THE ULTIMATE GUIDE TO PAYING OFF STUDENT LOANS

Tuesday, May 24, 2022

Graduating from college or university is a very exciting time as you start your careers and begin living independently. But, it can also be a very stressful time as the reality of student loan repayment sinks in. Loans can feel very overwhelming, so having a plan on how to tackle them is crucial in setting yourself up for financial success. Here are six tips to prepare you for taking on those student loans:

Consider your spending habits

As you graduate university, you will be responsible for your own spending habits. It is easy to lose track of your money if you are not conscious and deliberate in your spending. It takes time and commitment to get out of debt, so it’s crucial to be intentional about where your money is going. It is important to prioritize your spending to ensure you have enough funds to pay bills and uphold your other financial responsibilities even after making your monthly loan payment. Use YNCU’s financial goals worksheet to start setting these goals.

Set a budget

Setting a budget is the most common way to plan your financial activities. By having a budget, you will be able to lay out your expected expenses and plan accordingly. YNCU’s household budget tracker will help ensure you are living within your means while still making regular payments to your student loan. Regular payments will help you chip away at your debt and maintain a healthy credit score. Be realistic about the budget you are setting to ensure you will be able to stay within it. Finally, make sure you have considered all aspects of your financial activities before creating a budget.

Start right away

The best way to pay off your student loans is to start as soon as possible. There is a six-month non-payment period where you won’t be charged interest on your loans after graduation. This is the best time to begin paying off your debt as it means you are making payments towards the principal and accumulating less interest overtime. You do not have to wait to pay off your debt. Starting early will put you on the best track to minimize what you owe.

Don’t add more debt

This seems simple, but we know that after graduation it can be tempting to jump into life by going on vacation or considering a large purchase, like a car. Although these are exciting plans, paying off your existing debt is the best way to gain future financial freedom. Getting rid of your debt becomes extremely difficult if you continue to pile on more. Make sure your budget allows for you to have fun while not increasing your debt.

Speak to a financial advisor

There are many strategies to paying off student debt, including consolidating or refinancing your debt. As a recent graduate, you may lack the financial skills and knowledge on how best to take on your debt. Different options could be beneficial for you depending on a variety of factors. Consulting a financial advisor allows you to be aware of all your options and can help reduce the amount of debt you have to pay overall.

Stay motivated

We know it is challenging and overwhelming to pay off debt but don't be discouraged, just keep going. The most important thing to remember when paying off debt is that even small payments over time can make a big difference, so don’t miss a payment and ensure you are meeting your financial goals by regularly checking in with your advisor.

Graduation is a big milestone in anyone’s life and can come with many challenges. Figuring out how to pay off your student loans can be simple if you plan ahead and stay on track. Don’t forget to follow us on Facebook, Instagram, Twitter or LinkedIn for more honest money talk tips!