07 Oct Tips for Managing Student Loan Debt, Part 2
According to a TIME Magazine article from January 2016, the student loan crisis is growing worse and worse, with the American student loan debt load having just surpassed $1 trillion in 2012. Student loan debt now makes up the second highest debt load in the country, jumping ahead of credit card and auto loan debt and topped only by mortgage debt. TIME estimates that over two-thirds of college students graduate with debt and that the average college graduate owes $35,000 at graduation.
Clearly student loan debt is a growing concern in this country, but that doesn’t mean that it has to take control of your life. Whether you have just graduated, are taking a break from school, or are just now starting to pay back your student loans, here are some essential tips for managing student loan debt.
Note: This is part two of a two-part post. You can read part one of this post here.
Use the grace period wisely.
It can be tempting to sit back and enjoy the time after graduation when you aren’t required to be paying off student loans just yet. Use this time, however, to start putting money away for your student loans. If you know your minimum monthly payment will be $250, for example, try saving this amount every month and then putting it toward your student loan debt when the grace period ends.
Pay down principal.
When possible, try to put extra money toward paying down your principal every month (your principal is your outstanding loan balance not counting interest). The reason: paying down the principal reduces how much you end up paying in interest over the life of the loan. Be sure to contact your lender about applying that extra money toward the principal; otherwise, it might automatically be credited to a future payment instead.
Pay down higher-interest loans first.
On a related note, if you are considering putting some extra money toward one of your loans, put it toward the one with the highest interest rate.
Sign up for automatic withdrawal.
By signing up for automatic withdrawal, some lenders will offer you a slightly lower interest rate, saving you money on interest in the long run. But even if your lender doesn’t offer you a financial incentive to go automatic with your payments, it’s still a good idea because it will help you avoid late fees and missed payments.
Maintain your “college lifestyle.”
It can be tempting once you get a higher paying job to seek out more luxurious housing, spend more on clothing, eat out more, etc. Instead of adopting a more expensive lifestyle, however, it’s a good idea to maintain a more modest lifestyle. This will help you save some major money that you can then put toward student loans.
See the benefits of paying off student loans.
Of course it’s always better not to be paying off any debt, but you can make the best of the situation if you are in a position where you need to pay off student loans. Paying off your student loan debt is a great way to build a strong credit history, learn how to budget, and learn to live below your means. Besides—you took on student loans to get an education in the first place, and that is something that can grant you financial stability for a lifetime.