How to Manage Student Debt After Graduation

Jan 28, 2021 by

Graduation is an exciting time. This is your chance to celebrate your accomplishments and look back at all the studying you did and all the exams you took – knowing you’ll (hopefully) never have to do them again. 

However, graduation can also be nerve-wracking. Once you have your degree, you’ll enter the “real” world, possibly for the first time as an adult. You’ll be responsible for finding a job, forging a career, and perhaps most pressingly, paying off your student debt. 

The average student loan debt in the United States is now $32,731, with most borrowers walking away from graduation with $25,000 to $50,000 in loans to pay off. Some students may have loans in excess of $100,000. 

How are you supposed to manage this debt when you don’t even have a job yet? 

Take Inventory 

Your first job is to take inventory of your current loans. Too many students graduate from college without the faintest understanding of how much they owe, what their interest rates are, or what the terms of their loans are. Figure out how many loans you have, where they came from, and how they’re structured. Do some have a higher interest rate than others? When does interest start accruing? When are you initially responsible for making payments? The better you understand your loans, the better you’ll be able to manage them. 

Refinance Your Loans (If Possible) 

Next, consider refinancing your student loans. As EducationData.org explains, refinancing basically means you’ll be paying off one loan and replacing it with another – usually with more favorable terms. For example, if you have a student loan with 6 percent annual interest that requires you to start paying immediately, you may be able to refinance for a loan with 4.5 percent interest and somewhat deferred payments. 

Refinancing isn’t the right move for all college graduates in all situations, but for many, it’s a way to reduce your monthly payments, reduce your total interest paid, and finish paying off your debts much faster. 

Make a Plan to Pay Off Early

After that, you’ll need to put together a personalized plan to pay off your loans as early as possible; the longer it takes to pay off your debt, the more total interest you’ll pay. You can do this by making sure you’re paying on the principal (and not making exclusive interest payments) and by paying as much as possible. 

Additionally: 

  • Prioritize your worst loans. Make sure you’re paying off your “worst” loans first. If you have a loan for 6 percent annual interest and one with 4 percent interest, you’ll want to pay off the 6 percent interest loan before the 4 percent interest one. Structure your payments in a way that minimizes your fees and interest. 
  • Minimize your living expenses. You don’t need a grandiose, luxury apartment right out of college. Instead, consider moving back home or finding an apartment that allows you to save some money. You can also minimize living expenses by relying on public transportation (when possible), cooking your own food, and cutting back on entertainment expenses. Put the money you save toward your loans. 
  • Get a job. This should go without saying, but you should get a job to earn income you can use to cover your expenses. Instead of looking for the “perfect” job and turning your nose up at everything else, get any job that will have you; you can always keep looking for something better. 
  • Pick up a side gig. There are plenty of side gig opportunities to find, especially if you’re creative and entrepreneurial. With just a few extra hours every week, you could make a few hundred extra dollars and put that toward your loans. In just a few years, you’ll be in a much better position – and in the meantime, your side gig business may grow. 

Consider Deferment or Loan Forgiveness

If you find yourself in unfavorable financial circumstances, and you’re unable to pay off your student loans in a conventional way, consider using loan payment deferment or loan forgiveness plans to reduce your burden. With a deferment program, you can temporarily stave off your payments (and sometimes, avoid accruing interest) until you can find a better job. However, you should know that this isn’t a permanent or long-term strategy. 

With loan forgiveness, you may be able to cancel or discharge your student loan. However, this option is rarely available. You may be eligible if your college closed down before you could finish your degree, if you’ve been permanently disabled, or if the debt would demonstrably lead you to bankruptcy. 

Taking Charge

Student loan debt may be intimidating, but it’s not unconquerable. With the right plan, a forward-facing strategy, and a bit of patience and hard work, you can reduce your debt to nothing and secure a brighter financial future for yourself – starting as soon as you graduate. 

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