Congratulations! You just graduated. The best four (or five or six) years of your life are now over. Now comes the fun part of getting a job, moving across the country and spending every dime you have trying to make a life. Oh, and did I forget to mention that after six months or so, and for the next thirty or so month of your life, you’ll get slapped with a huge bill, usually more than one, to repay that money you spent four years drinking away. Everyone deals with this, some worse than others, but if you manage your money smartly (easier said than done), you can get ahead and stay ahead.
First, start by taking a good look at your loan bills. If you have more than one Federal Loan, consider consolidating, to cut down to one bill, and pay less interest. You can usually consolidate with one of your loan companies, or another outfit, like Sallie Mae. This may not be possible for private loans, but for Federal Loans, it’s a smart move. Personally, I began my repayment period with three separate loan bills each month, totaling around $330. After consolidation, I cut this down to $270, and only one monthly bill. In fact, my bill is paid automatically each month, so I never even see any paperwork.
As I mentioned in the previous paragraph, many lenders offer you the ability to pay your monthly bills on line. In fact, as my lender was an example of this, many will even give you a reduced interest rate if you set up recurring monthly electronic payments. The reduction is usually minor, around .25% or so, but every little bit helps when you are just starting out. Many are still hesitant to pay bills on line, and with good reason, but I, myself, have been doing this for around five years with absolutely no problems. In fact, my entire loan consolidation was done on line, without a hitch.
Another thing to consider is that most lenders will offer multiple payment plans. Take a good look at your situation while deciding what repayment plan to choose. There is your basic plan, which is a fixed payment each month for a number of years until it’s all repaid. There is an extended plan, whereby you can get lower monthly payments in return for a longer repayment period. Some will also offer a graduated plan, when your initial payments are lower, and they slowly escalate every few months or years, until they reach their ceiling. This is often a good idea for someone just starting a career, where you can expect to start at the bottom and work your way up, guaranteeing a larger salary in the future. I have stuck with the standard plan, choosing to shell out a little more now in order to get them out of my life quicker. There is no “right or wrong” here, it’s whatever works for you. Your loan company, and credit rating, will be happy as long as you are paying somehow.
What’s left? Well, if you are considering a career in public service, take a look at the College Cost Reduction and Access Act. This is a new program, which forgives your student loans after ten full years of public service in a number of qualifying positions, assuming you haven’t missed any payments. There are a number of caveats to this, so it’s a luxury, not something to depend on, but consult this link for more information: http://www.finaid.org/loans/publicservice.phtml. A number of employers will also offer loan repayment in exchange for service, Hospitals and other nursing facilities are common examples of this, although these programs seem to be on the decline in recent years. These programs are rare, and will completely depend on the discretion of your employer, but it doesn’t hurt to ask about it, during an interview, or by visiting the human resources department.
Now that you’ve saved as much as you can save, it’s important to treat your student loans with the highest importance. Missing even one payment can have a large negative effect on your credit rating. Budget for these each month as you would budget for rent and electricity, and make sure they are given a higher priority than luxuries like cable, and car payments – common temptations for someone just starting out with their first “real” paychecks. Missing a payment may not seem like a big deal now, but in ten year when you are applying for a mortgage, it can come back to haunt you. If you are doing well and have some extra money each month, try paying more than your monthly payment, in an effort to shorten the repayment period. If you do this, be sure that your loan company applies your payment to the principal of the loan, and not the interest. If you are mailing your payments, it may be worth including a letter indicating your intentions.
In today’s world they are a fact of life, but for lack of a better term, student loans suck. However, if you are responsible with your money, and pick a repayment plan appropriate to your situation, they can be entirely manageable. Additionally, when you make that final payment, feel like you have accomplished something and go celebrate, because you will have earned it.