Getting Started After College: Student Loan Repayment
by Keith Klein
Getting started on your own post-college is a turning point in many students’ lives. Big decisions like choosing a career and a city to inhabit loom large. For those who have taken on debt, Student Loan Repayment begins approximately 2 months after graduation (though lenders differ in this requirement), and repayment may add even more stress. There are some simple things that you should do to get yourself off on the right footing after college.
- Do create a baseline budget for yourself. This may be rough at first, but it will help you understand how much salary that you will need to meet your obligations. Start with 20% of your income going to savings, 80% divided between rent or mortgage, loan repayments, transportation expenses including auto insurance, medical insurance, utilities, food and clothing. Don’t forget to budget some amount each month for personal expenses: $5 per week to $500, everyone needs a little allowance.
- Do your homework. Will your desired career path begin with a position that will cover your expenses? If not, research forbearance (postponing the start of payments) and forgiveness (the cancellation of the debt) programs. A good place to start is the Federal Student Aid Office, part of the U.S. Department of Education.
- Do understand if the types of positions that promise forbearance are right for you. They are generally teaching and public service positions. "Any employment with a federal, state or local government agency, entity, or organization or a not-for-profit organization that has been designated as tax-exempt by the Internal Revenue Service (IRS) under Section 501(c)(3) of the Internal Revenue Code (IRC)," according to the U.S. Office of Education's federal student aid website.
- Consider an Income-based Repayment Plan, which uses a sliding scale for monthly payments depending on your income. Most students should at least consider this option.
- Do remember that student loan debt usually has very low interest rates.
- Don’t forget to take a hard look at exactly how much you owe and the terms that your loan servicer is expecting you to honor.
- Don’t stop paying your loans, even if you have applied for forgiveness or forbearance, until you have approval to do so.
- Don’t assume that any position that includes student loan forbearance as a perk is correct for your career path.
- Don’t overlook the public sector jobs because your ultimate career goal is in the private sector. Public service can be very rewarding and transition to the private sector may not be difficult.
- Don’t assume that paying off the loan with the highest balance first is necessarily the correct approach. In some cases, the esteem from “knocking out” the lower balances can be motivating.
With a little careful planning and budgeting, recent college graduates can get started on the right foot.
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