Post-Gradonomics

You graduated, you got a job, and now 6 months later you have to pay back student debt. Oh, and unless you are the 1 in 176 million who wins the 540 million dollar MegaMillions Jackpot tonight… you’ll hopefully appreciate the few tips I put together to help you on your journey to becoming debt-free:

1. Stay Current

Most college students move at least once during their college career. It is important to make sure you notify the United States Postal Service every time you move to ensure you are receiving all your mail. More importantly, lenders will send loan repayment information to the address you provided when applying for the loan. Neglecting to notify your lenders of a change of address could lead to you not receiving your student loan bills. Failure to pay your student loans results in default status. You want to avoid defaulting on student loans at all costs. Not only do defaulted loans tarnish your credit, they won’t be removed from your credit report until they are paid in full. Staying current on your loans is not only crucial to building good credit, but can help you receive discounts. Most lenders provide auto-debit and on-time payment discounts. The best way to take of advantage of this benefit is to set up an automatic debit from your checking account for your student loan payment. This will ensure your payments are on-time and will allow to receive the most common discounts that lenders offer.

2. Don’t Hate, Consolidate

Unless you are making bank out of college, your income most likely won’t support all the separate loan payments that you are obligated too. I had FIVE different lenders when I graduated for a combined student loan payment of over $700 a month. This was not manageable for me. After some research, I decided to consolidate my loans through the U.S Department of Educations Direct Loan Program . This helped me get my monthly payment down to around $350 a month, phew!  When consolidating loans, consider all your options. The government offers many different types of repayment plans. If you are struggling to get by, go with one of the options that will give you a lower monthly payment (just remember though… the lower monthly payment the more you will pay interest, extending the life of the loan). My suggestion would be to shoot for the standard repayment plan and if it becomes too much, you can always switch to another repayment plan! Also, do not consolidate no interest loans with interest loans. To make things simple, you’ll end up paying interest on a no interest loan and no one wants to pay more than they have too.

3. Pay Even When You Don’t Have To

Tax refund time and bonus time are undoubtedly my favorite of year. Why? Because if I’m lucky enough, I end up with a chunk of money to spend however I please. Each year, I resist the urge to do something incredibly stupid (like a new workout wardrobe from Lululemon) and set aside a substantial amount of money to go to a loan or credit card. My advice is keep half of the bonus for yourself and put the other half towards your highest interest loan or credit card. My other suggestion would be to take any cash gifts you might receive for birthdays or holidays and do the same. If you don’t have the discipline, you can set up an account at Lily’s List. Lily’s list is a gift registry for anyone with a student loan. It allows others to make monetary gift donations directly into your student loan account and registration is free!  If you can get into the habit of putting a little extra money towards your loan payments when it’s possible, it will help get you debt-free a lot faster!

What are some ways that you’ve paid down debt?

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