6 Tips When It Comes To Student Loan Repayment
About 70 percent of college graduates leave college with an average of $40,000 in student loan debt according to recent statistics which means if you are reading this you may be one of the millions of people who have student loans in the US (Federal or private student loans). Some people may feel like their student loan debt is so enormous they will never get out of it and others feel that it's not really a priority because the loans can be deferred and because the interest rates are lower than the typical credit card, they have time to pay it off.
"About 70 percent of college graduates leave college with an average of $40,000 in student loan debt."
If you fall into either of these categories, its time to adjust your mindset about your student loans; You CAN pay them off and they are part of your overall debt portfolio which means like your credit cards, you should have a plan to pay off these loans as early as you can. Yes, an average of $40,000 sounds like a lot, but if you are earning an income and you have a plan, you can do it. Below are a few tips to get on the path of repaying your student loans:
1. Make sure you are aware of all your student loans
A lot of young college students sign paperwork they don't understand. Fast forward four years, do you remember all the loan paper work you signed? If you don't, your student loans are also recorded on your credit report so order a free copy of your report today here and make sure you know what all your student loans are.
2. Factor your student loan payments into your budget and pay more than the minimum
As you pay off credit card debt (if you have any) your student loans should be your next priority. The one good thing about student loans is that interest rates are typically low.
Make sure your weekly or monthly budget includes your minimum student loan payments plus any extra you can put towards them each month. This means if you have any spare money, instead of shopping or going out to eat, apply some of it towards knocking out your student loans.
3. Prioritize your student loan payments
This will depend on the interest rates and your student loan terms. Federal student loans usually have lower interest rates than private loans so ideally you should to tackle your private loans as first priority if you have both types.
4. Make sure all your additional payments are being applied to your loan principal
If you are able to make more the minimum payments on your student loans you want to make sure your additional payments are being applied to your principal and not to the interest otherwise you'll never see your balances go down and many creditors will apply your payments to interest by default.
Review your statements, login to your accounts and if necessary call your creditors to ensure your additional payments are going towards your principal.
5. Don't skip your student loan payments
Skipping loan payments just adds to the amount of time and the amount of interest you will have to pay on your loans. A lot of times when you graduate, you may get a student loan grace period which will allow you to skip payments for a certain amount of time - if you don't have to, don't do it - make those payments.
If you are currently unemployed its ok to defer your loans until you can pay them but as soon as you start working again you should start making your loan payments. And if you can afford to while unemployed, at the minimum, make your interest payments so you are at least paying something.
6. Don't stop saving for your future self
Once you have a plan in place for your student loans, don't stop saving for your future self. Pay yourself first even if it means contributing just a small amount to your retirement savings.
Remember, there is no success without a plan, start paying your students today and treat them as you would any other pressing debt. It might seem like forever, but you can pay them off!
Bola Sokunbi is the founder of Clever Girl Finance and she's passionate about helping women take control of their money so they can live life on their own terms.