How to Effectively Deal with Student Loans After Graduation

If you are like many Americans who needed help financing their higher education pursuits, you are facing a student loan note each month fairly soon after the pomp and circumstance has ended. About two-thirds of college students that receive bachelor’s degrees are already in debt before they even find a steady career path. This debt is likely to last as long as twenty years so it is essential all grads with student loans know how to handle them effectively and reduce the likelihood of default.

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6 Steps to Paying Off Your Student Loan Debt

Here are six simple tips to help you keep up with and pay off your student loan debts as soon as it is possible:

Start a Repayment Plan Budget

Any smart personal financial plan includes all debts you have an obligation to pay so it is important to structure your budget to effectively include student loan debts. If you have a snapshot of all your new monthly financial obligations, you are less likely to forget to make payments. You also have a solid idea of where all of your income will be going once you start your new job. Accurate budgets will be a key factor in your decision to accept salary offers for your new career.

Go Automated

The best way to prevent the confusion and penalty of missed payments is to establish automatic payments for each of your creditors, especially your student loan providers. By consistently paying your debts each month on time, you not only cover your financial obligations you also avoid penalties. Plus, another upside to on-time bill payments is that your established credit foundation will be more positive. Check with your student loan lender to find out if there are discounts for electing to have automatic payment deductions. Many lenders give a rate discount of around 0.25% for automated payments after a certain period of time.

Consider Consolidation

If you have several lenders that provided financial assistance for your college education, it can be confusing to keep up with multiple payments. Plus you may be dealing with loans at various interest rates which can cause you to pay much more than you’d have to if the loans were consolidated. Consolidation of loans is also a good idea if you have any loans with variable interest rates. It is wiser to establish a fixed-rate consolidation loan so you’ll never have any payment surprises if interest rates go up.

Pay as Much as You Can

Adding an extra $50 or $100 a month can make it easier to eliminate your student loan debts in a faster period of time. Choose a reasonable amount you are sure you can afford for your repayment plan and stick with that. Whenever you have extra cash, allocate it towards your student loan as often as possible.

Defer When Necessary

The worst thing you can do is default on your student loan altogether. In the event you are not able to secure a steady income after graduation, seek a deferral on federal student loans. You have the option to defer payments for up to a period of three years or you can request forbearance for up to five years. You will have to pay back the accrued interest which increases the total amount of debt you own on the loan but the assistance option will prevent you from defaulting on your loan. Ignoring your student loans is not an option. Talk with your lender if you are having problems making payments.

Take the Deduction

Remember that when you are in the process of repaying student loans, whether they are private or federal, you have the right to deduct the amount of student loan interest you pay annually up to a total of $2,500 a year. Most student loan providers will mail you a statement of the interest pay which you should provide to your accountant or account for it on your own if you do your own taxes.

Student loans can take a long time to pay off but it is also a good way to build your credit foundation by making prompt payments for the life of the loan. Never get behind on your payments no matter what the reason. It is in your best interest to communicate with the lenders when financial difficulties arise and let the lender know about your temporary financial issues. Many have options to help and are willing to help you as a way of ensuring they will get their money back.

About the Author

By , on Jun 13, 2011
Tisha Tolar
Tisha Tolar is a co-owner of Trifecta Strategies, LLC and the author of Gen X. When she is not busy being a fiction writer, she writes personal finance articles for several web sites, including

Leave Your Comment (4 Comments)

  1. Pinyo says:

    @Cedric – There’s two separate issues here. (1) You borrowed the money to go to school, so you are responsible to pay the debt. (2) The school kicked you out — that’s unfortunate. You should ask the school if you are eligible for any kind of refund. If not, then you are out of luck. If yes, then take that money to pay down the loan.

    You can also try searching Google for “student loan forgiveness” and see what you can come up with.

  2. Cedric Barkley II says:

    Really need any advice you’d give concerning my student loan repayment. School I was attending two years ago kicked me out due to missing too many days for medical reason, now I still am stuck repaying the loans. Any advice?

  3. Kevin Mulligan says:

    @Jon: I met with someone last week who has something like $30,000 in student loans… he said he pays $135 per month, but if he only paid the minimum it would take forever to pay off because so much isn’t going to principal. Much better to not start… but if you do, pay them off ASAP.

  4. Jon says:

    If you don’t already have student loans do everything in your power not to acquire them! I got out of college without any debt and did it on my own. I had my own business and paid cash for college. It can be done. Search for scholarships, apply for FAFSA—do whatever you can! Debt is evil–stay away from it if you can.

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