So you have student loans and can’t wait to get them paid off? Join the club. Millions of young adults across the U.S. are in the same position right now. Some are struggling, some are making progress and some are just getting by.
1. Start planning. Now. The sooner you start, the sooner the debt will be repaid. The monthly payments will become rhythmic. Don’t be afraid or overwhelmed. Do your research! There are many options available.
2. Pay attention to paperwork. Always read everything your lenders send to you, and correct errors promptly. Make sure they have your correct address and contact information. Complete forms on time, and know when you need to start paying back your student loans.
3. Pay off the loans with the highest interest rates first. Luckily, you won’t get penalized for speeding up the repayment of a student loan. Consequently, you’ll want to use any extra cash to pay off the loan with the highest interest rate first.
4. Accelerate your payments. Resist the temptation to spend your whole paycheck, and instead use spare cash to increase your loan payments. This will reduce the total amount of interest you will owe.
5. Go for graduated payments. A graduated student loan repayment plan means your payments start off low, and are raised every two years. This strategy works well if your income will likely increase steadily.
6. Consider consolidation. Consolidation lets you combine several federal loans into one. This may lower your interest costs, particularly if some of your loans have a variable rate. You may risk losing the deferment and forbearance rights of your current federal loans if you consolidate.
7. Delay with a deferment. A deferment lets you temporarily suspend your loan payments. Unemployment or economic hardship may qualify you for deferment, as well as being in school, pursuing graduate studies, or being in an internship or residency program. Working mothers and those on parental leave may also qualify. Check whether you will still be charged interest while your loan is in deferment.
8. Never miss a payment! If you miss payments, you may suffer financial consequences, which can be especially high if your lender sends your loan to a collection agency. Remember, bankruptcy usually does not eliminate student loan debt. On a positive note, if you make your loan payments on time it will help you build your credit score, and may help you qualify for new credit and lower interest rates.
If you are new to college and are planning to take out a student loan, remember these things:
1. Borrow only what you can pay back
2. Apply for scholarships/grants
3. Federal loans are generally better
For more questions, contact a financial representative from your financial institution! They will be able to help you come up with different options to pay back your student loan debt!
Until Next Time,