When you finally graduate from college it feels like a huge accomplishment. You’re feeling excited and relieved but possibly a little anxious. All that student loan debt you’ve been using to fund your education is looming over you and needs to be addressed. But what the heck is a person to do? It’s all so overwhelming and your financial counseling was, well, lacking. Read on for the five most common mistakes new grads make and five things every single graduate should do when they graduate to make their loans repayable.
1. Using your six month grace period when you have a job.
It seems like a great idea to just not pay on or deal with your student loans for six months. I mean after all you’ve earned it right? Not so much, interest is still accruing.
2. Picking the wrong repayment plan.
Whatever financial aid said is the plan most people choose is good enough for your right? Not necessarily, each individual has different goals when it comes to repaying student loan debt. You want to pick a plan that aligns with those goals.
3. Ignoring or not acknowledging your total debt amount.
You owe a lot of money and it sucks. You don’t want to look at it. Like a child, you want to cover your eyes so it can’t see you. Here’s the thing, the debt is there accruing interest whether you acknowledge it or not.
4. Not refinancing when your goal is to repay your debt as quickly as possible.
Refinancing isn’t for everyone but if your goal is to pay off your debt as fast as possible and your debt:income ratio is good (1.5:1 or less) and you have a steady job, refinancing is likely to be a good decision for you. Not refinancing cost me over $7,000 in 2015.
5. Being resigned to a life of powerless repayment.
Your loans are too much, no one else gets it, and you got the short end of the stick. We’ve all felt the self-pity and sense of powerlessness over your finances. Staying in this mindset won’t get your loans repaid.
What Every New Grad Should Do With Their Student Loans
You’ve read the mistakes and maybe even committed some of them yourself. So what exactly should you do with your student loans?
1. Start repaying your student loans as soon as you have a job.
Whatever your repayment strategy, refinancing, loan forgiveness, or income-based repayment, interest is accruing when you’re not making payments. Six months of interest adds up quickly. Also if you’re not making payments you’re not getting any closer to loan forgiveness options which require a certain number of payments before you’re eligible.
2. Take time to consider the best repayment plan for your financial goals.
What exactly is your goal with your student loans? Do you want to repay them as fast as possible? Pay the least amount of money possible? This goal will help you determine the repayment strategy that’s smartest for you. If you wan’t to pay as little as possible a loan forgiveness option that takes 10, 20, or 25 years might be your best bet. If you want to pay them as quickly as possible refinancing may be best for you.
3. Know your number and own it.
Your unwillingness to look at your student loan debt amount doesn’t do you any good. You still owe a lot, even if you’re in denial about it. You will have to pay it back. So you might as well make your payments work as efficiently as possible for you. To do that you need to look at your total debt amount and own it. Don’t feel ashamed about it, just take care of it.
4. Check out refinancing and see if it’s right for you.
Tomorrow’s post and video will be all about refinancing so you can explore this further. The simplest explanation of good candidates for refinancing are those with higher interest loans, good credit, and good income who want to repay their loans as quickly as possible.
5. Know your power in repayment.
Your repayment strategy is in your control. You can no longer control the amount of debt you took out for your education so let it go. Educate yourself, make the best decision you can, and advocate for borrowers.
Now that you have a few do’s and don’ts for student loan repayment I would love to hear your thoughts. Have you ever made one of these mistakes? Or have you ever made a decision that really saved you some money? Comment below or on the Repayable Facebook page. If you ever have any questions you can always email me at jeni@repayable.org.
Only five days until Repayable’s release (out January 1st)! You can pre-order the e-book here.
Recent Comments