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8 tips for managing your student loan debt
It's exciting to graduate from school, get your first job and begin earning money out in the real world. For many young people, however, that independence comes with a price in the form of student loans. College can be expensive, and borrowing money is common - according to CNN, more than 40 million Americans are carrying some form of education-related debt.
However, there are ways that you can ease the burden and manage that debt more shrewdly. With some careful planning and a little discipline, you can handle student loans with relative ease. Here are eight pieces of advice for doing so:
1. Be proactive
Nobody would ever mistake making a student loan payment for a day at the carnival. However, it is vital that you not ignore them, and make a plan to pay them back as soon as possible. If you have yet to find a job, or are otherwise worried about your ability to repay, get in touch with you issuer as soon as possible. Particularly when it comes to federal loans, there are a number of affordable repayment options. In some cases, you can negotiate a repayment schedule that is based on the income that you are currently earning.
2. Make repayment as easy as possible
The simpler it is for you to make payments, the more likely you are to actually follow through on a regular basis. If you have multiple federal loans, make the process easier with a Direct Consolidation Loan. This step allows you to package all of your different debts into one easy monthly payment. Talk to your loan provider about the date that your payment is due every month, and ask if it can be adjusted so it lines up with when you get paid. Finally, sign up for automatic payments. That way, you'll never have to worry about logging in or writing a check, and you know that you won't miss a month as long as there is money in your account.
3. Make a budget
Striking out on your own means handling a number of expenses for the first time. With all of the new money coming and going, it's easy for some things to slip through the cracks. Prevent that from happening by making a monthly budget that clearly lays out all of the income you are earning, all of your expenses and what takes top priority. Once you have accounted for rent and food, you can determine how much you are able to spend toward loan payments. Be on the lookout for different ways that you can make your life more cost-effective.
4. Choose a repayment amount you can handle
Once you've set your budget, you should have a good idea of how much money you'll be able to put toward your student loans on a monthly basis. How much you will ultimately end up paying is a function of two factors - what you can afford, and what your goals are.
Some people want to lower their monthly repayments as much as possible. Others are interested in ridding themselves of loans quickly. In both situations, it's important to carefully consider the options and make a choice that works with your lifestyle. Using this handy online repayment calculator can help you figure out what works for you.
5. Look into loan forgiveness
In some cases, you may not have to pay your student loans back at all, or can have a lot of the cost waived by the government. Generally, these programs are offered to those who work in a public service capacity for a given number of years, and are only applicable to particular types of loans. If you think you might qualify, or are interested in learning more, do research as soon as possible to ensure you are on the right track.
6. Avoid putting off payments
In some situations, you can postpone your loan repayments temporarily. This is called deferment or forbearance. While this is a handy option to have if you are in a tight spot, such as after a major medical event, it is not a habit you want to get into unless strictly necessary and is not a long-term solution. Even while you are not paying on the balance, the interest continues to accumulate. That means that the overall amount you'll have to pay will go up, which will make it even harder to recover from financial hardship. Defer if you have to, but look into other options first.
7. Make extra payments - when you can
Whenever you have an opportunity, make an extra payment on your student loan. HomeRoom, the official blog of the United States Department of Education, offered a couple pieces of advice on how to navigate these additional payments:
"Tell your servicer two things. First, tell them that the extra you pay is not intended to be put toward future payments. Second, tell them to apply the additional payments to your loan with the highest interest rate. By doing this, you can reduce the amount of interest you pay and reduce the total cost of your loan over time."
The faster you pay your loans off, the lower your overall interest payments will be. If you receive a bonus at work or get some extra birthday money, consider putting it toward your loans. It'll save you in the long run, and make you feel more grown up in the process.
8. Reward yourself
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Paying off your student loans doesn't have to be all bad. You can challenge yourself by setting milestones, and then offering yourself rewards for reaching or exceeding them. This is a good way to keep yourself motivated, even when you're forgoing meals out and fun trips with friends in favor of responsibility. Made your payment on time this month? Indulge in a frozen yogurt. Thinking about getting a new tattoo? Make it contingent upon paying off your highest-interest loan. Once you start to associate progress on your loans with things you like, paying them is a lot more palatable.