In just six short months, you are likely to have to start repaying those loans. And according to the latest statistics released by the Federal Reserve and the College Board, the AVERAGE amount of student loan debt owed by a recent college graduate is just a few dollars shy of $29,000.
Students who live in the tri-state area (Connecticut, New York, and New Jersey) and took on student loan debt all owe more than the national average. New York graduates owe an average of $37,196, New Jersey grads owe $35,202, while Connecticut students check in at an average of $34,713. Students who grew up in the District of Columbia lead the pack. They are nearly $55,000 in debt by the time they finish college.
But here is the most startling statistic of all. While most associate student loan debt with young adults, it’s actually older adults who owe the most. Statistics show people 62 and older still carry nearly $50,000 in student loan debt while recent graduates age 24 and younger owe less than $14,000. People between the ages of 50 and 61 still need to pay back more than $47,000 in loans acquired when they were in school.
Paying back all of that money requires discipline and sacrifice. If you’re a recent graduate, coming up with a plan to pay back your loans is a good place to start. Write your plan on a piece of paper and keep it somewhere where you will see it frequently. If you see it everyday you’re more likely to stay committed to your goals while chipping away at the debt.
Your grace period could be six months to a year, but you don’t have to wait that long. If you start a job immediately, consider initiating payments during your grace period. If your monthly installment is $250 once you have to start making payments, proactively tackle the loan now.
Doing so will not only help you establish a routine of setting aside the $250 every month but you’ll also get ahead of your repayment schedule.
There are many repayment plans available for federal loans. Be proactive and consult the National Student Loan Data System to explore other payment options. Request a complimentary copy of your credit report, which will list your lenders. Consider opting for an income-based repayment plan aligned with your current earnings.
You can also explore the possibility of consolidating your loans into a single payment. There’s also the option of investigating whether your loans qualify for deferment, student loan forgiveness, or a more advantageous payment plan.
Certain employers provide employees with student loan payment benefits as a perk. There are also some jobs, specifically government positions or positions within nonprofit organizations, that can make employees eligible for levels of student loan forgiveness after making payments on loans for a period of 10 years.
There are also opportunities for loan forgiveness for individuals who decide to work in low-income areas or underserved rural communities that are in need of professionals such as teachers, doctors, lawyers, dentists, social workers, and other high-demand professions.
Getting a salary bump right off the bat in your initial job might not be feasible, but there could be opportunities for overtime. You could also consider launching a side venture or taking up a part-time position.
Your unique skills or services might be in demand and could bring in additional income, which can then be directed toward reducing your debt.
This might seem like a no-brainer, but life and circumstances don’t always go as planned. While refraining from making other significant credit card purchases or taking on additional loans may seem like basic financial wisdom, not everyone possesses this insight.
If you aspire to have a lavish wedding, want to acquire a high-end car, or purchase a home, you may need to adjust your short-term goals and reconsider these types of purchases. There’s also emergencies that may require you to spend money that you don’t necessarily have. You may need to purchase a plane ticket to attend the funeral of a grandparent or a family member, your car may need to be repaired, or there could be numerous other situations that could require you to dip into your savings.
Some lenders may offer a reduced interest rate if you enroll in an automatic payment plan. This approach not only helps to avoid late fees but also prevents missed payments, which can damage your credit score for years.
There could be some tax benefits. It may be possible to lower your taxable income by as much as $2,500 for a given tax year by deducting the interest you pay on your student loans. If you use a tax professional, be sure to ask the question. Every small deduction can make a difference.
Paying a little more than your monthly minimum will reduce the amount of interest you owe and help you repay your loan faster.
If you receive a work bonus or get a big tax refund, have the discipline to use it to make a lump sum payment toward your loans. It will reduce the interest that accrues over the life of the loan and help you get out of debt faster.
Your student loan debt will not go away. There is no statute of limitations so your loans will follow you through life, including bankruptcy. If you find that you are unable to meet your obligation, reach out to your loan servicer and explore alternative repayment options rather than not paying.
By seeking assistance promptly, you can develop a customized plan that aligns with your financial situation and budget.
Making a late payment on a federal student loan can lead to a late fee of 6 percent. Ultimately, the government has the authority to garnish up to 15 percent of your wages and Social Security benefits, and they can also deduct 25 percent of each payment for collection fees, further increasing the total loan cost.
Late or missed payments have long-lasting consequences. They will appear on your credit report for as many as seven years, negatively affecting your ability to purchase big-ticket items such as a car or a home, and limit your ability to get a credit card.
Studies show that about $138 billion of outstanding student loan debt is currently past due, with two out of every five student loan borrowers experiencing delinquency within the first five years of repayment. If you’re having trouble making your payments, you’re not alone. Millions of other Americans are dealing with the same issue.
If you find it challenging to make payments, request a deferral or forbearance. Neither of these options will harm your credit score and when your account is brought up to date, it can actually increase your credit score.
If you experience short-term financial difficulties, such as a job loss or medical leave, you can temporarily suspend payments on federal student loans. However, it's important to note that during this period, your loans will continue to accrue interest, making them more costly in the long run.
Another alternative is to opt for one of several repayment plans for federal student loans. The plans adjust your monthly payments based on your income, ensuring that as long as you make consistent monthly payments, you won't have to worry about defaulting.
This won’t be a popular section, especially for recent college graduates who want to get out and live a little after four years (or more) of living on a college budget. But unless you’re stepping directly into a job that pays six figures or more, tackling your student loan debt should be your top priority.
Eliminating your debt will be your first step to financial independence, and if you work hard to pay off your loans quickly, you’re likely to develop some habits that will help you as you get older. Try these budgeting ideas and see how much money you can save.
Nothing helps a budget more than splitting rent and utilities two, three, or maybe even four ways. You might have lived with roommates for several years, so why not do it for a couple more and use the money you save to pay down your loans.
Eating out costs a lot. Even fast food meals in many areas are $10 or more. Even the worst cook can learn a few easy recipes that will keep you from eating every meal out. Macaroni and cheese, tuna, burgers, soup, pasta are easy to make and will help you save.
You may need to have nice clothes for your job, but you can find nice clothes in a lot of places and not pay full price. Off-market department stores, thrift stores, yard sales in more affluent areas are all places where you can find nicer clothes at discount prices.
When you’re home, keep it casual, at least until your loans are paid. When they are, you can step out in style.
Even in the least expensive areas, gas is more than $3 a gallon. Imagine how much you can save if you carpool with a friend or a colleague from work. In warmer climates, riding a bike to work will save you money and help you get in shape.
If your job takes you to one of the country’s larger cities, the subway and other public transportation can get you to and from work and help you become more familiar with the neighborhoods and shopping areas adjacent to where you live.
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