You've been hard at work in school for the past four and a half years. The day you graduate from college is finally here. It's time to look back on what you've done and look forward to a successful career and a happy life.
If you're like most college graduates, you'll have to deal with something else in the future that won't be so nice. Don't forget about those student loans that helped you get through college. Now is the time to pay up. Studies show that two-thirds of students leave college with a lot of student loan debt. 10% of them owe more than $35,000. You sound like one of them. Don't worry if so. Stop, take a deep breath, and keep reading for ways to make paying back your loan as easy as possible.
Rule #1: Pay according to the plan.
At last, all the hard work over the years is starting to pay off. You got a great job with a good salary, so you can finally buy those cool toys you wanted when you were up all night studying. Then you get your first student loan bill, and that new car seems just as far away as it did before. We know it stinks. But you have to take the hit. Pay back your student loan quickly and often.
By paying on time, you'll save thousands of dollars in interest, avoid late fees, and protect your credit. Also, most lenders give a two-point interest break to people who have paid on time for 48 payments in a row. Try to catch the streak. Setting up an automatic electronic transfer so that your monthly bill is taken straight from your bank account is the easiest way to do it. If you go this route, many lenders will cut your interest rate by another 1/4 point.
Also, unlike most other loans, there are usually no fees for paying back student loans early. Put the extra money you get from a raise toward your student loan payment. Get rid of that monkey, you'll be glad you did.
Rule #2: Ask Uncle Sam for help.
Even though student loan interest rates are lower than those for credit cards and other loans, it's still a frustrating thing to have to deal with. But there is hope. If you are single and make less than $65,000 or married and make less than $130,000, you can deduct up to $2,500 of the interest you pay on your student loan each year.
Rule #3: Be original
There are things you can do if you've done the math and still can't come up with your monthly payment. Since your salary will only go up as you move up the corporate ladder, you can work out a plan with your lender to pay back your debt in steps. At first, your monthly payment is small, but it will get bigger as the loan goes on.
There is also something called a "repayment plan based on income." This is made for people who work for themselves or whose income changes often. More money means more money to pay back. Have a rough time? Your payments drop. The Department of Education has a plan for people who take out direct loans that is based on their income and forgives any balance that is still owed after 25 years. The amount forgiven is still income, though, and will be taxed as such.
Even though these choices might help you save a little money, be careful. The longer it takes to pay back a loan, the more interest you'll have to pay.
Rule #4: Stop and rest.
If you have no other options, you might be able to stop making payments for a while. You can ask to put off your loan payments if you lose your job or go back to school to get a higher degree. If your request is approved and you have a Stafford loan, the government will pay the interest that builds up while your loan is put on hold.
Try a forbearance if you can't get a delay. You can stop making payments for up to a year, but you'll still have to pay the interest that has built up. It's not the best deal, but it will keep you from not paying back your loan and getting a big fat black mark on your credit report.
