Thinking about your student loans in the weeks after graduation might feel like the ultimate buzz kill. Plus, you figure you still have a 6-month grace period to enjoy post-grad life before that first student loan bill comes due.
But chances are, you’ve got a lot to do between graduation and your first loan repayment if you’re going to be able to afford it.
So set aside some time now to take full advantage of your student loan grace period. And when your first bill comes due, you’ll be ready for it.
Step 1: Figure Out What you Actually Owe
According to Turbo’s 2019 #RealMoneyTalk Survey, only 42% of Americans are aware of how much student loan debt they currently have (or had in the past).
When you’re 18 years old, it’s easy to get so caught up in the excitement of going off to college that you don’t totally register what you’re signing on for when you borrow the money to pay for it.
Well now is the time to figure that out.
Start by visiting the National Student Loan Data System and check your credit reports to figure out exactly what you owe and to whom.
In addition to your total amounts owed, write down all the details you can about your loans – from your monthly loan payment amount to their respective interest rates, to your lenders’ contact information.
It’s hard to make an effective plan for paying off your student loan debt until you know exactly how much of it you owe.
Step 2: Consider Your Repayment Options
Now is a good time to get in touch with your lenders and make sure they have your updated contact information. You can use this opportunity to ask them any questions you might have about your loans, including your repayment options.
While most will put you on the standard 10-year repayment plan by default, there are alternative options, like Income-Based Repayment plans, if you have Federal loans. You can learn more about what alternative options might make the most sense for your Federal loans at https://studentaid.ed.gov/.
If you have private loans, you can ask your lenders directly what alternative repayment options are available. You might also be able to get a lower interest rate by refinancing your debt, but it’s important to understand the pros and cons of refinancing before making that decision.
It’s best to explore all of these options a few months before the end of your grace period, so you have time to understand them, complete any necessary paperwork and put a plan in place for affording whatever repayment plan you ultimately decide on.
Step 3: Talk To Your Employer
As you get started in your post-college career, you’ll want to take full advantage of any employer-sponsored benefits, including any student loan repayment perks.
Talk to your HR manager to see if your employer offers this benefit, and if so, how much your employer will contribute to your loans. Then double check with your lender to make sure those contributions are being properly applied to your loan.
Step 4: Build a Budget Around Your Monthly Payment
Start tracking your monthly expenses to figure out how you can create a budget that accommodates both your monthly student loan payment and your monthly cost of living. Try setting aside some of this money now so you can actually experience how much you need to cut back on your expenses (and/or increase your income) between now and your first payment due date.
Even though you’ve graduated, consider holding onto some aspects of your ‘college lifestyle’– think, roommates, cheap dinners and public transit – to keep your expenses low, so you can start building some savings and paying down your loans as soon as possible.
Step 5: Get Started
Not all student loans come with a six-month grace period, and even those that do may still accrue interest during the grace period. All of which means that if you’re not making any payments during that time, your total loan balance could still be increasing.
So the sooner you can afford to make payments toward your student loans, the sooner you should consider starting. Even payments smaller than the monthly minimums you’ll eventually be charged can help you start making progress on your debt repayment and get you into the habit of being proactive about your debt.
Step 6: Ask For Help
The student loan grace period gives you time to transition between school and work, but that time can go by quickly. If, by the time you get your first student loan bill in the mail, you’re not sure what to do next or how you’re going to be able to afford it, ask for help.
Ignoring your student loans will only make things harder later on down the line. For the most part, student loans cannot be discharged in bankruptcy. And skipping payments will not only hurt your credit, but you can also be sued for your student loans and have your future tax refunds withheld and wages garnished.
So rather than ignoring a student loan bill, you can’t afford to pay, call your lender to explain your situation and see what other options might be available to you.
If you can’t find any way to pay your bill, there are options to research such as deferment or forbearance, which may allow you to put your student loan payments on hold for a period of time. Just remember that these options won’t eliminate your student loan debt. In fact, they can make it even more overwhelming since interest will continue to accrue during the deferment period. So only use these as a last resort.
And remember, by getting a jumpstart on your student loan repayment now, before your grace period ends, you can get into a good habit before the real payments kick in.