Managing Student Loan Debt After Graduating College

Higher education in the United States is often more expensive than the average person can afford. Although financial aid, grants, and scholarships can help lighten the load, most students end up taking out a loan to cover the remaining expenses. In most instances, payments aren’t due until after graduation, enabling them to complete their studies without much concern. 

Unfortunately, most college graduates don’t have the means to pay down student loans. While deferments, forbearances, and income-based payment arrangements are available, the interest accumulates, increasing the overall debt.

Eventually, some college graduates run out of lifelines and default on their loans. Ultimately, learning how to manage student loans can help you avoid the same outcome. 

Know Where You Stand

Whether your loan has a grace period or not, it’s essential to know where you stand. Review your student loans to ensure you understand the balance, interest rate, repayment start date, monthly installments, and associated fees.

If you don’t understand something, now is the time to contact the loan servicer. 

Make Interest Payments

From the moment the student loan is accepted, it starts accruing interest. The interest gets added to the principal amount. Then interest accumulates on the higher balance. Allowing this to happen is working backward. It means you’ll end up paying interest on the unpaid interest (capitalized interest). 

Making interest payments will prevent this never-ending cycle. It prevents the interest from being added to your principal balance saving you hundreds, if not thousands of dollars over the life of the loan. 

Hunt for Jobs Strategically

Be strategic as you begin looking for a job to sustain a living and pay off student loans. Depending on your degree, some companies may be willing to pay more for your expertise.

For instance, someone who got an MBA in San Diego could make $20,000 a year or more than someone with a high school diploma. So, opt for jobs that list degrees as requirements that match your educational background. 

Another factor to consider when job hunting is student loan repayment assistance. Several companies are starting to provide employees with extra cash to pay down their debts.

Whether you get $100 a month or $1,000 a year, it’s an effective way to stay on top of your debt. 

Be Careful With Consolidation

On the surface, consolidating your student loans may seem like the perfect solution. You can lump all your loans into one and make reasonable monthly payments until the balance is paid in full.

While consolidation could be beneficial for some, it’s not the case for everyone. For starters, you’ll still have interest to repay, which isn’t always cheaper than your old loans. 

For students trying to consolidate federal loans with a private lender, it’s important to note that your loans will become private. Any programs and assistance you may have qualified for before (deferments, forbearances, income-based options, etc.) will no longer be available. 

It is also possible to refinance student loans. Refinancing a student loan means taking out a new loan with more favorable terms to replace your current student loan.

Keep Up With Your Payments

Although a lot is going on after you graduate college, neglecting your student loan payments can have severe consequences. Missed payments turn into delinquencies, which become a default after so many months.

A defaulted student loan ruins your credit, making it harder for you to apply for housing, cars, credit cards, and even some jobs. Defaulting on a federal student loan could result in your income tax returns being relinquished or your paychecks garnished. 

Whether you’re paying $5 a month or $500 a month, you must keep up with your payments. Incorporate them into your budget to ensure you’ve set aside cash to cover the amount due. Set up automatic payments through your loan servicer or online bank if necessary. Finally, contact the loan company immediately to make other arrangements if you run into financial trouble. 

In Conclusion

Each year thousands of students graduate from college in debt. Many put this on the back burner as they focus on navigating life. Before long, the debt is so massive that it begins to impact other areas of their lives that can take years or even decades to overcome.

Fortunately, this doesn’t have to be your story. Using suggestions like those discussed above can help you keep student loan debt under control.