Between the escalating cost of tuition and the unemployment rate of young adults, it’s becoming increasingly difficult to get through college without having to take out a student loan. During 2017, the average student loan debt for a graduate at the undergraduate level amounted to $39,400. The burden of student loans is making it significantly harder for graduates to buy homes and settle down, which can lead to severe episodes of stress and anxiety. Thankfully, it’s possible to develop a plan that will make it substantially easier to take control of your student loan debt.
Be as organized as possible
The first step toward taking complete control of your debt is to be as organized as possible. Obtain a clear breakdown of your loans and familiarize yourself with your balances and interest rate. If you have a clear understanding of how much you owe and what needs to be paid back, the risk of missed payments is greatly reduced. If you have more than one loan, itemize the terms for each one separately. Information on federal student loans can be obtained from the National Student Loan Data System. A copy of your credit report will enable you to understand your private student loans better. Avoid applying for additional loans you don’t really need, and resist the urge to use a student loan for things that aren’t directly related to your studies.
Don’t lose contact with your lenders
It’s imperative to always stay in touch with your lenders and ensure they have your updated contact information at all times. If your phone number, email address, or mailing address changes and you don’t inform your lenders accordingly, you may miss out on important messages about your loans. This could result in you missing a payment, which will not only end up costing you extra money but may also negatively affect your credit rating. Don’t ever try to avoid your lender after defaulting on your repayments. Make contact as soon as a problem arises to try and make a repayment arrangement that will suit both parties. Don’t lose hope if you feel yourself drowning in your debt; there are plenty of accredited companies that can help you address your financial obligations. Although a debt management plan may not be ideal, you can seek assistance either directly from your lender or from a law firm that deals with bankruptcy and debt.
Get a job
Getting a part-time or summer job while you’re still in school will not only enable you to pay toward college yourself, but can also help you save some money to pay toward your loans. It could also help you consider your future career prospects while you’re still in school. According to Forbes, as many as 14 million college students work part-time while pursuing their degrees. This could include any number of side hustles to earn some extra cash while in school. Apart from the obvious financial benefits, working while in college allows students to apply theories they’ve learned to real-life problems. This allows working students to acquire a range of professional skills that may not always be taught in a class environment.
Start repayment as soon as possible
Student loans all boast a grace period, which is dependent on the type of loan you have. As far as government loans are concerned, the grace period is typically six to nine months after graduation, which presumably gives students enough time to try and find a job. However, this grace period doesn’t prevent you from starting your repayments earlier. Even if you can only make partial payments every month, you’ll find yourself considerably ahead of payments when the grace period ends. One of the biggest benefits of paying back a loan early is that it will lower your debt-to-income ratio significantly. This means you’ll have more money at your disposal when the time comes to make big purchases such as a house or a car. The sooner your student loans are paid off, the sooner you’ll have money at your disposal to settle down or use for wealth-building investments.
Draw up a budget and save
Even though it may seem tedious, the importance of drawing up (and sticking to) a budget can’t be stressed enough, according to Jeremy Brannan, Assistant Vice President of Student Financial Services at Southern New Hampshire University. By creating a budget while in college, you’ll be able to save toward your tuition, books, general living expenses, and your loan repayments. Creating a simple budget doesn’t have to be a difficult process. Start by writing down your fixed expenses such as rent, utilities, insurance, etc., then add flexible expenses that will include things like entertainment and clothes. Add your loan repayment to your budget as well, even if repayments aren’t due yet. It’s important to analyze your budget objectively. Try to see where you can save some money that can be utilized to start paying off your loans as soon as possible.
Every year, an increasing number of college students apply for financial assistance in the form of federal or private student loans. While there are always some risks involved with debt, making the effort to repay your student loans as fast as possible will help ease your financial burdens significantly.
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