College is stressful enough, and establishing plans for after the journey can feel daunting. Being an adult means paving the way for yourself, paying bills, and handling unexpected adulting issues. However, having a plan can relieve anxiety and keep you accountable for your actions. Overwhelming debt can result in increased stress and even depression, which is why it is so important to get your debt under control. Learning to manage money properly is a necessary skill for long-term financial health. Here are five steps you can take to get started.
1) Make a plan for your student loans.
The number one leading cause of debt for students is education loans. Failure to make payments will significantly harm your credit score and impact your bank account. Once a loan is received, it is easy to forget about it, especially when you do not have to make payments during school or the six-month grace period after graduating.
The easiest way to start saving money is by calculating your total debt. If your loans are from the government, you will be assigned a loan servicer after the Department of Education first disburses them. Create an online account to access your loan details and make payments. A helpful tip from EdFinancial is, “You are not required to make payments while in school, but if you can afford it, making even small payments can save you interest and lower the total cost of your loans.”
2) Speak to a specialist
Your school’s financial aid office is there to help you with any questions you may have about your loans and repayment. Even if you have recently graduated, financial services can still extend their help to you. Beyond your school, you can reach out to a financial planning specialist who can help you navigate the repayment process and assist in handling paperwork. Don’t let the process overwhelm you and keep you from getting a head start organizing your finances. There is help available to everyone to help walk you through paying your debt and creating a budget.
3) Pick a Payment Plan.
The Federal Student Aid website offers a Loan Simulator tool that allows you to get an early look at which plans might work best for you. Most borrowers select the Standard Repayment Plan, paying loans off within ten years. The Graduated Repayment Plan starts with lower payments but gradually increases every two years. There are also extended repayment plans and income-based repayment plans. It is best to look into each option to ensure you opt for the best repayment plan for your situation.
4) Make payments in full and on time
Once you choose the right plan for you, make sure you stay on top of payments. Missing a payment or several will result in a defaulted loan, which has serious consequences, including tax offset and wage garnishment. As a student or a recent graduate, making payments might be difficult, so it is important to explore your options early.
5) Stick to a Budget
One of the essential parts of managing money is sticking to a budget. Budgeting doesn’t mean that you never get to do anything fun. It is simply making a plan for what you want to do with your money. Start with your income, then list your expenses. Most financial consultants advise keeping an emergency fund and maintaining a savings account. A practical budget involves allocating money for what you enjoy while ensuring your expenses are covered.
Becoming debt-free can be difficult but is not impossible. Incorporating a plan and sticking to these steps can help you manage your student debt.