You finally graduated, armed yourself with a diploma, and now you’re ready to fight the line of interviews for your dream job. There’s just one problem. You have a new villain called student loan debt. It’s the last thing you want to deal with, but avoiding the problem will only make it bigger. Here are some practical steps you can take to make sure you claim the victory.
If you’re having trouble, you’re not alone. 8 million people haven’t made a payment on their student loan(s) – that amounts to $121 billion in unpaid debt.¹
It’s certainly hard to pay student loans when you’re a recent college grad with no job or a job that barely pays enough for the necessities. We totally get it, and we’ll come back to that problem in a minute. But first, consider the reasons why addressing your student loans sooner rather than later will help you be more financially successful in the long run.
Student Loans (Plus Interest) Add Up
According to the U.S. Department of Education, the average student loan debt is over $30,000, and the average interest rate is nearly 7%! It could be more or less depending on whether you choose a public or private college, and whether it’s for profit or non-profit.
With a general ten-year repayment plan for that $30,000 loan, you would have to pay at least $350 a month, and you would end up paying over $11,700 in interest.
Ignoring Loans Leads to Bigger Problems
Dragging around debt limits your ability to fund your goals and meet other financial responsibilities:
● Almost half of Americans said they would sacrifice becoming homeowners (45%), buying a new car (58%), going on a vacation (59%), and/or long-term savings (46%) in order to pay off student loans.²
● 77% of people said their student loans influence their personal relationships, like delaying an engagement or marriage.²
● 78% of people with student loans said their debts affect how they save for retirement.²
● 86% of people with student loans feel overwhelmed.²
On top of that, the stress of a financial burden like student loans can result in both emotional and physical symptoms such as irritability, lack of energy and/or motivation, anxiety, depression, fatigue or indigestion.³
Okay, you get it. Ignoring your debt problem upsets your finances and your health. So… what now?
It’s time to assess your situation and make a plan for success.
Figure Out Where You Stand
Before you can take down the beast known as student loan debt, you have to prepare for battle. In other words, remind yourself of the student loans you have to pay:
● Make a list of all your student loans. Are they private or federal? What is the overall sum?
● What is the interest rate, and when do you have to start paying it back? (This will come in handy when you’re prioritizing your debt payments.)
● What is the minimum monthly payment required from you?
A good place to start is with the National Student Loan Data System; it’s a federal database for all student loans (paid and outstanding).
Next, look at your cash flow. How much money are you making? Once you’ve paid the other necessities like rent and utilities, how much of your income can go towards student loan debts? Figuring out how much you can actually afford to put towards your student loans each month will help you decide if you can actually meet the minimum payments required or if you need to talk to your lender about a different repayment plan.
Make a Plan of Attack
Each lender has a standard repayment plan; however, they typically provide other options if you can’t meet their requirements due to financial difficulties. Other options could include the following:
● Payments based on your income (which is especially great if you have a low income that keeps you from meeting the minimum payment required)
● Plans that reduce the monthly payments by increasing the loan term (Careful though – increasing the loan term could mean increasing the amount you pay overall.)
● Consolidation (which could help you lower your monthly payment and/or interest rate)
● Deferments and forbearances that temporarily suspend monthly payments (Putting them off can be a life saver if you have a serious financial hardship, but it takes diligence to make sure you don’t end up in a worse situation.)
● Cancelling loans entirely through a forgiveness program (keep in mind that this comes with tax consequences)
If you know you will have difficulty with the standard repayment plan, reach out to your lender as soon as possible to see if you can move forward. If you have problems negotiating a repayment plan for a federal student loan, you can contact the U.S. Department of Education Ombudsman’s office by calling 877-557-2575 or visit their website, studentaid.ed.gov/sa/repay-loans/disputes.
The new stage of life after college comes with plenty of responsibilities, like finding a job and your own place, and it can make debt seem like a daunting opponent. Don’t worry, your Money Coach, who is a Student Loan Specialist, will join you on the battlefield. Together, you can assess your situation and make a strategy for success. Call 888-724-2326 today and move forward with confidence.
¹Douglas-Gabriel, Danielle. “White House Steps up Effort to Reform Student Loan Servicing to Stave off Rising Defaults.” Washington Post, 28 Apr. 2016. Web. 22 Jun. 2016.
²EdAssist. Student Loan Debt: Who’s Paying the Price? Bright Horizons Family Solutions LLC, 2016. Web. 7 Jun. 2016. PDF.
³“A Stress Snapshot.” apa.org. APA, 2007-. Web. 1 July 2014.
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