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Five Student Debt Tips From a New Graduate

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As a recent graduate myself, I’m now relieved to be finished (for now) with school. I’m also blessed to be in a job I love with room for growth and advancement. However, what I don’t love is the over $16,000 I owe in federal student loans. But I’m not letting it get me down.

I’ve put together a personal repayment plan that involves not only paying off the other debts I’ve accrued over the years, but banishing them into the darkness with all my missing socks. By working in the public and non-profit sectors I also plan to get the remainder of my loans completely waived after 10 years as well.

I have a few techniques up my sleeve and I want to share them with you so that you can get debt free, like I’m also planning, as soon as possible.

1. Understand your loans
The first thing you need to do to get your student debts under control is make sure you fully understand all their terms and conditions. For each debt you need to keep track of your repayment status, lender, and balance. Keeping all these details safe and in one easily accessible spot will help you determine your options for things like Pay As You Earn (PAYE) programs, Public Service Debt Forgiveness, and other loan repayment plans. You may also want to refer to the National Student Loan Data System to check the current status of all your federal student loans, loan amounts, and repayment schedule.

I use the debt tracking and budgeting app You Need A Budget (YNAB) to hand enter all my monthly bills and expenses. I don’t use any of the other apps that sync to my bank accounts because I feel like that is putting me needlessly at risk for identity theft and other financial issues. Also, I like to be fully in control of my finances: hand entering my details helps me stay abreast of my expenses.

2. Know your grace period
A grace period is the amount of time you can legally wait between attaining your degree and starting your student loan repayments. Every loan has a different repayment schedule with varying grace periods. For example, the grace period for Federal Stafford loans is six months but for Federal Perkins loans it’s nine. Be sure to keep this in mind and be aware of the ticking clock based on the terms and conditions of your loans.

3. Don’t panic
Okay, so, I know I mentioned the ticking clock, but there really is no reason to come unhinged. Even if you think you’ll have a hard time making those payments due to circumstances like unemployment, poor health, or other financial issues, just remember that you do have the option to legally manage your federal student loans.

Two legal ways to temporarily delay and postpone your federal student loan payments include both deferments and forbearance. You may also qualify for a Pay As You Earn (PAYE) plan to help reduce monthly costs.
If you are earning, but are under employed or facing some other hardship, consider applying for the PAYE plan while you take a breather or look for another better job. However, bear in mind that interest continues to accrue on some types of loans during forbearances and deferment, which can increase your total debt – so don’t rely on this option unless you absolutely have to.
4. Make a debt repayment plan
When you sit down to figure out how to get out of debt, it can be a daunting task. There are a few different ways to go about it and more advice out there than you could ever possibly read on the subject. However, there are a few principles to keep in mind when repaying any kinds of debts. Depending on your personality and the unique nature of your debt, choose the system that works best for you.
Pay off high-interest debts first

If you’re hoping to pay off one or more of your loans ahead of schedule to save on interest, be sure to start by paying down the loan with the highest interest rate. Private loans usually have the highest interest rates compared to government loans, so start with those. The only exception is the IRS. If you owe the IRS anything, make those payments first while still paying the minimums on your other loans. Trust me, you don’t want the IRS in your life. Get those payments out of the way before tackling your remaining debts.

Debt snowball method

Apply the debt-snowball method to your loan repayments. This system works in a different way by keeping you motivated and giving you tangible results faster. With this system you pay off the smallest loans first, completely ignoring any interest rates. You only make minimum payments on the rest.
Once the smallest debt is paid off you throw a little party that you knocked it out of the park so quick. Then you roll over the total amount you were paying on that debt along with the minimum you were paying towards the next smallest debt (adding whatever else extra you can manage each month) until the second debt is paid off.

You continue in this way, adding whatever you were paying to each debt to the next largest debt in the queue until all your debts are paid off. This creates momentum with your debt repayments and also motivates you to keep going. You’ll see debts getting knocked down and kicked to the curb quickly.
5. Pay extra when you can
This is key. Depending on your budget, and if your financial condition allows, pay more than your required monthly payment when possible. Though I know it might not be fun or sexy to use your seasonal bonus or tax refund to pay down your debt, in the long run you’ll be saving thousands of dollars in interest over the life of the loans.

Be sure to specify that any extra money you’re sending should be applied towards your loan balance. If you don’t specify, the loan company may automatically credit the extra amount as a pre-pay towards your next month’s bill.

From one recent grad to another, paying down our student debt doesn’t have to be scary or difficult. We just need to take the time to understand our loans’ terms and conditions and apply for federal programs or other deferments if needed. If we make calculated extra payments in line with our unique budgets each month, the strategic planning will pay off big in interest saved over time. With a strong will and resolve, we’re all sure to make progress in no time.

Latest Activity: May 11, 2018 at 11:39 PM

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