Many new graduates are still celebrating their accomplishments. And rightfully so – getting a degree is a big deal. But once the excitement of finishing school wears off, you begin to realize how daunting the long road ahead to paying off those student loans really is.
I had $20,000 in student loans when I graduated from college. That’s certainly not a huge amount compared to others but the amount is still significant. It took a lot of discipline and hard work, but I was able to pay it off in two years. This is despite me taking some wrong turns along the way. It goes to show that if you generally make the right choices, paying off your loans can be much more manageable than it seems. Here are 4 rules to follow to tackle your student loans:
Understand your loans from A-Z
Understanding the ins and outs of your student loans is one of the most basic, yet important things you can do. However, many graduates skip this step altogether and end up blindly making the minimum payments. You should know your exact balance, the lender, and the status of each loan you take out. It’s also important to know your grace period or the amount of time you have after you leave school until you have to make a payment. For example, the grace period for federal Stafford loans is 6 months. Knowing these details will help you figure out what to do next.
Formulate a repayment plan
Formulating a repayment plan can be the most difficult part of the process, but it’s one of the most crucial. The standard repayment process for a federal loan is 10 years. Can you realistically pay this off in this time frame? Figuring this out early in your career can be difficult but try your best to do so. If paying the loans off is not possible in the time frame needed, there are other options, such as consolidating your debt to establish a different payment schedule. Understanding how much you can afford and how much you need to budget today can help save you money down the road.
Prioritize your loans
Not all loans are created equal. Some may have higher interest rates than others so be sure to prioritize your repayment plan depending on that factor. If you have both federal and private loans, chances are your private loans come with a higher interest rate so pay those off first.
Pay more if you can
If your financial situation allows for it, pay more than the minimum required. This will reduce the total amount of interest you have to pay in the life of the loan. Plus, you will pay off your loan much faster and become that much closer to becoming debt free.
Paying off your student loans can be a long process. Your situation can change over the years but don’t think the worst even if you can no longer afford your payments because there are options. Just make sure to be on top of your loan situation at all times so nothing catches you by surprise.