Your college debt clock begins once you take out your first student loan. Inflation doesn’t help either because by the time you graduate, your debt will increase. Moreover, your credit won’t be dependable to the banks when they look at your debt. Your responsibility is to monitor and maintain your debt clock based on how much you owe. Treat your debt like a company’s balance sheet. This will allow you to make smarter decisions in reducing your college debt.
Things to consider
Make a list of all the loans you have, their balance, interest rate, terms and monthly payment. Two weeks prior to your monthly payment, make sure you create a calendar reminder. Even if you have not received a coupon book or monthly statement, you will be required to make timely payments. Remember that you do have a 6-month grace period after you graduate, but don’t forget to report any unemployment or financial hardship before this period ends.
Plan how you will make your first loan payment. If you change address, be sure to report it to the lender. Take a look at how many other expenses you have to consider such as security deposits for rent and utilities, purchasing work attire, furnishing a new apartment, or buying a new or used car. Right after college, your income will have to stretch for various expenses. Stay within your budget and what you can afford. If you have to sign up for automatic bill payment with your lender, be sure to do so. This could provide you with a small rate of reduction in interest.
If you are facing financial difficulty, ask your lender about alternate repayment plans. Most of these, such as the extended repayment program and the income-based program, will offer you a lower payment each month. Try to avoid increasing the loan terms. You will be able to reduce your monthly payments by a third if you change your loan term from 10 years to 20 years. However, you will considerably increase the interest over the life of the loan. If you are able to afford it, stay with the standard repayment term of 10 years.
Consolidating your loans can save you money. Your monthly payments may be reduced to something you can afford. This might allow you to get a new and lower interest rate. Bear in mind that some loan consolidation programs depend on your credit scores to determine your interest rate. Use your credit cards wisely. Restrain yourself from buying things that you don’t really need or can get later.
Now that you have graduated, you now need to consider where you will live and how you will commute to your place of employment. So you will need a car if you don’t already have one.. If you currently drive an expensive car, perhaps selling it for a less expensive vehicle can save you some money. You could also opt for public transportation. Maintain a strict household budget because you have to think about food, gas, utility, and of course, your student loan. See if you can spread out your due dates. You don’t want to be paying everything all at once unless you get paid once a month. If you get paid biweekly, work out your due dates to pay some then and the rest when the next paycheck is due. If you get paid weekly, you’re going to have to do the same thing. Most lenders will work with you so don’t be afraid to ask.
Student loan debt
The average student loan debt since 2012 is over $27,000, which is 58% more than five years prior. Within the same period, it is reported that credit card and auto loan debts have decreased, which shows that student loan debt is on the rise. If you have a $25,000 student loan and 20 year term, your monthly payment would be approximately $150. It is almost the same that an average household pays for a used vehicle each month. Most students stay in debt for about ten years. The key to paying off your loans is to manage your debt clock and discipline yourself to pay the required amount each month or something extra if you can afford it.
Dave Landry Jr. is finance and debt management advisor who has recently begun blogging to share his expertise. Dave is also an associate contributor to National Debt Relief.