Managing Student Loan Debt

The average college student borrows at least a portion of his or her tuition money to attend a four year school. This means most young adults graduate college already in debt. For some, the amount owed by the time they enter the workforce is two to three times their annual salary. Having this much debt at such a young age is a frightening scenario, but it is common. Luckily, there are ways to protect your credit, still save money when your earning potential is limited, and manage your student loan debt.

Get Organized

The best place to begin is to organize your finances. Understand what you will owe in student loan debt when the loan repayment period begins and determine the amount of each monthly payment. Some people have the option of postponing loan payments for a period of time, but the interest continues to accumulate during this time. Postponing loan payback does not save you money overall, but it can provide an opportunity to get settled into a job and begin your life before repayment begins.

Create a Budget

Once you have a handle on what you owe and how your repayment is structured, create a budget. It can be tempting to overspend once you are employed full-time and earning more, but do your best to keep your spending under control. A budget helps you prioritize and ensures your bills are paid and your savings is built before you spend on other things.

If possible, begin budgeting before you graduate. If you are working while attending school, aim to save about 10% of your earnings so you have a small cushion by graduation.

Work with Your Lender

Ignoring your student loan and not facing financial issues regarding the money you owe is a big mistake. Lenders can provide options to make it easier to pay back the money owed. The average student loan has a repayment period of 10 years. If you think paying off your entire loan in that time is unlikely, speak with the lender about an Income Based Repayment Plan. This ensures your loan payments are less than 10% of your income and forgives the remaining debt after 25 years.

It is possible to postpone payments for a short period of time. Some lenders allow you to skip payments for a month or two here and there, in case you change jobs or face a financial emergency. Again, remember interest continues to accumulate during this time, so in the end you pay more for the loan.

Defaulting on a student loan affects your credit score, which means a mistake you make as a young adult can affect you well into mid-life. This is why it is so important to take action when financial problems arise. If you are struggling with student loan debt or you believe a lender is taking advantage of you, contact the Law Offices of Robert M. Gellar. We’ll help you sort through your student loan issues and build a bridge to your financial future.