Congratulations! You are officially done with college and have a brand-spanking new diploma in your hands. Before you get used to your post-education freedom though, you may want to evaluate your financial situation — most importantly when to start paying off student loans. The smart graduate will take action on their student loans immediately.
Not sure what to do after college or where to start? Here is an easy to follow checklist to ensure your student loans are handled properly:
1. Sign up for Automatic Payments
Even though you are a responsible college grad now, it is easy to forget to make your loan payments on time. Avoid extra charges and hits against your credit score by setting up automatic payments. If possible, schedule two half payments a month that are synced with your paycheck.
2. Have a Pay Off Goal Date
No one wants to be stuck repaying their student loan debt for decades, yet that is what happens to a majority of graduates because they pay only the minimum amount and student loan rates keep them stuck in repayment status for much longer than they imagined.
Instead, have a realistic goal date; try paying off student loans in ten years or less. The faster you pay off your loan, the more money you save in student loan interest rates. A great calculator to use to help you determine what you need to pay each month to reach your goal date is the Go Banking Rates student loan calculator.
3. Create a Plan to Pay Multiple Student Loans
It is not unlikely for new graduates to have 2-3 different loans, especially at higher degree levels. If possible, consolidate your student loans. To do this, talk with your lender(s) to figure out if this is a possibility for your situation. If it is not, decide which loans you will attack first. Each loan’s monthly minimum must be payed off, but putting more money towards one loan can make a bigger difference in the long run.
Some recommend putting more money towards the loan with higher student loan interest rates. This is wise because the higher rate charges are costing you more than the low rate loans, so paying it off quickly is ideal.
However, other financial experts, like Dave Ramsey, suggest putting any extra money towards your smallest loan first, because it will be the easiest and fastest loan to pay off. Either way, put all extra money and payments towards one loan instead of spreading them out over all your student loans.
4. Seek Help for Student Loan Debt
Paying off student loans is a large task and sometimes life gets in the way. If you do not make enough to pay off your loans or were recently laid off, act immediately to get help with your loans.
IBR Info is a program that makes loan payments more manageable based on your income level. Also, if you are a teacher, government worker or work for a non-profit organization, this is a great program to check out for loan forgiveness programs.
When it comes to student loans, you are not alone. However, you can be ahead of all the other new graduates by taking charge of your student loans.
Make sacrifices such as driving a used car or limiting dining out so that you can pay more toward your student loan debt. The best way to get motivated to pay off your student loans is to read inspiring stories of those who have done the same. Now that you have your diploma in hand, take control of your career, as well as the future of your finances.