Even before taking out student loans, you should come up with a plan for repayment. Figure out how much you are borrowing, how much you will be earning, and what your best option is. This is where budgeting comes in handy.
The average student loan debt is rising, as is the number of student loans that are going unpaid and falling into default. More people with student loans are finding it harder to make their payments on time, if at all, and are falling behind. That being said, it’s pretty important that those who aren’t already in that boat prepare adequately for their upcoming task of paying back what they borrow, and those who are already falling behind find a way to fix their situation.
Follow these tips to stay on-track with your student loans.
- Determine how much you are borrowing, and what the grace period is. Each loan may have a different grace period, so make sure you read the terms of each carefully. Keep track of your loans, and always be aware of the terms and conditions.
- Figure out how much you will be making in income. If you have a part time job, are participating in work study, or even run your own small business, figure out some average numbers. Know how much are you bringing in per month after taxes.
- Figure out a payment plan. Once you know how much you are bringing in, take a close look at how much is going out. Do you have enough left over to pay your loan payment each month? If not, where can you cut back on your spending to give yourself some money to pay off your loans? Sometimes with work study, you can find ways to put it all towards your loans. This is a great way to keep your interest from building while you are in school and get a head start on your repayment.
- Do the math. Use the smallest numbers available so you’ll always be pleasantly surprised, rather than have to scramble to scrape up some more cash. What I mean by that is calculate your lowest possible paycheck. Say you are sick a few days, or don’t get scheduled for as many hours as usual… plan your budget around those numbers. That way, you can always pay off more, but you’ll never be short.
- Stay on top of it! If you can get a good foundation going while you are still in school, repayment after graduation will be a breeze! If you are already well accustomed to paying a certain amount every month, then continuing to do so won’t be a problem at all!
- If for some reason your circumstances change, talk to your loan provider about your options. They offer forbearance and deferment plans to buy you some time to get things in order. Either one is a vastly more preferable option that going into default, which can affect your credit score and impede your ability to take out loans in the future if you need to.
Once you are out of school and have a stable job, look into refinancing and consolidating your existing student loans. This is a good way to roll everything into one payment and potentially get a lower interest rate. Check out the student loan refinance offers from major lenders using our student loan consolidation finder.
I neglected to do this with my own student loans, and to this day I’m kicking myself over it! I was only nannying a few days a week after classes, but even with just that money (which I didn’t need to cover any of my bills or other costs) could have paid off nearly $4,000 in the time I worked that job! That would have been a nice weight off my shoulders once the time came for me to begin repayment!