Paying Off Student Loans
Congratulations! You've graduated from college and are just starting your new career. However, your student loans are also coming due. While the ultimate goal is to get them paid off in a timely fashion, there are a few things you need to consider. Privately funded student loans can be costly to repay, but federal student loans can actually be a beneficial tool when it comes to learning how to efficiently manage your finances.
Build Good Credit
Federal student loans typically have a low or moderate interest rate. They also report to all three credit bureaus. Once you graduate and establish your repayment plan, you can begin to pay off your loans and build your credit. For some, a student loan may be their first experience when it comes to loans and paying bills on time. Most lenders work will work with you as a new graduate, creating a payment plan that is both affordable and manageable.
Pay On Time
Always pay your bills on time. If it helps, set an alarm on your smartphone to remind you the week before it's due. If you get in the habit of paying your loan a week before it's actually due, you won't be late. And even if you forget, you will have a few days to pay it before it's late. Because federal student loans are reported to the three credit bureaus, you can begin to watch your credit improve if you monitor your credit or FICO score. Better yet, set up automatic bill-pay from your checking account and have the payment made a few days before the payment due date.
Maintain Your Student Loan and Pay Off Other High-Interest Debt
If you find that the amount of your total debt you have relative to your income is too high for your comfort level, you can pay extra on other types of high-interest debt. Instead of adding more money to your student loan payment, consider putting it towards your credit cards or other loans that have higher interest rates. Continue to maintain your student loan by paying the monthly payment. If you are able, pay slightly more. By prioritizing your high interest credit cards, you will pay less in interest and be able to better manage your credit card debt. Your student loan rates won't change like those associated with your credit cards, so it may be a good idea to double up payments on your credit cards or other loans.
Taking time to pay off your federal student loans gives you an opportunity to establish the credit you will need for other important life events, such as buying your first home or car. They also give you an opportunity to learn how to manage your finances in a way that will last you the rest of your life.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as investment, tax, or legal advice. The opinions expressed and material provided are for general information only.