By Mathew Jade, Guest Writer
Our 20’s are a time of growth, fun, change, and most importantly, education. By the time most of us are 29, we’ve graduated from college, perhaps even finished grad school, gotten married, started a business, or settled in to a nice job.
Come to think of it, that’s a lot for eight years. And although these years may sound successful, the truth is, we all make a lot of mistakes during this time. And one of the biggest mistakes we tend to make often has to do with student loans and their repayments.
How can we avoid common pitfalls when it comes to paying off our student debt? Knowing the challenge we're up against is an empowering first step. So with that, here are a few top loan repayment mistakes to avoid.
Losing Track of Payments
As you try to plan your life after graduating from college, figuring out how much money you need to keep aside every month to repay your student loan is crucial. This will help you budget other expenses in a much more efficient manner. There are numerous repayment estimators on the Internet that can help you calculate how much you need to pay, based on your loan amount and income.
Not Choosing the Right Repayment Plan
Your chosen payment plan plays a major role in determining the exact amount you will pay back monthly. The time it will take for you to pay back the whole of your student debt is also a crucial factor in your payment plan. Different plans meet different preferences. You can also use online repayment estimators to figure out which plan is best for you, based on the average income of people who graduate with the same or similar degrees.
Choose a plan that you know for sure you will be able to afford. If you’re struggling to make the monthly repayments, consider switching to income-based plans. Skipping payments will only create problems for you and your credit score.
Not Pay Extra While You Can
The interest on your federal student loan accrues each day. An easy way to save money in the long run is to pay more than what’s required each month. This will help cut down the interest accrued, in turn, helping cut down the amount you pay in the long run.
While many of us would love to party with that extra amount from tax refunds, we could make better use of that money. Making an additional loan payment is always a financially savvy move. And of course, pitching in a few extra dollars every month towards loan repayment also helps cut the amount of interest accrued.
If you think you won’t be able to pay your next student loan payment, or are already feeling overwhelmed, get in touch with your loan servicer immediately. Skipping even a single student loan payment is a big deal, as it can result in defaults: negative impacts on your credit score which in turn affects your ability to borrow for a car or home. Your loan servicer can recommend options, reduce, or postpone your payment, while keeping your loan in good standing.
So stay on top of student debt. Balancing factors in our young adult lives can prove challenging, to say the very least. Managing debt reduces stress and keeps a substantial factor of our 20’s and early 30’s organized and balanced, thus propelling us toward a successful future.