Loaning Help

The average going rate for a bachelor’s degree, cap and gown? $26,500 (for in-state tuition only, of course) going once, going twice… sold to the student pursuing a professional degree.

Piggy Bank

Graduation day is the last stepping stone before being released into the real world. And that student loan debt you acquired along the way? That’s your welcome-to-the-real-world present. So, just what do we do with a gift that we don’t necessarily like? Simply ignoring your obligation isn’t a sufficient answer. Here’s how to tackle student debt before it becomes insurmountable.

Things To Know

Most student loans have a six-month grace period, which means you do not have to pay a penny for nearly half a year after you finish school. It is advisable, however, to start paying your debt as soon as possible. (You can even start paying the interest you owe on some loans while you’re still in school, if you’re able.) Your minimum monthly payment once your grace period is over is based on the type of loan, the amount you owe, the length of your repayment plan and your interest rate. If it’s within your means, pay an amount more than the minimum payment each month.

Once you have established your regular minimum payments, you can determine which loans to pay off faster and in what order.

  • Private loans. Private loans are the most dangerous student loans. They have variable interest rates, require a co-signer, may not be consolidated and have limited repayment options.
  • Loans with a co-signer. If you are unable to pay back these loans, the responsibility falls onto the shoulders of your co-signer.
  • Loans with variable interest rates. When these rates go up, you’ll have to pay more money back in interest. These are typically your private loans.
  • Unsubsidized loans with the highest fixed interest rates. An unsubsidized loan is a loan that accrues interest from the disbursement date. This interest is added to the principal.
  • Subsidized loans with high interest rates. Subsidized loans are not accruing interest while you’re in school, so your interest on subsidized loans should be zero when you begin repayment. You will, however, want to pay down the principal to avoid future growth.
  • Unsubsidized loans with low interest rates. Though interest accrues from the time of disbursement, if the interest rate is very low, you won’t have much capitalization by the time you’re in repayment.

Should You Consolidate?

A lower interest rate means more money in your pocket. If rates have dropped since you originally borrowed money or if your financial situation and credit score have improved, consolidation should be considered. On the other hand, if you’re close to paying off your debt, the fees incurred upon consolidation may not be worth it. Although reducing your monthly payments can help you in the short term, in the long run, if you extend your repayment terms, you can wind up paying extra dollars in interest.

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