Financial aid for college is almost a must for most students nowadays. However, it can be tough to start paying back education loans after graduation. To avoid defaulting and accruing more interest and penalties, here are five tips to help you manage and overcome your student loans.
Borrow only what you need
Students can often take out large student loans to cover all their college expenses, including housing, food, and transportation, along with tuition, books, and fees. Although it may be tempting to have all these expenses covered up front, students should keep in mind that the total sum will eventually have to be repaid, with interest. Instead, they should borrow only what they absolutely need for college tuition and maybe books. Other expenses might be covered by part-time employment, living at home with parents or another relative during college, and using public transportation, if feasible.
Pay as you go
Although student loan programs typically don’t expect repayment until the student graduates from college or stop attending, it can be helpful to start paying back before graduation if possible. Even small amounts each month will offset the total amount of the loan and reduce the total balance due upon graduation or if the student must drop out for some reason. Paying while in school also keeps the loan fresh in students’ minds so they take this financial obligation seriously rather then mentally deferring it as an abstract, ill-defined responsibility.
To either reduce the size of student loans or begin repayment early, students can learn to live frugally until the loan is paid off. News stories abound of students with loans of about $100,000 who lived on a tight budget for a few years to pay off the loan. They not only succeeded admirably and sometimes ahead of their own schedule, but also learned some helpful budgeting practices that allowed them to avoid future debt while buying big-ticket items like houses and cars. Monthly budgets can be pared down in areas like meals by eating cheap meals like eggs, tuna, and pasta instead of steak or dining out. Driving an older but reliable vehicle avoids a car payment and cuts insurance costs. There are many ways to live cheap while paying off a student loan by making high payments for a year or two.
Some students have sold personal possessions to raise money that could be applied toward. student loans. Collectors’ items like sports memorabilia or a second car are typically sold on eBay or similar sites. Some students sell their car and take the bus or walk to work.
In addition to working a full-time job after graduation, many students take on a second part-time job to double and triple their student loan payments. Walking neighbors’ dogs, delivering pizza, or restaurant serving are popular secondary positions, depending on the person’s schedule and interests. If possible, devote all the income from the second job as well as the regular monthly payment from the first job to repaying the loan, and it will get paid down quickly. Paying off student loans will help to make you feel free and improve your credit score. Borrow less and pay back quickly to get out from under the burden of this potentially long-term debt.
Jessica Kane is a professional blogger who focuses on personal finance and other money matters. She currently writes for Checkworks.com, a leading supplier of personal and business checks.