Graduation time is nearly upon us. You’ll put on colorful robes, balance those awkward mortarboards, listen to a hopefully inspiring commencement address and get that tassel flipped. What an event! But after the obligatory back slaps, what then? The job market is still tight for recent grads and you’ve got six months until your student loans kick in. If you have to settle for a part-time gig, a stint as a barista or less than optimal starting pay, your monthly debt load can quickly overwhelm.
We get it – money’s right all around. With that in mind, here’s five must-read tips to better cope with your student loans:
#1 Understand Your Debt
Too many grads come out of school with no clue how much they’ve borrowed or what that will equate to in monthly payments. Tuition.io’s free student loan app is the best tool to get an understanding of your debt. The tool is free and you’ll be able to see ALL of your student loans in one interface – even if you’ve got a blend of federal and private student loans. You can see your total debt, total monthly payments, check out repayment options and contact your lenders with questions all with this free award-winning tool. Get it now!
#2 Understand Payment Plans
This one can be tricky. You need to understand what your options are and what payment plan you can afford that can get you out of debt fastest. The standard plan will pay off your loans in 10 years. If you can afford these payments, this is the way to go. If you can’t afford your monthly payments, income based repayments may be your best bet, but we also recommend booting in extra cash whenever you can. Extended payment plans aren’t great, but are better than default. And don’t get talked into a consolidation without comparing the end result. These can end up with you paying more interest and also shortcut debt reduction strategies (see #3).
#3 Pay As Much As You Can
The best way to unload your debt ASAP is to plow as much cash into it as you can. We’ve written before about the debt avalanche strategy where you devote any spare cash toward paying down the principle on your highest interest rate loans. This will allow you to fast-track eliminating that loan. Then you can take the amount you were paying on that loan and use it to fast-track the next highest rate loan. This strategy will get you out from under your student debt years faster than making minimum payments!
#4 If You’re Unemployed, Consider a Deferment
It’s easy to get off track with student loan payments if you’re jobless or working for minimum wage. But no matter what, you need to deal with your school debt. Try to get an income based repayment plan to reduce your monthly payments. If this is not an option (like with private student loans), ask for a temporary deferment. We recommend deferment only if no other options will work for you, because it is better than going into delinquency or default. These both will trash your credit, make getting a job harder and will result in interest and fees piling onto your loan making the situation worse.
#5 Last Ditch Option: Forbearance
Deferment is preferable to forbearance because interest won’t accrue. But if you can’t get a deferment and truly cannot afford to pay your student loans, you should be able to get a temporary forbearance. Interest will continue to accrue while in forbearance, which will make the debt worse. This should be a last ditch option and only taken if you would otherwise become delinquent or in default on your loans. Another reason to get your student loan debt under control? A recent article says stress causes smelly feet – and what’s more stressful than finances?
For a more in-depth look at managing student loan payments, please check out some of our other recent blog posts on related topics: