Welcome to Your Student Debt
Yes, my darling new graduate, it’s actually going to suck as much as you think it will.
Oh, I’m just kidding! Well, no, I’m not. The unique terror of student debt is borrowing against your future – an income and budget you’re probably just establishing – and trying to figure out how that will fit.
But your grace period is going to end whether you want it to or not – I’m reminded of this as I have a whole new batch of ’08 friends facing down repayment in November and December. (Um, happy holidays?) And my intuition – I have no stats, just personal experience – is that more people are facing down the staggering levels of debt you used to associate with law or med school, just for the bachelor’s or master’s degrees. And that the insecure market isn’t catching them like it was.
Exit counseling and loan education focus on consolidation, deferment and forbearance, options everyone with student debt should understand. On top of that, here is some advice from the trenches, for those about to enter repayment….
- Start now! With a few more months till repayment, don’t get used to living on your full paycheck. Put the amount of your minimum payment in a savings account, or use it to pay down other debt. (Or just start on your loans now.)
- Take care of other committed payments. Shares of rent, utilities, memberships and subscriptions might be more under your control right now than debt you incurred two years ago.
- The more punishing your minimums, the more important and more painful prepayments are. Which is awesome and not cruel of the universe at all. It’s counterintuitive and frankly kind of miserable to throw additional money on a huge minimum payment, but you’ll be happy to get that minimum down. I gambled more than I realized when I chose to make large regular prepayments at the expense of much of my savings – I ended up having to scrape through more of my savings than I anticipated. (Of course.) However, the risk paid off, and even with regular prepayments, it’s both financially and psychologically worthwhile to fight your debt head-on.
- Keep the faith. Okay, I was just kidding – it’s not so bad. It’s only money, anyway.
Might be worth adding: your lender is under no obligation to provide you with billing statements, which means when you go into repayment, you may have to actively seek out what your monthly payment needs to be.
Maddening but true! My source is the FFEL administration.
Yes, it is always better to face one’s debts head on. Otherwise sooner or later it will just raise its ugly head and the students will end up paying up more. It is good advice you gave for the newly graduates and members of the work force not to be used to spending the whole pay check but put something aside to pay off the debt.
Evelyn Guzman
Debt Challenger
This is great advice. I think it’s really important to start making payments if you can before your deferment comes up, because you’re paying directly on the principal and not just paying on interest. If you’re still in school and can afford to start making payments on your loans before they start collecting interest, even if it’s only $50 a month, it will make a huge difference when you graduate.
Also, think about consolidating those loans if you have more than one. But do your research. You’re only allowed to consolidate once, so you want to make sure you make a wise choice.
I just paid off my student loans earlier this month. It was so exciting to send in that final loan payment. I didn’t get as giddy as when I bought my first new car. But hey, it feels great to carry a 0 debt balance!