Student loans are a fact of life for many who attend college right after graduating high school. Although student loans need not be repaid until after graduation, new graduates face pressure to find a job right away lest their mountain of debt grow even higher. However, you can practice careful money management to help ensure that your payments don’t reach overwhelming levels. Keep reading to discover three tips that can help you deal with debt after you graduate.
Make a Budget, and Stick to It
Image via Flickr by 401(K) 2012
Putting together a budget can be deceptively easy. Your base salary isn’t likely to change from week to week, and most of your bills remain will stable from month to month. But living on a budget can become chafing when it limits the discretionary income you have available for fun monthly activities.
Even so, you’ll need to stick with it, remembering that self-discipline can help you successfully live on a budget. Money won’t magically reappear if you spend it elsewhere unless you plan on getting a second job — so be smart, resisting the urge to spend money unnecessarily and keeping current on your bills. The growing pains of budgeting won’t last: They’ll ease up as your career advances and your earning power increases, expanding your budget.
Consolidate Your Loans
Multiple loans mean multiple payments and a variety of interest rates and can translate into your making many payments throughout the month while sometimes being charged more interest than is reasonable. Never forget that you don’t have to keep your student loans with the original lender for the lifetime of your loans. If you wish, you can take out a personal loan to consolidate all your loans into a single loan, reducing your payments while paying a reasonable interest rate — helping you get out from underneath your debt that much sooner.
Pay Extra Whenever Possible
Student loans consist of two parts: the principal and the interest. The principal is the amount that you borrowed to pay for your education; the interest is the additional amount the lender charges you for the use of its money. Every time you make a payment, you reduce your principal balance as well as paying off interest. When you do, you trigger a recalculation of your interest on the new principal balance for your next payment.
Paying extra — while noting that you are paying the excess toward your principal only — leaves you with an ever smaller outstanding balance, which reduces the amount of interest you pay. By doing so, you can pay off your student loans sooner, getting out from under your debt earlier than you would have otherwise.
Anyone can do this — you need not pay much extra. A few dollars here and there can help hasten the day when you’re debt-free, even though such amounts can seem small at the time. Put a little extra toward your principal each month, and you’ll see results sooner than you think.
Student loans might feel like a lifetime burden, or at best like a second mortgage. But neither has to be true, especially if you employ smart money management and repayment tactics. Though you certainly don’t have to spend every available cent on repayment, putting a little extra now toward paying off your student loans can go a long way toward bringing a brighter future within your grasp.