It’s terrifying to think about the thousands of dollars you owe when you’re only eighteen and starting college. It’s easy to put the thought away into a safe corner of your mind known as the adulthood box one—you’ll deal with when you’re older. As scary as the box is you’re not alone. In 2019 nearly seventy percent of college students have some form of student loans either private or federal. Over 44 million Americans collectively hold $1.5 trillion in student debt—meaning one in every four adults are paying off student loans. Managing student loans can be confusing especially if it’s your first time handling your own finances. Here are several tips to help get you started.
1. Know Your Loans
Become familiar with your loan by logging into your lender’s website. For example, If you have any federal student loans your loan information will be in the National Student Loan Data system otherwise known as Nelnet. Once you log in, if you have multiple loans you’ll want to become aware of how they differ from each other. Which one has the largest amount? Which one has the higher interest rate? Are the grace periods the same? You’ll also want to keep track of how much the minimum payment is each month. Do this for any loans you have whether federal or private and keep notes. It’s easy to lose track of all the information and it is crucial.
2. Start Payments During the Grace Period
Student loan payments do not start until six to nine months after your education ends whether it’s graduation or taking a year off to backpack through Europe. By starting to make low payments you’ll not only lower your average monthly payments you’ll also get into the habit of paying your loans each month.
3. Come Up with a Game Plan.
There are several methods on how to decide which loans to tackle first. You can pay start paying off the loans with the highest interest rate, the loans with lowest amount, or the most expensive loan. There are pros and cons to each method. However the important thing is to pick the one that works best for you. The one most use is paying the loans with the higher interest rates first. This will take longer, but by paying these loans off first it will save you money in the long run. Paying the smallest loan first will feel more rewarding and allows you to slowly warm up before tackling the bigger ones.
There are several apps that can help when it comes to budgeting. Every Dollar creates a monthly budget for you. All you have to do is put in your monthly income, bills, and other expenses. You can also make a google spreadsheet putting in the same information. Once this is done see what categories you can cut back on. For example, if you’re buying lunch for work everyday pack a lunch. The leftover money can go to your loans.
5. Pay More than the Minimum Payment
After paying hundreds of dollars each month, it’s really easy to fall into the trap of not wanting to pay more than the minimum payment. If you increase your payment even as small as five dollars, you’ll pay off your loans faster than the ten year plan the bank sets you on. You’ll also save money by getting ahead of the interest rates. The faster you pay off the loan, the less interest will be added up.
For more helpful tips sign up for the Personal Financial Management course. This six week online course will teach students not only how to manage student loans, but how to save and invest, file taxes, decrease credit card debt, and how to plan for the future one that involves becoming debt free.