Graduating from school is a feat anyone should be proud of, but for many, all the hard work and achievements can come with a cost: student loans. When it comes time to repay them, there’s a number of steps you can take to make sure they don’t become overwhelming, so that you can enjoy the fruits of your labor as you pursue your career and chosen lifestyle.
Financial experts advise that when evaluating student debt, make sure to be informed and know how much debt you have. This way, you can layout a well-thought-out strategy to pay your loans down. For instance, many students are forced to take out a variety of loans. Whether they’re federal loans or private loans, interest rates and rules can vary, so being aware of this will further aid your strategy.
When you’re juggling multiple loans, applying the “debt avalanche” concept can help you minimize the impact of your interest rates and reduce the number of loans you’re paying on. What’s a debt avalanche? It means that if you’re paying on multiple loans, you pay a little more each month on the one with the highest interest rate. Once that’s paid off, you use the money you were paying toward that loan, plus the money already being used to pay on the next highest interest rate loan until that’s paid off, and so on.
However, paying on multiple loans can be a heavy burden, especially when you have credit card payments and other expenses. That’s where student loan repayment plans can help. For most federal student loans, you’ll have a six-month grace period before you must begin making payments after graduation (or after you leave school). This grace period gives you time to get financially settled and start working on your repayment plan. Additionally, taking advantage of a debt management program to manage your other debts can help you focus more on paying off your student loans.
It may all be well and good if you’ve secured a job and can begin paying on your student loans, but what happens if you’re unemployed? You may qualify for deferment, which allows you to put off paying your loans until you’re in a more stable financial situation. Another way to alleviate your loan burden if you’re struggling financially is to request for forbearance, which allows you to pause your payments for a time period. The difference? Deferred loans don’t accrue any interest while loans in forbearance do accrue interest to the principal.
Some borrowers working in the nonprofit, public service, and education sectors may qualify for student loan forgiveness. Make sure you understand your options so you can capitalize on the benefits of your education and move forward in life toward financial success.