Hi everyone! Please enjoy a guest post this week from DeAnna, who blogs over at Young & Free St. Louis.
Student loans: It’s a curse word for many. I recently spoke with Colleen Henegan from Vantage Credit Union and she helped me break down the scary walls and understand the basics of repayment options. Colleen has a background in student loans and worked closely with many lenders when they were still active in colleges.
Note: This post may contain affiliate links.
Student loans are there to supplement your finances in order for you to further your education. A lot of people are afraid to get one, and if you can avoid having one you should, but for many of us, they are inevitable. Knowing you will have to take out loans to pay for your education and knowing the ins and outs of the loans will help you prepare for the future. Though it may seem like a lot of money (and usually it is!), an investment in education is generally considered to have a large return.
Alright, so you are approaching graduation or have entered repayment. What do you do now?
There are options for you and these tips will help you explore a few of them. Make sure to do additional research on your own as well, so as to not miss anything that may assist you in repayment.
Student Loan Repayment Options
1. Know what consolidation is and what it does.
“Direct Consolidation Loans allow borrowers to combine one or more of their Federal education loans into a new loan that offers several advantages. With only one lender and one monthly payment due for student loans, it is easier than ever for borrowers to manage their debt.”
While consolidating offers plenty of benefits, it also may have negative effects on your planned course. For example, if you are planning to enter a loan forgiveness program, consolidation is normally not an option.
2. Avalanche effect
If you decide not to consolidate- instead of just paying your monthly payments, try to direct where the money will be going. Start with the loan that has the highest interest rate and pay MORE than the minimum payment each month. After you have that loan paid off, move down the line, paying the highest interest rate loans first. This will help get rid of the most “expensive” loan first and help pay off your loans quicker.
3. Utilize your online resources to educate yourself
What kind of budget will you need in order to afford living with loans? What job would be ideal for you to have? Depending on your major and the job you are looking to obtain, will you be able to afford your loan payments? What kind of savings plan/payment plan do you need to establish while you are still in college? Do you qualify for deferment or forbearance? Having these things on your mind- and determining the answers- before you graduate will save you from headache afterwards.
4. Don’t assume
Just because your neighbor makes the same amount of money, has the same assets, and has the same number of dependents does not mean your situations will be identical. There are many options (FAFSA, scholarships, deferment, forbearance, assistance) available to help you with your education costs and loan repayment. Just because your friend used a certain process or program to pay back their loans, does not mean it is the best method for you as well.
5. Get the info!
Take the time to understand each one of your individual loans, not only the process of payment. Keep up with the information that is constantly changing for so many student loans out there. Don’t be oblivious or laissez-faire about your loans, it will come back to haunt you in the end. Checking on the loans and the interest building up will help you estimate your monthly payments after graduation and may inspire you to start saving more money to help pay them off.
6. Look into ALL of your options.
Not just the most desirable/favorable one. Maybe it would be smarter for you to go to school part-time (instead of full-time) and work more during a certain time of year in order to earn more money. This could help you keep your total amount of student loan debt down, which means less for you to pay back!
I hope these tips spark some interest in understanding your student loan repayment options! As mentioned, take the time to do some additional research and it will benefit you in the long run.
Editor’s note: There are so many things I wish I’d known about student loans before I went to college. My personal best student loan tip is to keep your expenses as low as possible while you are in school! Mr. CMF and I certainly wish we had put more effort into keeping expenses low rather than living too high on student loans as we did. I also wish I’d put more effort into using websites like Scholarship Owl to find and apply for scholarships. Had we made more of an effort to live frugally back then, we would likely be a heck of a lot closer to having our student loans paid off than we are currently!
Suggested Reading: If you are looking for an inspirational read on student loan debt payoff, I highly recommend checking out Destroy Student Debt: A Combat Guide to Freedom
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photo credit: seier+seier via photopin cc, with changes
I can’t stress enough to really do your research before consolidating. My husband had a few loans he could have had forgiven because he taught in a low income school district, but since he consolidated them with the wrong company, he lost out.
Oh no! So true that you have to be careful about consolidating. When the hubs and I finished grad school we briefly considered consolidating our two student loans into one big loan, which would have had a lower interest rate. HOWEVER, they were both fairly large balances and the thing about student loans is that if you die, your debt dies with you- UNLESS you’ve consolidated it. Then your grieving spouse would be on the hook for your student loan debt. Morbid, but important to know! We decided to forgo consolidating our loans together for that reason- we just consolidated individually.
I’m all about researching and learning about the best student loan repayment options for you. For example, I pay on the 10 year plan and pay more every year than required. I know keeping myself on the 10 yr plan helps me stay on track, even though I could be on the 25 yr plan.
Amen sister! We are also technically on the 25 yr plan, but we pay extra on our student loans every time we get paid. We’ve got ourselves on our own 10 year plan as well! We are hoping to be officially done with student loans within three years.
This is great information. I consolidated my loans and it worked out fine, but I know people that could’ve used the loan forgiveness but find out about them too late.
Bummer on finding out about it too late! I think the saddest thing about student loans is that they are issued to people who often have so little understanding of A) the loans themselves and B) repaying them! At least I know that was case for me!
Awesome post DeAnna, I was lucky enough to never need a student loan, but I understand how they are unavoidable in many cases. Thanks for the great read!
Kudos to you for making it without student loans! I am pretty envious here…
What a timely post. On our podcast, OG just mentioned how much he’s frustrated by SO MUCH student loan talk. I replied that we need more of it….because the numbers show people don’t understand their options. Great work.
Thanks! And I agree, with the student loan situation what is currently is in this country, I don’t think we can possibly talk about it too much. The stakes are just so high for those entering college and potentially getting saddled with tens of thousands in debt- which will have a huge impact on their financial future for YEARS to come!
Great tips of things to look out for! I’m with Dee in that the best way to keep your student loan bills down is watching your expenses in college and not use your loans as a way to fuel lifestyle inflation. I did that and still kick myself for it. Outside of that, make sure you do your homework when consolidating. I consolidated mine with one of my lenders and that helped me knock off a good bit of interest.
I totally used my student loans to fuel inflation of my lifestyle when I was in grad school!! Ugh, I certainly hope to impart on our new daughter to do better in this regard.
People may want to check their credit report to verify they are paying on every loan. While enrolled in school one can easily lose track of all the new loans taken out each semester.
Great point! I personally wound up with several loans that I ended up consolidating into one big loan when I graduated. I don’t really think I did much right with my student loans when in grad school, but one thing I did do right was keep track of them so I knew what I had when it came time to consolidate.
With the growing epidemic of students graduating with huge student loan debt, its important that all students are educated before, during and after they finish school. These are great tips for those who have finished school, but I really think it is equally important that students are just as informed before they go to school and decide to take on the student loan debt.
You are so correct- that’s the most necessary step! It’s definitely most important to be informed before you take out loans in the first place 🙂
I LOVE your idea of having a repayment plan in place before the loan is taken out! Or at least before the end of school. Honestly, if something like that were more the norm I wonder if we would see so many students having so much difficulty paying loans back after they graduate. Because, if nothing else, having a program like that in place would help raise serious awareness about student loans!