Attacking Student Loan Debt Post Graduation

After graduation attack student loan debt

Today’s guest blog post is by Barney Whitstance.

If you’ve just graduated or are taking a break from college and just started repaying your student loans, the tips below will help you to keep your student loans under control. If you work through these tips, they will help you avoid fees and added interest costs, keep your repayments affordable, and protect your credit ratings from being adversely affected.

1. Know about your loans. For your student loans it’s important to keep track of repayment status, lender, and balance. Having these details will help you determine your options for loan repayment and forgiveness. You may refer to National Student Loan Data System to check the current status of all your federal student loans, loan amounts, and repayment status.

2. Know your grace period. Every loan has different schedule and different grace periods. The grace period is the amount of time you can wait between finishing your college and starting your student loan repayments. For example, the grace period for Federal Stafford loans is six months and for Federal Perkins loans is nine months. The grace periods are different for different type of loans and different terms and conditions. Keep this in mind and be aware.

3. No need to panic. If you’re having trouble making payments due to issues like unemployment, poor health, or difficult financial conditions, you do have the option to legally manage your federal student loans. The legal ways to temporarily delay and postpone your federal student loan payments include both forbearance and deferments. You may also qualify for a Pay As You Earn (PAYE) plan to help reduce costs even if you’re working. If you are earning, but perhaps not enough, consider applying for the PAYE plan while you are underemployed or looking for a better job. An unemployed deferment may also be the right choice if you are having trouble finding work. However, interest accrues on loans during forbearances and on some types of loans during deferment, increasing your total debt.

  1. Pay the most expensive loans first. If you’re planning on paying off one or more of your loans ahead of the schedule, start paying of the loan with the highest interest rate. If you have any private loans, start paying them off first, since they usually have higher interest rates compared to government loans. The only exception is with the IRS, you don’t want them in your life, get IRS payments out of the way first then tackle the remaining debts.

    Alternatively, you can also apply the debt-snowball method to your loan repayments as well. It works in the opposite way. You pay off the smallest loans first and only make minimum payments on the rest, ignoring interest rates. Once the first small debt is paid off you then roll over the total amount you’re able to pay each month until all your debts are paid off. This creates momentum and motivates to keep you going because you see progress quickly.

5. Pay extra if you can. If your financial condition allows you to pay more than your required monthly payment, every time or on and off, doing so can the lower the total amount of interest you have to pay over the life of the loan. Make sure to specify in a note that the extra amount of money should be applied towards your loan balance. If you don’t specify, your extra payment may automatically be credited as a prepay on a future payment meaning you might not be billed for the next month.

Paying down student debt doesn’t have to be scary or hard. Take the time to ensure your understand your loans’ terms and conditions. This can help you make the best choices for your current situation. Apply for federal programs and other deferments if needed. Continue making calculated extra payments each month as often as possible in order to pay less interest over the course of the loan. With some strategic planning and resolve, you will be sure to make progress in no time.

Barney-Whistance

Barney Whistance is an enthusiastic Finance and Economics blogger who is most interested in global economic climate. Apart from doing majors in Finance, he is also a Chartered Accountancy Student and planning to complete his Ph.D. in Finance before he turns 30. You find him  on Twitter.