Looking sharp in that cap and gown, my friend. Now that your college days are behind you, I’ve got a little bad news: It’s time to start paying back your student loans.
But there’s good news, too: While your student loan debt might leave you wanting to crawl back into your dorm room, it’s not difficult to create a master plan to manage your debt.
The Post Grad Grace Period
The first thing to know about your student loan (or loans), is when you’ve got to pay it back. The grace period is the amount of time, such as six months, after you leave school and before you have to repay the loan. This when you would ideally be finding a job and an apartment, starting work and getting your finances settled.
Direct Subsidized Loans and Direct Unsubsidized Loans, both of which are federal loans, generally have a six-month grace period. However, PLUS loans, which are also government loans, do not. That means that as soon as you receive your last student loan check, you’re on the hook for starting to pay it back.
Federal Perkins loans are a little different. If you’re a full-time student, then you have nine months post-graduation to start repayment. But if you drop below half-time, then you’ll need to check in with your school as to when repayment begins.
Private loan repayment will depend on your lender, so definitely check in with them to find out.
If you do have a grace period, now’s the time to put that diploma to good use. Take advantage of your college experience and connections and hustle hard for that first job. All you need is a foot in the door.
Staying On Track With Payments
Job acquired, huh? Nice one. You’ve worked hard to get here. Pop the cork on some champagne — and get out your spreadsheet. (Sorry, man, but if you want to keep your finances on point, you’re going to have to do a little math.) Fortunately, if you do a little work up front, you can pretty much put your money on autopilot.
Once you’ve got the job, arrange to have your paychecks automatically deposited into your bank account. You know your money is going to show up in your checking account every payday without you having to lift a finger.
Then, once you’ve got the apartment, arrange to have your utilities and other bills put on autopay. You know your bills are going to be paid without you have to lift a finger here, either. The spreadsheet is for figuring out how much money is left over after bills, rent, and food. Since you’ve already checked in with your loan servicer about the grace period, you should know how much your student loan payment is and when it’s due. If you have more than one loan, you’ll need to know this info for each loan.
If there’s money left over after rent, bills, food, and student loan payments, save a little and spend a little. You’re young and good-looking, so have fun with it! But put a little to the side for rainy days, down payments, weddings or crazy vacations. Even if it’s not a lot, it’ll stack up soon.
Refinancing Options
How do you know when to refinance your student loan? What does that even mean?
There are a few factors that’ll inform whether you want to refinance your student loan(s). First, having more than one loan means you’ll likely want to consolidate them, if only to make your life simpler.
Second, if the rate on your loan is higher than you’d like, you may be able to refinance to a lower level. Or, if you have an adjustable rate on your loan, refinancing could bring it to a fixed rate. Plus, you may be eligible to extend your term, stretching your payments over a longer period, thereby bringing the monthly payment amounts lower.
However, if you do decide to refinance or consolidate, be aware of a few pitfalls. You may lose out on certain deferments or income-based repayment plans by refinancing. Also, refinancing a federal loan into a private loan may remove certain benefits and repayment options mentioned above.
Final Thoughts
Managing your student loan debt doesn’t have to be overwhelming. If you treat this debt rationally and formulate a solid, logical plan of attack based on researching your options, you’ll be well on your way to financial freedom as you begin your new, adult life. Flip that tassel and get started.
