Truly Useful Tips for Handling Student Debt

Truly Useful Tips for Handling Student Debt

For many college students, graduation is a double-edged sword. On one hand, you are finally ready to enter your choice of career and start living your adult life. On the other hand, you are likely facing a huge pile of student debt. You are not alone in this. In fact, the total of student loan debt across the country is now higher than credit card debt and is well over $1 trillion. While facing up to your student loan debt can be intimidating, there are ways to make it somewhat easier. Follow these useful tips for getting a grip on your debt so you can pay it off:

  • Put your grace period to work. If you have federal Stafford Loans, you will have a grace period of six months before repayment begins. The period is even longer for federal Perkins Loans, at nine months. The grace period varies greatly with private loans, so it is vital to check with lenders to see what you are facing. This is also a great opportunity to compare repayment options to see what you can manage to pay.
  • Research options. Typical repayment of federal loans means making monthly payments of $50 or more for a period of as much as 10 years. This allows you to spend less on interest than repaying over a longer time period. According to Mark Kantrowitz of FinAid.org, if your total debt is lower than your starting salary for one year, you should be able to easily pay off your debt in 10 years or less. If your debt is larger than your income, you may find yourself struggling with repayment unless you choose the right repayment plan. You can view all possible repayment options on the Student Aid on the Web site of the U.S. Department of Education.
  • Test drive repayment plans. While you are in your grace period, use online loan calculators to see what you would have to pay monthly for each repayment option. While you are test-driving your payments, place the monthly payment in a savings account. This will provide you with a real experience of handling payments and will also allow you to set aside some emergency money.
  • Never go into default. Defaulting on student loans can be financially devastating. You cannot discharge the debt through bankruptcy, and the government can seize your tax refunds, take a portion of your Social Security benefits, and garnish up to 15% of your salary without getting a court order. Any of these consequences will cost more than paying through the income-based repayment plan.

Student loan debt is an unfortunate part of the college experience. While it is unavoidable for many, there are steps you can take to make repayment as painless as possible.

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