Student Loans – What Happens After You Graduate?

student loans after graduation

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  • With so much advice being given to college students about how to raise the funding they need for their education, the fact that this money has to be repaid often gets overlooked.

    It’s never too early to start thinking about what will happen after you get your hard-earned degree.

    Of course, you will be busy writing your resume, going for job interviews and landing that all-important first job and getting your foot on your career ladder, but you should also spare a thought to the repayment of your student loans.

    According to Forbes, American students leave college owing an average of $28,650 (2018). This sizeable amount is only second to mortgages as the highest outstanding debt that many Americans have in their name.

    How do you go about paying off your student loans?

    In the same way that you budget your expenditure when you get your paycheck, you should get into the habit of keeping track of the status of your student loans. You should know the name(s) of the lenders, the outstanding balance and your monthly repayments. You can log into the student loan site to find out this information or ask the lenders directly.

    If some of your loans aren’t included in the list, this probably means they were non-federal (private) loans. Information about a private loan can be found in the original paperwork, from the lender or by contacting your school.

    One thing that you won’t need to worry about financially is paying your student loan. Recognizing the financial burden of this post-graduation period, all loans have a period of grace which is how long you’re permitted to wait before making your first loan repayment. This grace period varies from lender but is usually 6-9 months. It’s your responsibility to know when the first payments fall due.

    Choosing the right repayment option

    Unless you specify otherwise, federal student loans are usually put on a standard 10-year repayment plan automatically. If you find that you’re struggling financially, you can extend your loan term. However, you should bear in mind that although the monthly payments will be more affordable, the loans will end up costing you more overall in terms of the interest you’ll have to pay.

    One option is to choose an IDR (income-driven repayment) plan such as Income-based Repayment or Revised Pay as You Earn. These schemes cap your monthly loan instalments at a reasonable percentage of your income so that you can also meet your living expenses. Unfortunately, this option isn’t available for non-federal loans although your lender should accept interest-only payments if you’re suffering from temporary financial hardship. 

    Keeping up your repayments

    You should enroll for automatic payments of your student loans via your bank account. In this way, you won’t run the risk of being late/defaulting on a payment because of an oversight. 

    It is also crucial that you notify your lender(s) when you change address, email address, cellphone number, etc. In this way, you’ll remain in contact with them at all times. This is especially important if they wish to query a non-payment.

    Note:
    After your graduation, it’s understood that you’ll need time to find a job, get your financial affairs in order and if necessary, pay for relocation expenses to another city/state. This can cause a massive drain on any savings you may have. Cashfloat.co.uk offer money on demand for those unexpected expenses. With a quick, convenient and streamlined online application, this direct lender can give you a helping hand when you need it the most.

    Paying off student loans faster

    The quicker you pay off your outstanding student loans, the less you’ll pay in the long run in interest payments. It therefore makes good financial sense to pay off your loans as quickly as possible. There are many ways to do this without this having an impact on the quality of your life.

    One way is to put any unexpected cash windfalls such as bonuses, work commission and IRS returns towards the reduction of your student loans. Selling unwanted items on auction sites or in garage sales is another way to raise some cash.

    Problems in paying off student loans

    If you’re struggling to make your student loan repayments, you aren’t alone. According to Forbes, in 2019 the delinquency/default rates for student loans (i.e. owing for 90 days or longer) was 11.4%.

    You might be facing temporary hardship because you’re between jobs or for reasons of illness or injury. In such situations, the most important thing is to contact your lenders immediately and let them know. Burying your head in the sand and ignoring all communications from them can have longstanding consequences for your credit rating and block your access to other loans in the future (including mortgages).

    Who’s eligible for loan forgiveness?

    Loan forgiveness is only available for federal student loans. Your loans will be forgiven after making about 25 years (depending on your repayment plan) ofaffordable repayments through an IDR scheme.

    Not all students wish to go in for lucrative professions where it’s easy to pay off student loans. The Public Service Loan Forgiveness program allows student debt to be wiped out for graduates who go into professions like teaching and nursing or any other job position in public service, the government or the nonprofit sector. If you wish to share the prosperity and privilege you’ve enjoyed by working for an organization like the Peace Corps or doing voluntary work, then you might also be eligible for forgiveness of your federal student funding.

    other valuable tips:

    Is loan consolidation a good idea?

    Consolidating all your loans (student loans, credit card debt, etc.) into one single debt by taking out one loan enables you to reduce your monthly payments. However, it will make your borrowing more expensive overall and you should be cautious when refinancing federal student loans in this way. Not only will the interest rate be higher but you’ll miss out on all its benefits such as forbearance and loan forgiveness.

    Note:
    After your graduation, it’s understood that you’ll need time to find a job, get your financial affairs in order and if necessary, pay for relocation expenses to another city/state. This can cause a massive drain on any savings you may have. Cashfloat.co.uk offer money on demand for those unexpected expenses. With a quick, convenient and streamlined online application, this direct lender can give you a helping hand when you need it the most.

    Image Credit: Pixabay

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    Off-to-College reference:

    GUIDE: manage college money

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