Whether you’re receiving your degree next month or next year, it’s never too early to start thinking about your student loan repayment strategy. We know, that sounds like a drag, but coming up with a plan now can make your transition into the “real world” a little bit easier. And if that’s not convincing, becoming debt free can also get you one step closer to financial independence. Here are a few tips for how undergraduates can better prepare for student loan payments after graduation.
- Sort through the jargon – If you’ve already attended a student loan meeting at your school, you’ve may have noticed all the financial jargon that gets thrown around. At Level Money℠, we’ve got you covered with this post of essential loan vocabulary and definitions. That way you can understand what your lender or financial aid advisor really means when they’re discussing “principal,” “consolidation,” or “forbearance.”
- Choose the right repayment plan for you – While you are (almost always) stuck repaying the money you borrowed for school, you aren’t necessarily stuck with the standard repayment plan. For private and federal student loans, you usually have a handful of options for how you want to repay your debt. It’s important to find the right plan for you and your unique financial situation, but income-driven repayment and student loan refinancing are common choices amongst today’s borrowers.
- Understand the consequences of failing to repay – While you won’t be arrested for defaulting on your loans, the government can garnish your wages or tax refund to recoup their money. And whether you took out private or federal loans, there are other long-lasting consequences you should consider — namely, the negative impact on your credit history.
- Include your loan payment in your budget ASAP – Adulthood is expensive, especially when you’re starting out on your own. It’s easy to get in over your head with unexpected costs associated with your first apartment or weekends out with friends that no longer include free parties on campus. That’s why it’s important to include your monthly student loan payment in your budget even if your loans have a six-month grace period, and use the the Level Money℠ app to easily remember this new payment. You could start making payments early or use that money to build up an emergency savings fund.
- Think now about what matters to you – You want to be able to live your life after college without every penny going towards your rent, utility bills, and student loans payments. Here are some ways you can save money while you’re on campus, but it’s also a good idea to consider what’s most important to you and what expenses you can cut or minimize after graduation. For example, it can be easy to fall into an expensive delivery food habit after living with access to a dining hall. And if your parents used to cover the cost of your cell phone, you might find you can wait a few more months for that next upgrade.
And while you’re already being super responsible and planning ahead, checkout our list of financial don’ts for new college grads.
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