Facing down a big pile of student loans can be intimidating, to say the least. How can you manage the repayments without disrupting your financial stability?
These are some crucial steps that can help you manage the repayments before and after graduation.
Before Graduation
Apply for FAFSA
Every year, you should fill out a Free Application for Federal Student Aid (FAFSA) form. FAFSA will show you what financial aid you qualify for, including grants, scholarships and student loans. Grants and scholarships are types of financial aid that you don’t have to repay. So, you might reduce your dependence on student loans by taking this simple step. Your future repayments could be much lower.
Pay Early
You do not have to wait until you graduate to start paying your student loans. You can pay them down early.
Federal direct subsidized student loans will not accrue interest while you’re attending school or while you’re going through the official grace period (the grace period is six to nine months after graduation where you do not have to begin making loan repayments). Making payments during this time will help you pay down the principal without worrying about interest.
Unsubsidized student loans may accrue interest during these times. In this case, consider making early payments to tackle the interest.
After Graduation
Build a Budget
A personal budget can help you figure out how to manage your monthly expenses, including your loan repayments. So, use a spreadsheet software or mobile budgeting app to create this basic financial guide as soon as possible.
An important budgeting tip: always leave some savings. You will want to have a small safety net in case something disrupts your financial routine. Move these savings into an emergency fund for safekeeping.
When you spend every single dollar in your budget, and you don’t have emergency savings, you’ll be vulnerable to urgent, unplanned expenses. What will you do when something goes wrong? What if your car needs repairs, or you need to rush your dog to a vet clinic for emergency treatment? You won’t have enough to cover the payments right away.
In that stressful scenario, you will need to find an alternative payment method. You could use a credit card to cover the expense quickly and then repay the balance through your usual billing cycle. Or you could go to a website like CreditFresh to see whether you qualify for a personal line of credit loan. With a personal line of credit loan, you can request a withdrawal from your approved credit limit. That withdrawal could get deposited into your bank account, which you could then use to pay off your emergency expense in a short amount of time. Like your credit card, you could make repayments through a steady billing cycle.
Personal lines of fdic bank lines of credit shouldn’t be used for everyday expenses. And they certainly shouldn’t be used for student loan payments. They’re meant for emergency uses only.
Automate Payments
Sign up for automatic debit when it comes to your repayment process. Automatic debit means that your bill payment will automatically be removed from your bank account and sent to your student loan servicer on the due date. Your servicer might reduce your interest rate because you’ve enrolled in this repayment option.
Another benefit that comes with automating payment options is that you’ll never let a bill slip your mind, which means you’ll save money on late fees. When you miss student loan payments, your servicer can charge you a late fee that’s up to 6% of your payment amount.
Apply for Loan Relief
The Biden administration has recently announced a student loan relief program that can benefit millions of Americans. Graduates that are paying their student loans can now sign up for this program, which could eliminate a significant amount from their debt loads. If you received a Federal Pell Grant, you could get up to $20,000 in debt relief. If you didn’t receive a Federal Pell Grant, you could get up to $10,000 in relief.
The online application for the program is already available. Borrowers will have until December 23rd, 2023, to apply.
Look Into Help
If you’re struggling to make your student loan payments, don’t panic. There are options available for graduates in your position, like student loan consolidation, income-driven repayment plans, student loan deferment and student loan forbearance. Look into what options you are eligible for and that will benefit you the most.
When you notice that you’re struggling to keep up with your payments, take action right away. It’s crucial that you don’t ignore the problem. Ignoring the problem will inevitably lead to loan delinquency (late payments) and loan default (missed payments). Defaulting on your student loans will come with a series of consequences, including no longer being eligible for student loan deferment, student loan forbearance or changing your repayment plan.
Your student loan payments don’t have to overwhelm you after you graduate. You have the power to manage them and manage them well. Follow these tips and get relief!
