Adulthood is littered with tricky minefields of responsibility—take the right steps from the beginning and you can avoid disaster, but make too many wrong moves and things could turn out badly.
Chief among the responsibilities that we must take seriously when leaving the safe confines of the classroom and entering the adult world are handling student loans. Most of us who graduate college with student loans have taken them on with the very best of intentions—we initially considered them a wise investment in our educations and our professional futures, one that would yield dividends for us and ultimately place us in a position to make good on our obligation to repay the debt.
That said, even those of us with the noblest of intentions can fall victim to mishandling these often-sizable financial burdens—whether due to unfortunate financial reality, sheer irresponsibility, or some other cause. Whatever the reason, the dangers of not fulfilling your obligation to repay your student loans on a timely basis can be significant: it can negatively impact your credit score and creditworthiness, making it difficult to secure loans for an automobile or home; it can cause uncomfortably contentious relationships with your loan companies; and it can cause non-stop stress and anxiety, which can take a serious toll on your mental, physical, and emotional health and well-being.
Hopefully, by now we’ve convinced you that it’s in your best interest to take your student loan debt seriously and responsibly. If you’re on board, then keep reading for advice on how to avoid making mistakes with your student loans.
Know your terms
Not all student loan debt is created equal. The terms of your loans, including repayment terms, are set by the lender (or company that purchased your loan obligation) and agreed upon by you when you signed the agreement. It’s in your best interest to know what those terms and your obligations are—even if you’re not a financial guru or are even interested in contract minutia. Making a commitment to take on student loans comes with the understanding that you agree to all of the terms of the agreement. Know what you’re signing upfront, and make sure you’re fully aware of any and all changes that occur during the life of your loans.
Avoid the minimum
Simply put, loan companies of all shapes and sizes dream about having borrowers who only pay the minimum each month and only pay the interest on their loans without every attacking the principal. Don’t be one of these folks—doing this will only keep you on a never-ending debt cycle. Paying more than the minimum each month, even if it’s a modest amount, can make a big difference in how much you ultimately hand over to your loan company over time and help ensure that your student loans won’t take a lifetime to pay off.
Make a schedule
Sure, these days you’re probably able to work with your student loan company to set a repayment schedule—this usually refers to which day of the month your payment is due on (make sure you choose a date that makes sense for your life and needs). That said, this shouldn’t be the end of your scheduling criteria. A key factor in handling student loans responsibly is developing a payment schedule that allows you to effectively pay down the loan principal in addition to the interest that’s likely accruing. Of course, this all depends on when you’d like to pay off your loans, how much you can realistically afford to pay each month, how much you owe in the first place and the terms of your loan. But once you have a good handle on these elements, developing a payment schedule that allows you to see a light at the end of the tunnel and eventually be free from student loan debt at some point in the future is a smart financial strategy.
Set reminders
For most of us, life is a constant hectic struggle to juggle a myriad of responsibilities and obligations—and it isn’t uncommon for a few things to get forgotten each month. That said, the last thing you want to forget is a student loan payment. The consequences of forgetting a monthly payment can include accruing additional interest and debt, as well as a negative hit to your credit score. The good news is that most large student loan companies allow you to set up an auto-payment option so you don’t have to struggle with remembering your loan payment each month. Even if you don’t want to take advantage of this option, always set your own reminders (your phone can be your best friend here).
Know your options
Although your student loans come with an obligation to repay based on an agreed upon set of terms, that doesn’t mean there aren’t additional repayment alternatives that you can take advantage of—you have to know about them before you can. Options such as forbearances, income-sensitive repayment terms, and debt reconsolidation and refinancing are potential courses of action you can take advantage of in an effort to stay on top of your loan obligations. Take the time to do your homework and research what options your loan company offers—even if you don’t ever use them, it’s in your best interest to be an informed and educated borrower.
