This is the average debt load a student will end up with after graduating college. If you’re like the 66% of all undergraduate students who have taken a student loan, you probably want to get rid of those things as fast as possible. It’s easy to get caught up in the borrowing maze in college and managing your loans can become a headache quite fast. With lenders selling your loan to other places and changing their name – it’s hard to keep everything straight!
Here are a few things to help you manage your student loans better– and help ease the pain of repayment.
If you’re currently a student, do yourself a favor and keep a running total of all your student loans in one location. On this summary, you’ll want to keep track of each loan provider, account number, original amount, username, and password. (You can use the Financial Snapshot to help keep your student loans organized)
If you’ve already graduated and start to see the lender letters pile up…work fast to build this list and move to the
Build a Loan Payment Account
When you graduate from school, you are given a six-month grace period before you have to start repaying your loans. I recommend that you prepare by opening a savings account or second checking account that is devoted to your loan payments. Once this account is set up, you can automate the payments directly from this account.
Before payments start, it would be ideal to have saved at least 2-3 months payments in the account as a buffer. Having $500 – $1,000 extra to fall back on will take away some of the payment anxiety.
Rework Your Personal Budget
If you are still in school or nearing graduation, you probably have a better idea of what your payments will look like. If not, then jump on the lenders’ websites and log into your account. You should be able to calculate the estimated payments – if not, then use this calculator.
Once you calculate the payment information, take a look at your budget and work the payments into your plan. If the payments are high and they are keeping you from eating, consider extending the terms or looking into income based repayment.
Caution: Extending the term of your loan or paying interest only should be considered only in the most critical of situations. Prolonging a loan means you pay more! It’s that simple.
Snowball The Loans
Now that you’ve organized your loans and set up your account to make the payments automatically, you might consider the snowball approach. If you have a handful of small loans with a lender, you might be able to make additional payments to completely eliminate one of the loans. By paying the smallest loan off entirely, you’ve eliminated a small payment and can focus the extra cash flow towards the next smallest loan. It’s great to see those student loans melt away, and this is a great approach to maximize your student loan repayment.
What tips do you have for those starting to pay off student loans?