3 Savvy Student Loan Moves for Recent Graduates

Vanessa has just wrapped up a graduate program in healthcare and is eager to enter her field. However, she can’t get a job until she's passed a board exam that allows her to get licensed — and in the meantime, her lender expects payments to begin. What’s the best way to manage student loans when you don’t yet have income coming in?

Whether they’re entering healthcare or another field, Vanessa's question resonates with many recent graduates. After all, a degree doesn’t guarantee instant income. To get advice on how to navigate this common situation, we turned to Michelle Kruger, Ph.D., CFP, author, teacher and financial planner who specializes in helping everyday people manage their money.

Get Started: 5 Things Frugal People No Longer Buy — and Why More Americans Are Following Their Lead

Consider This: 12 Subtly Genius Things All Wealthy People Do With Their Money — That You Should Do, To

The good news is that people in this position — needing to repay student loans before they’ve cashed their first paycheck — have options.

1. Look Into Deferment Options

If Vanessa doesn’t yet have the income to cover both living expenses and loan payments, Kruger says that’s a common challenge among new grads. In these cases, she recommends taking advantage of deferred repayment plans.

“Federal student loans usually offer a six-month grace period post-graduation before payments begin,” she said. “Some private loans also provide grace periods, though interest still accrues.”

To avoid being buried by interest, Kruger suggests that — if possible — borrowers make even small payments during the grace period can help reduce long-term interest costs.

2. Explore Income-Driven Repayment Plans

While Vanessa didn’t specify her loan types, Kruger notes that most federal borrowers qualify for income-driven repayment plans like RAP, IBR or ICR.

“These plans cap monthly payments based on income and forgive any remaining balance after a set term,” Kruger said.

In the past, borrowers could consider the Saving on a Valuable Education (SAVE) plan, but legal challenges hindered its long-term viability and it officially ended on March 10, 2026, following a federal court order.

For readers unfamiliar with these plans, here’s a brief overview:

• Repayment Assistance Plan (RAP): This income-driven repayment plan for federal student loans launched on July 1, 2026. Monthly payments are based on a sliding scale (1% to 10%) of your total adjusted gross income from the prior tax year, divided by 12. RAP requires a minimum monthly payment of $10, even if your income is very low or zero. This eliminates $0 payment options found in older plans. Also, your monthly payment is reduced by $50 per month for each dependent you claim on your federal tax return.

• Pay As You Earn (PAYE): PAYE is being phased out by RAP and is no longer available to new borrowers. However, existing borrowers are still good until July 1, 2028, at which point they must switch to another plan. PAYE caps monthly payments at 10% of a borrower’s discretionary income.

• Income-Based Repayment (IBR): This is only available if you took out any new federal student loan before July 1, 2026. Otherwise you have to go with RAP. Bases payments on income and family size, capping them at a manageable level. Remaining balances are forgiven after 20 or 25 years of qualifying payments.

• Income-Contingent Repayment (ICR): This is also only available if you took out any new federal student loan before July 1, 2026. Payments are the lesser of 20% of discretionary income or what you’d pay on a 12-year fixed plan, adjusted for income. This is the only income-driven plan available to Parent PLUS borrowers (if consolidated).

Kruger encourages borrowers to explore their eligibility for these programs, especially if they’re in a temporary employment gap.

“Borrowers could also look into deferring their student loans beyond the grace period if they are expecting to get a high-paying job but have not yet started work by the end of the grace period,” she said.

3. Avoid Other Forms of Debt

While Vanessa is pursuing licensure and employment, Kruger advises steering clear of new debt — especially high-interest debt like credit cards.

In the meantime, she recommends building a realistic budget to cover living expenses and prepare for future loan payments. Kruger also encourages creative solutions when it comes to saving or earning extra income, even if it means working outside her chosen field for now.

“You may want to look for short-term ways to earn income outside of your career path or reduce expenses — such as living with roommates or family,” she said.

What To Do When Things Change

Ideally, Vanessa will soon be licensed and working in her field. When that happens, she’ll have the opportunity to reassess her repayment strategy.

“You can change your repayment plan by contacting your student loan servicer,” Kruger said. “StudentAid.gov has a helpful Loan Simulator tool that allows borrowers to evaluate how different repayment plans will impact their monthly payment, repayment period and total interest paid.”

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.