The caps and gowns may barely be off and the graduation party might just be winding down, but for many students the idea of student loan repayment already lingers over their celebrations. But rather than stay up all night dreading the inevitable, making a game plan now will make loan repayment less painful for grads who avoid these five mistakes.
1. Not knowing (and preparing for) monthly payment amounts
Life after graduation comes with a wide array of new challenges. Preparing to do battle with adulthood gets a lot easier if new grads put “Budgeting” near the top of their To-Do lists. Keeping a good budget (and sticking to it) makes it easy to stay on top of debt. And since student loans might be a part of that monthly budget, why not know how much will be due each month, so other expenses can be budgeted accordingly. Not sure how to estimate a monthly loan payment, online calculators abound to help crunch the numbers
2. Passing on paying extra when possible
Interest on federal student loans is like an invisible financial enemy, hiding out and accruing little by little each day until it makes loan repayment unbearable. Instead of ignoring the impact of loan interest, face it head on and proactively. Using tax refunds or job bonuses to make additional loan payments or budgeting a few extra dollars each month can make an impact on both interest payments and the bottom line.
3. Being tied into the wrong repayment plan
Whether it’s an “Income Based” or “Pay As You Earn” plan, the type of loan repayment plan can have a major impact on monthly student loan payments both in amount of dollars and time spent. Make sure to review available payment plans and find the one that best suits your loan and income. Federal Student Aid offers a great online estimator. To compare these plans based on your student loan debt and income, use the repayment estimator.
4. Missing payments
Missing payments is a no-brainer way to get into trouble with loan repayment. Don’t hide from loans if they become overwhelming. Missing payments can negatively impact credit scores and make purchasing a car or home much more difficult for years to come. Instead of skipping payments, contact a loan servicer as soon as possible and talk about options to reduce or postpone loan payments to keep the loan in good standing.
5. Paying for student loan help
Unscrupulous businesses frequently prey on desperate people. And what person is more desperate than someone being stressed out by debt? Rather than click on one of the countless online ads that offer to help with debt for a fee, start with free loan help provided by the U.S. Department of Education through loan servicers.