Not everyone finishes school and steps directly into their first “real” job. Before the real work starts there are often periods of job searching, temp work, unemployment, funemployment, and desperation. During this time, managing student loans for many is a game of whack-a-mole. Borrowers do what they can to keep up with little time for long-term planning or strategy. This can lead to some cringeworthy decisions, but with a stable job and steady pay, attacking student loans becomes much easier.
Make Sure You Know How Much You Owe
Waiting for student loan bills to show up in the mailbox is a terrible strategy. If one of your lenders is working from an old address late fees and interest charges will pile up. Don’t let a collections agency be the one who notifies you about the status of one of your loans.
The good news is that it is fairly easy to track down all of your student loans. For Federal loans, the Department of Education’s Student Loan Database will have all the information you need. On the database you can find all of your loans, how much you owe, and the servicer responsible for collecting payments. The best place to track down private lender information is usually your credit report.
Tips to Get Serious About Repayment
Smart student loan repayment requires a bit effort to make sure you are paying as little as possible. A bit of research and financial planning will go a long way and potentially save thousands.
- Make a Budget – It sounds like a pointless exercise, especially if you try to be frugal already, but actually making a budget and sticking to it will ensure that your hard earned dollars go as far as possible. Free resources like mint.com make the process incredibly easy.
- Get Lower Payments on Your Student Loans – This one might sound counter-intuitive, but the fastest way to pay off your student loans requires getting the lowest monthly payment possible. The idea is to free up as much cash as possible each month so that you can pay off the highest interest rate loans first.
- Put Together a Real Strategy – Student loan strategy isn’t one size fits all. For many people, paying off the highest interest rate loans first makes the most sense. Others may choose to attack their private loans first and try to qualify for federal programs like Public Service Loan Forgiveness. If you have a cosigner, paying off the cosigned loans should get extra priority. The key is to make a plan. If you haphazardly pay extra money on random loans, you limit the effectiveness of your extra payments.
- Don’t Sleep On Extra Sources of Income – If you are getting a real paycheck it might seem like a side-hustle is completely unnecessary. However, if you can make a few extra bucks in addition to your regular job, you can make student debt disappear quickly. Better yet, make your second job something you really enjoy. With some sweat and some luck you might end up creating your dream job.
Don’t Forget About Retirement
If you are still paying off college, thinking about retirement can seem miles away. However, when you are young is the best time to be thinking about retirement. Money saved in your 20’s and 30’s can grow dramatically by the time you hit retirement age. The key is to strike a reasonable balance between the two important goals.
For example, if your employer offers 401(k) matching, take advantage of this program. At many employers, this can be dollar for dollar matching. This means that your retirement investment doubles from day one. Try not to let student loans get in the way of this important retirement building tool.
It’s also worth noting that money contributed to certain retirement accounts can lower your monthly payment on federal loans. For borrowers considering Public Service Loan Forgiveness, this can be a very powerful tool.
Use Your Income to Leverage Lower Payments
One of the biggest perks about having a “real job” salary is that your income can open the door for lower interest rates. Companies like Laurel Road and SoFi will pay off your existing high interest student loans and replace them with new loans at hopefully much lower interest rates. The idea behind their business is that a college grad with a job is much less of a credit risk than a student with no degree and no job. For borrowers with private loans, going this route is usually a no-brainer if it lowers interest rates. Federal loans get more complicated because it means giving up federal perks like income-driven repayment plans and student loan forgiveness.
Sadly, refinancing is a service that isn’t really available to the people who most desperately need it due to the credit score and income requirements. However, for people who can already afford their student loan payments, it can make the process substantially quicker and less expensive.
The first real job after college is an exciting time. A steady paycheck opens the door to many new opportunities. One opportunity that should definitely be utilized is the chance to get your student loans under control.