to college. All of a sudden a brand new vista opens up before you. So much to learn—so many new people to meet, so many new opportunities suddenly heading your way…and so much money to pay back. Eeep! The trouble with student loans is, since they are the least exciting part of the college experience, most students (and even parents) can tend to set them up and then forget all about them…at least until that first repayment invoice arrives. Luckily, this common mistake is easily rectified. All you need to do is take a few minutes to learn about the student loan life cycle and create a repayment plan.

The student loan life cycle 

There are four basic stages to the student loan life cycle.

1. The loan research and application phase

In this first phase, you’re researching all available funding avenues, including student loans. You’re applying for the loans and funding resources that best fit your need and financial profile.

2. The "in college" phase

For most students, the presence of student loans is largely ignored while studies are underway. This is actually the purpose of student loans because they don’t fall due until after graduation. Student loans are a unique type of funding resource that permit students to focus fully on doing their very best in their classes.

3. The post-graduation "grace period" phase

Many types of student loans offer newly graduated students what’s called a "grace period." This initial post-graduation period—typically 6-12 months—gives the new graduate extra time to find a job and accrue some income before the student loan falls due. (Note: This phase is specifically designed to accommodate the possibility that a student may not graduate with a job in hand.)

4. The repayment phase

Finally, the fourth phase of the student loan life cycle is the repayment phase. Here, any grace period has lapsed, and those loan coupons and email alerts are arriving regularly.

Building a student loan repayment budget

The repayment phase is typically the time when many new graduates begin to struggle. Either the financial reality of what their new job pays is out of alignment with their projections, or the economic downturn has delayed the start of their new career, or their in-school expenses were higher than anticipated, or another combination of factors has intervened to make repaying those student loans more difficult.

While it may not be practical to save towards student loan repayments while in school, here’s a sample budget that can help you do so if desired (courtesy of

100% of your incoming financial support is broken down as follows:

  • 70%: Living needs (rent, utilities, food, gas, clothing, etc.)
  • 20%: Savings (emergency fund, vacation and fun, car/computer, etc.)
  • 10%: Debt (car payments, student loans, credit card or other debt)

By building a budget from day one of your college life, you give yourself time to get used to and prepare for the "debt repayment" mindset, even if you can't meet these percentages precisely.

  • Free budget calculator: This free online budgeting tool will help you create a personal budget that adheres as closely as possible to the percentages listed here.

Free loan calculators

Another very helpful tool to prepare for Phase 4 of the student loan life cycle is a loan calculator. Thanks to the "age of the Internet," there are some wonderful, free, online loan calculation tools to help you navigate the repayment process, save where you can, consider repayment options, and more.

  • College Cost Calculator: Use this tool to calculate the approximate amount of funding you will need to afford higher education.
  • Loan Repayment Calculator: Use this tool to calculate your approximate monthly loan payments at payback time.
  • Grace Period Calculator: Some savvy students start repaying student loans even during the grace period. This calculator helps you estimate the impact of doing so.
  • Interest Savings Calculator: Even if you can't repay any portion of your student loans while in school, you may opt to make interest payments. This tool can help you decide if the benefit is worth it.
  • Loan Repayment Estimator: This tool helps you choose the repayment plan and time period that works best for your financial life.
How Understanding the Student Loan Life Cycle Can Help You Save