It’s graduation season. And while this marks new beginnings and the transition into adulthood, it also means something else: it’s time for students to start paying off their student loan debt. As if repaying student loans wasn’t already terrifying enough as it was, according to the Wall Street Journal the graduating class of 2011 should be a little bit more concerned than previous classes. Why? This particular class will finish this spring with a not-so-prestigious title: the most indebted college graduates, ever. Yes, ever. Most gradates will cross the stage with an adjusted average debt of more than $22,000 – a whopping 47 percent increase from the class of 2000, according to the Wall Street Journal.
While repaying your loan is unavoidable, there are things you can do to ensure that you don’t get yourself into an even deeper financial hole and acquire more debt after you graduate —which happens more often than one would think. With that said, to learn how to avoid falling into severe debt, follow these simple and practical tips listed below.
Read the Fine Print.
First and foremost, make sure that you are well-informed about your loan. About a few weeks after you graduate your lender might require you to participate in an “exiting” loan counseling session. Here, you will be given all the formalities regarding your loan, including a reminder of how much interest you will be charged, information regarding your grace period (if one exists) and how much you are expected to pay each month. While it may seem somewhat tedious, do not skim the papers. The information is highly important. No matter what happens, you need to leave your counseling session having the answers to the following questions: What do I need to do in case I can’t find a job right of school? Could I qualify for a loan deferment? Can I consolidate my loans and save money? Will automatic withdrawal payments save me money? What happens if I miss a payment or turn a payment in late? And most importantly, how much do I owe in total and how long to I have to pay it off?
Live Within Your Means.
If you are lucky enough to find a job immediately after graduation, it’s highly recommended that you don’t let your pay stub amount get to your head—you need to live within your means. Don’t get some fancy high rise apartment and have to skip meals every single day just so you can live there. In fact, rent should cost you no more than 25 percent of your monthly wages. If you want to live in that particular high rise downtown, then at least consider getting a roommate. If that is not possible, find another place that is affordable. If everything seems to be out of your price range however and the main focus is to save some money, then consider living with your parents for a while until you get your feet on the ground (that’s if your parents will have you back). If your parents let you live rent free, a good way to pay a good chunk of your loan off in one setting is to use your income tax refund check to repay your lender.
Prepare for Emergencies.
Even if you make enough money to live comfortably, it is still highly recommended that you watch your money carefully and budget. It may seem nice having more money than usual, after all you suffered long enough as a broke college student, but you should always prioritize and ensure that you have enough money to cover your bills, including your loan, and that you don’t spend your money on extravagant things—especially within the first few months of your new job. Instead, you should be focusing on establishing a nice little safety net in the bank—some extra cash that can help you whenever you’re in a bind. This is because there are a lot of unfortunate situations that can occur, and if you lose your job and get fired, you’ll need that stash to help you recover. For example, your car could break down and you could use that money to buy replacement parts or an entirely new car; or you could get really sick but have no health insurance due to your recent termination, and need that money to pay medical bills. And of course, you’ll need that money to be able to continuously make your loan payments on time. Thus you should always save and budget. And there are several different and simple ways you can save money too—for example, you don’t really need to go out and eat with your co-workers 5 days out of the week.
“Loan Forgiveness” Careers.
Lastly, many people are unaware that there are particular programs that reside within certain professions that will actually repay an employee’s loan for them in full or partially if the employee meets certain conditions. For example, an employee may be required to work within a facility for 5 years before they can qualify for loan forgiveness or have to deal with individuals of a particular socio-economic group. Whatever the case, make sure to check with your place of employment to see if any loan forgiveness programs exist and what you need to do to qualify, especially if you are involved in the professions listed below:
- Medical Profession: Nurses, Doctors, Physical Therapists
- Volunteer: Peace Corps, AmeriCorps
- School Teacher
- Social Worker
- Government Worker
This is a guest post by Nadia Jones who blogs at online school about education, college, student, teacher, money saving, movie related topics. You can reach her at nadia.jones5 @ gmail.com.