Ideas to Manage the Burden of Student Debt

Each year a new crop of graduating high school seniors begin their collegiate careers while college graduates consider the opportunities that graduate school provides. As a result, the mountain of student debt continues to build. While this debt is unavoidable, here are some ideas to help make that mountain a little less insurmountable.

Check mark Know the note. Not all student debt is created equal. Understanding the terms of all your student loans is important. With this knowledge, select the correct loan option and know which loan to pay first. Things you should know about each loan include,

Check The interest rate
Check The term of the loan
Check Amount of any up-front fees
Check Pre-payment penalties (if any)
Check When interest and payments start
Check Payment amounts
Check Payment flexibility
Check How interest is calculated

Suggestion: Create a spreadsheet with a student loan in each column. Then note the variables from this list under each note. It will create a strong visual of your student loan situation.

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Check mark Pay the interest. Some student loans accrue interest while you are in school. With the compounding of this interest, your student loan amount continues to grow with each passing year before repayment begins. Banks love this. You should not.

Suggestion: Figure out how to make the interest payments while in school. This will not only lock the amount you owe, it will reduce the amount of interest payments you will be paying on your interest.

Check mark Pay a little extra in the early days. The math of loans benefits banks in the early years of the note. This is because the vast majority of interest is paid by you in the first years of repayment. The last year of your loan repayment is primarily principal payments.

Suggestion: Pay extra every month as soon as payments start. While this seems impossible as you enter the workforce, even $10 extra a month can dramatically reduce the amount of total payments you make over the life of your loan.

Check mark Small savings yield big results. Having a hard time finding a few extra dollars to make extra payments? Consider observing and then changing your spending habits.

Suggestions: Purchase one less latte a week. Occasionally order water versus another beverage with a purchased meal. Drop one monthly service from a bill. Place these savings in an envelope and use them as a bonus payment on your student loan principal.

While student debt is an unavoidable outcome of getting a great education, it can be minimized if actively managed. Remember small changes can yield results if planned for in advance.