5 Strategies for Managing Student Loan Debt After Graduation


debt after graduationGraduating students who have taken out student loans are often in for a bit of a surprise soon after graduation. Reality starts to sink in once you receive your first student loan bill in the mail.

The average amount of student loan debt is in the $33,000 range and 1 in 5 students graduate owing more than $50,000. Nearly 6% of graduates owe more than $100,000 by the time they receive their diploma. There are lots of reasons that college can end up costing more than planned. Not all credits are accepted when transferring from another college and switching a major can have a dramatic effect on the cost of your degree. 

Many students do no fully appreciate the true cost of student loans while they are attending school and use loan proceeds to finance a lifestyle beyond there means of paying for it.

Whether or not you land the job you were planning on, you will still be obligated to make payments on your debt.

Below are some tips to help you manage debt after you graduate from college.

 

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1. Understand Your Loan Terms

It's important that you understand the terms of your loans and when payments will begin. If you make the mistake of not knowing anything about them, then you may find yourself unprepared and possibly overwhelmed when it comes to managing your debt once you enter the workforce.

Of course all the information you need is contained in your loan documents however, you can call your loan servicer and ask for all of the details. They can even send you a statement to let you know how much your balance is and more. 

2. Consider Forgiveness Programs

You may want to consider some of the loan forgiveness programs that are available. For instance, the public service loan forgiveness program is designed to forgive the loans of graduates who are working in a qualifying field and have met all requirements.

Once your loan is forgiven, you no longer have to worry about making loan payments and you will be free and clear from student loan debt. Most loan forgiveness programs require a certain number of payments before the forgiveness will kick in so you will need to make sure you read.

3. Consolidate Your Loans

If you have more than one outstanding loans, you may want to consider consolidating them into one loan. Consolidating student loans is generally not a money saving move since the interest rate will not be reduced. In fact, when you combine loans, the interest rate is a weighted average and often results in an increase in the length of the loan as well as an increase in interest costs. Think carefully before consolidating loans, it just may end up costing you more over the long run. Another option might be to refinance your student loan.

4. Choose the Right Payment Plan

If your total student loan debt is greater than your yearly income, you'll probably qualify for an income-based repayment plan. Income-based repayment plans typically result in a lower monthly debt payment.  You may even qualify for loan forgiveness after 20-25 years if you continue to make monthly payments under the terms of your loan.

5. Adjust Spending to Make Room for Student Debt Payments

It is essential that you stop spending your money on unnecessary things and cut them from your budget. For example, if you purchase a coffee from Starbucks each and every day and it costs you $4, then you are spending an additional $120 on coffee each month. Consider purchasing coffee at the store and brewing it for yourself or cut the coffee out altogether. This $120 could be used directly toward your student loan payment and you will enjoy knowing that your debt amount is dwindling quickly.

No student wants to graduate from college and then live paycheck to paycheck while making their student loan payments. Not only does it stink, it can put undue stress on you. Before you graduate, you need to sit down and start thinking of strategies and ways to pay your student loans without feeling broke.

One of the most important things to keep in mind is that there are options available to help you repay your student loans, so you are not just stuck. You should contact your loan provider if you are having trouble paying. You may be eligible for payment plans that are based on your income, deferments, and more.

The best piece of advice that you can receive is to never ignore your student loans because they do not go away. In fact, ignoring them and not paying them only makes the entire situation ten times worse than it needs to be.

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4 Responses to 5 Strategies for Managing Student Loan Debt After Graduation

  1. Matthew 02/01/2017 at 1:57 am #

    As harsh as some student loan burdens are these days, there are still many ways to dig yourself out … excellent tips!

  2. Kelly 01/28/2017 at 2:46 am #

    If I had known any forgiveness programs, I would have resort to that option as it took me more than 5 years to pay off my student loan and it was very difficult to make ends meet as payment to student loan was high for me.

  3. Joanne Mahoney 01/26/2017 at 5:33 am #

    I think all college bound students need to attend a seminar about the reality of paying back student loans after graduation. My son insisted on going to a private college. Even though he received academic scholarships and financial help from us, he graduated with a hefty amount of debt.

    He received a great education, but at a great cost. I hope it was worth it in the long run.

  4. James 01/08/2016 at 4:49 pm #

    The first thing I did was to consolidate my loan because it was easy to pay and it gave how much debt I still had. Doing this helped me pay it more often and more. One thing I wish I had done would be I should have stayed at my parent’s home longer to cut my expenses so that I could get out of debt more easily.

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