Oh, the Loans You’ll Pay: Here’s How to Get Started Right After Graduation
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Your gown is tucked away. Your cap is proudly Instagrammed. The last notes of “Pomp and Circumstance” have fizzled out.
You’re looking to the future, and you’re excited to enter this thing everyone condescendingly calls the “real world.” Welcome.
Oh, just one little thing: You’ll be slapped with a monthly reminder of the burden of your college education for the next 10 to 20 years.
OK, good luck, byeeeee!
We know you’d like to spend your time enjoying a last summer at home, settling into a new job or taking that overseas trip you’ve been putting off. But if you could take a few minutes today to take a quick look at your student loan debt, we promise your future self will thank you in spades.
Here are some steps you can take now to help pay down your student loan debt faster than your sun-soaked peers.
1. Figure Out How Much Debt You Have
Before you can pay off your student loan debt, you have to know how much you owe and to whom. It’s such a basic step, a lot of people overlook it.
But do you want to blindly receive a bill every month, send a check and wait for the next one?
Considering you often sign off on student loans as a teenager without a clear understanding of what they even are, you probably don’t remember the terms of repayment down to the finest detail.
It may seem overwhelming, but the information is simple to retrieve.
Use these tools to see how much you owe and who owns your debt, so you can make plans fully armed with information:
Credit Sesame’s Free Credit Report Card
Credit Sesame will let you see how much money you owe and to whom (even if you’ve defaulted on loans). It’ll show your balance on both private and federal loans (and other debt) and offer tips to help reduce your debt and raise your credit score.
Office of Federal Student Aid
For federal student loans, sign in at studentaid.ed.gov to see:
- Which grants and loans you received.
- How much you still owe on each.
- How much interest you owe on each.
- Status of each loan (in repayment, forbearance, default, etc.).
- Your repayment plan for each loan.
- Loan servicer (to whom you make payments).
2. Simplify Your Loan Payments
One of the simplest ways to repay your loans quickly is to refinance.
“The earlier you refinance, the more you can save and the faster you can pay off your loan,” says Christine Roberts, Head of Student Lending at Citizens Bank.
Refinancing will generally mean replacing your laundry list of loans with one loan that brings your student debt under a single umbrella.
For your federal loans, the Department of Education offers a direct consolidation loan.
This federal loan lets you combine multiple loans into one new one and takes an average weighted interest rate. You’ll only have to make one payment each month, and you have more time to pay off your balance.
If you have private loans — or you’re still struggling with payments on your federal loans — try getting a lower interest rate with a company like Credible.
Other companies offer similar services, but we like that the average Credible user saves about two interest points on their current federal loans
Refinancing could simplify your life with one monthly payment, instead of several. It may also lower your monthly payment, improve your interest rate and/or give you more time to pay.
Drawback to this method? A longer repayment period means your balance will spend more time accruing interest. While it’ll make life easier each month, it could cost you more money over the next 10 or 20 years.
Enter your info at Credible to find out what your new interest rate could be.
3. Create Your Monthly Budget
For many 20-somethings, the months after college graduation are when you finally start adulting for real. A huge (and hugely unpopular) part of that is taking control of your finances.
The first thing you should know is budgeting doesn’t have to be complicated.
You don’t have to be an Excel genius or a numbers wiz. You just have to pay attention to how much money is coming in and how much is going out.
Don’t forget to include your student loan payment in your monthly budget! If it’s an afterthought, it’ll be a burden every month.
4. Earn Extra Money
When staring down a mountain of debt, many people forget to consider this option.
Instead of sacrificing the lifestyle you want when student loans eat away your paycheck, try to earn extra money dedicated to paying off debt.
Think it’s easier said than done? We’re talking about stuff so simple, you can do it around two jobs, a family and a social life — no excuses.
Or, maybe you’re savvy enough to nab an apartment with a spare room. List it on Airbnb to cash in. If you’re a good host with a desirable space, you could bank hundreds of dollars this way.
These gigs let you earn more money when you’ve got the time and energy to hustle — and take a break when you’re worn down by the new job you hopefully landed straight out of college.
5. Know Your Options
In a perfect world, you’d understand the ins and outs of student loans before signing the contract. But we understand that’s not realistic for most people.
Instead, do your research now — before your loan payments become a looming nightmare of debt that follows you around for the rest of your life.
You have several options for repaying federal loans. Standard repayment has you paying off your loans over 10 years.
If that means a monthly payment you can’t afford, consider signing up for an income-driven repayment plan. They limit your monthly payments to a certain percentage of your income and extend the period you have to pay.
When you can’t make monthly payments, deferment or forbearance could allow you to temporarily postpone or reduce payments.
For private loans, you may be able to negotiate deferment, but the option isn’t built in the way it is with federal loans. Or you can look into refinancing for better repayment terms.
Even if you’re on top of your loans, learn your options now. You don’t know how your finances will change in the future, so it’s better to understand your options before you’re in a panic.
6. Start Making Payments
You just graduated. Aren’t you supposed to wait six months to start paying back your loans?
Yes, many student loans come with a grace period — you’re not penalized for skipping payments in those months. But you can start paying anytime (even while you’re in school).
“You can start paying off student loans right away, and you should pay what you can as soon as you can,” Joseph DePaulo, CEO and co-founder of College Ave Student Loans, explained to us a few months back. “Students who put money toward their loans during school save money in the long run.”
Private loans don’t all come with a grace period, so make sure you understand your repayment terms.
“With most private loans today, you have the option of paying interest during school, interest and principal [during school] or deferring [until after school],” explains Kevin Walker, VP and Head of Education Loans at Lending Tree.
But, Walker added, “every private loan accrues interest during the in-school period.”
The earlier you make payments, the less time your loans will have to accrue interest, so get crackin’.
Conquer Student Loan Debt
That wasn’t so bad, right? Now tell your friends — you don’t want them still drowning in debt at 35 (albeit in the sunshine beside a pool) while you’re ready to take on the world.
Dana Sitar (@danasitar) is a senior writer/newsletter editor at The Penny Hoarder. She’s written for Huffington Post, Entrepreneur.com, Writer’s Digest and more, attempting humor wherever it’s allowed (and sometimes where it’s not).