We’re approaching the time where May college graduates will begin their loan payments. Dealing with student debt is tough and scary, but not uncommon. Seven in 10 college students will leave college with loans, and Americans now owe a whopping $1.3 trillion in loans. There is hope. However, understanding and managing your loans can help you stay on top of your payments.
Understand your Loans
The first step in managing your college loans is understanding what you owe. Some recent graduates do not realize how much they owe, but this is crucial. After determining your loan amount, look into your different payment options. Some loans offer an income-based repayment plan that starts at a lower monthly amount and gradually increases over time. If you have more than one loan, be sure to tackle the loan with the highest interest rate first.
Create a Budget
Once you know your monthly payment, it is crucial to create a budget. Develop a realistic list of expenses, and take home income. If you spend time building a realistic budget, there will be fewer surprises when the bills come. It is always better to over budget for expenses than to run out of money.
Working two jobs may not be ideal, but earning extra income can help your budget and pay off your loans quicker. Finding a part-time weekend job, picking up extra shifts at your current position, being a tutor or giving lessons are great options. Additionally, services such as Uber, Lyft, Airbnb, and Rover are other ways to earn more money. Working more does not have to be forever, but even a few months of extra income can increase your savings and decrease your loans.
Setting up automatic payments will help you avoid missing a month. Missing a payment can have serious implications. Not only will you owe more interest, but your credit score will also lower, and this can cause issues later in life when you need to make a big purchase such as a house or car. Automatic payments will help you prioritize your loan payment and prevent skipping the monthly bill.
If you can’t afford your monthly loan payment, there are other options to prevent a missed payment. Under specific circumstances, loans can go into deferment or forbearance which temporarily stops payments. You will have to work with your loan(s) provider to determine if this is an option for you.
Student debt is scary, but it is important to understand your loans and manage your finances effectively, so you successfully pay off your debt. It is essential to have a plan so that you can make payments on time.