Student-Debt Advice For College Graduates

The Experts Offer Suggestions to Graduates Starting Off Careers With Enormous Loans to Repay

June 30, 2014
Excerpt by Michelle Perry Higgins

Start Shopping for Long-Term-Care Insurance at 45A Payoff Plan for Student Loans

The good news is that you are a college graduate. Congratulations! The bad news is your college education has cost you plenty and you need to pay it back. Don’t bury your head in the sand; make a payoff plan as soon as possible. The debt will suffocate your finances if you don’t get a handle on it immediately.

First, start with making a bare-bones budget that is realistic. This should include the regular payment obligations on your student and other debt. If the bottom line is negative, you need to chop some more non-debt expenses. If it is positive, you can apply that surplus to additional payments on your debt starting with debt that is nondeductible (student loans may be deductible) and has the highest interest rate.

If you still find that you are having trouble making payments on your student loans and you are on the standard 10-year repayment schedule, you may be able to change the repayment option or apply to consolidate your loans if you have more than one. Bear in mind that if you consolidate your loans, while the monthly payment may be less, the period for repayment is likely to be longer, so if you make the regular payments only you may end up paying more when the loan is ultimately repaid.

The goal here is to increase principal payments aggressively as your career develops and your income grows over time in order to shorten the repayment period.

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