Graduation is an exciting time for many. But now repaying student loans will start for the new graduates. While some lenders give you a sixth month grace period before you start to repay, starting to pay your loads right away save you interest charges. Interest charges can add up to hundreds, or thousands of dollars depending on the original amount you borrowed.
If you think deferring student loan payments until your income is larger, think again. Student loan debt is still a part of your financial picture and will affect your credit score. Secondly, if you are considering purchasing a new car or home in the next few years, deferring payments will hinder those plans.
Ready to get started? Here are some tips to take for repaying your student loans:
Take the time to fully understand your repayment options and terms.
This includes your minimum payment, interest charge each month, and payment schedule. Once you understand how much you will pay over the course of the loan term, you may want to pay more each month and decrease the loan term.
Help your credit score by setting a goal for an early payoff date.
This will save you interest and help your credit score by decreasing the amount of time that you are carrying a balance on the student loan. It will also reflect in less debt.
Make your payments in full and when they are due.
Late fees can add up. If you are experiencing problems coming up with the money to make the payments in full and on time, contact the loan servicing company to discuss options that may help you.
Refinance your student loan.
While you may lose some benefits if you refinance your student loan, the lower interest rate may benefit you. The timing of your refinance may matter- consider refinancing when your credit score is high, likely a few years after college when you establish a better credit score.
Consider consolidating your student loans.
Not every consolidation offer is in your best interest, so you need to read the fine print to understand how consolidation will help-or hurt you. Look for lower interest rates and reputable lenders that are backed by the U.S. Department of Education.
Set a budget.
Include your loan payment in your monthly budget. It needs to be just like any other bill you must pay each month, like utilities, rent, etc.
Make payments on your loan while you are still a student.
If you can work part time and make payments while you are still a student, do it! Another option is to make interest payments while still attending school. Interest is deferred until graduation, but still accumulates.
Student loans are the second largest debt that most Americans have besides the debt of a home. Work with your financial professional on a strategy to pay off your student loans so you can save for other financial goals and start build your credit with minimal debt.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
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