Student loans are one of the most common forms of debt and can easily turn into a life-long hassle if you aren’t careful. If you are a recent graduate, the best thing that you can do for the state of your finances is to make paying off your student debt a priority. Here are a few ways to get your student loans taken care of as early as possible in your career.
1. Pay more than required to reduce principal
When your first student loan payments are due, your lenders suggest a minimum payment, usually based on a ten year repayment schedule. If you are able to afford it, it’s best to pay more than the suggested amount, which can help reduce interest rates. Be sure, however, to notify your lender in writing your intent to do so, as paying extra each month may only roll over to next month’s payment, in effect not reducing your principal.
2. Know exactly how much you owe, when payments are due, and how to get in touch with your lenders if you have questions.
Your school’s financial aid office is the best source of information about student loans. If you have any questions about when and how to make payments, or if you need to update your contact information, be sure to contact the office and clear things up. The worst thing you can do is go MIA when it comes time to repay student loans and default, which can ruin your credit score. Staying in touch is key.
3. Look into loan forgiveness programs.
Many recent graduates don’t have a specific career path mapped out once they leave school. If you’d like to take a few years off to help your community or others in need, consider applying to several programs offered by the federal government that can effectively forgive your student loan debt. Examples of such programs include AmeriCorps, the Peace Corps, and the National Guard. Teaching in specific low-income communities can also serve to forgive student debt. For information, check out this FinAid article on student loan forgiveness.
4. Loan consolidation is a good option for some.
While paying off your loans quickly is best for your finances in the long-term, if you’re interested in reducing your monthly payment and making it easier to keep track of your payments, consolidating your loans may be helpful. By consolidating, you can extend the repayment schedule of your loans, and you can also put everything into one easy payment. There are a few downsides to consolidation, which you can read more about here.
5. If you want to pay off some loans ahead of schedule, work on the most expensive ones first.
If you have multiple student loans and would like to get rid of one or more as quickly as possible, pay off the ones with the highest interest rates. It’s also good to prioritize private loans, as their interest rates are more often than not higher than federal loans, and they don’t have the repayment flexibility that government loans tend to have either.
While student debt is something that more and more of us have to tackle considering the rising cost of higher education, if you’re smart about it, you can get rid of the debt in no time. Just be aware, stay on top of things, and don’t panic. A debt-free future is closer than you think.