Often, when you hear about student loans, debt comes to your mind. It is, however, true that every dollar borrowed for college accrues two dollars in debt but then again college is a very crucial part of your future and career plans and student loans make college possible for most students. Here is a guide to help you take charge of your student loan situation.
Have a Budget and Stick to it
One of the first steps to take control of your finances is to have a budget. It doesn’t matter if you make $20,000 or $200,000 a year, this step is important. If you are going to start saving money today, you will need to have a budget.
Creating a budget isn’t complicated; you can easily create a spreadsheet in Excel or Google Sheets. From there, you will need to list out all of your sources of income and expenses. When listing out your income, be sure to include any bonuses that will come in such as tax returns. When listing out your expenses, it is important to think about whether an expense is fixed or semi-fixed. Fixed expenses such as your rent or mortgage payments are stable and won’t change often. Semi-fixed expenses such as electric bills or cable bills can vary from month to month based on whether or not you use these services
Borrow wisely
The first approach to student loans is deciding which loans to take. You should consider federal student loans before going into private loans. Private loans are more expensive because they tend to have higher interest rates and the interest may start compounding even before you are out of college. Also, the private sector is so much different from the federal sector when it comes to student loans. With federal loans, you will have access to provisions on forgiveness or deferment but the same cannot be said about private loans.
Related: 7 Tips to Save Money by Grabbing the Student Discounts
Avoid late payments
Falling back on payment will hurt your wages, tax refunds and even social security benefits, so you do not want to be late on your payments or default. Such actions could also increase taxes and collection fees. All these are bad for your overall credit score. On the brighter side, paying your loans on time could attract reduced interest rates.
Get on top of your loan payments right away:
As soon as you start earning income, you should pay even a small amount towards your student loans. This will ensure that you will continue to accumulate interest only on your remaining loan balance.
Easy Tip: If you want to pay more than the minimum payment due on your Federal Student loan, log in to StudentLoans.gov to change your payment amount at any time.
Make the most of deferment and forbearance options:
Deferments are options to pause or delay your monthly payments if you are in school or otherwise unable to pay due to qualifying circumstances. Forbearance is an option to pause or delay your monthly payments due to financial hardship, such as a job loss or unexpected bills.
Extend your term
Extending your loan term will not only give you more time to repay the loans but also reduce your monthly loan payments. However, the interest rates will remain the same and that means that you will pay more in the long run. So the trick would be to leverage this strategy during your low times and when things get better you can increase your monthly payments to help reduce your debt balance with the extra payments.
Start a side hustle
You are now in debt and your focus should be to pay it back. One way to ensure a smooth reduction of your debt is cutting on expenses and using the extra cash from variable expenses to offset the debt. The other way is to get a side hustle for additional income. You could find part-time jobs like babysitting or cleaning households to earn more funds to support yourself and pay off the debt.
Navigating through your student loans does not have to be that hard and a burden as most people think. You can still get the best loan packages then work on payment plans that will ensure that you live comfortably while still being able to pay your student loans on time.
