There are few things in life that give you the same sense of accomplishment that comes with graduating from college. But what happens when that degree also comes with a sizeable student loan debt?
In 2016, the average U.S. graduate owed more than $37,000 in loans.
Even if you're lucky enough to land a job soon after completing your degree, figuring out the best way to pay back student loans can be confusing. Keeping on top of making payments can also stretch your monthly budget to the point of snapping.
So, what are some of the best strategies for paying back student loans, without added stress or debt?
Make Interest a Priority
Knowing that you have to pay back student loans is not the same as knowing how to accomplish this task.
One of the first things you will need to do is determine how much you owe, and who you should pay back first. Many students end up using multiple borrowing streams to finance their education, such as government loans, bank financing, credit cards and personal loans from family and friends. Generally, you will want to make sure you're paying back the loan with the highest interest rate first. You might feel obliged to repay family members immediately, or pay off the smallest loan in a lump sum. But, if you prioritize your repayments from highest interest to lowest, you'll pay less in the long run.
Be Calculated
Even numbers-savvy grads might need help figuring out the best repayment strategy. Handy tools, such as a student loan repayment calculator, can make the task a little easier. Don't be afraid to experiment with different repayment scenarios in order to figure out the best plan for you and your bottom line. While you'll still need money for day-to-day expenses, the faster you can pay down your debts, the more you'll save.
Don't Wait
Many government loans and student lines of credit offer a grace period after graduation, but even if you are not required to pay down the principle during this time, interest will continue to accumulate. It's tempting to use this grace period to catch up on other bills, or put any extra money you have towards another purchase. However, with even a modest interest rate of 4 to 10 percent, if you're able to start paying back student loans immediately you can cut down the repayment time by several months, and potentially save hundreds of dollars.
More Money, More Payments
There are generally no rules against paying more than your minimum payment each month, or paying more frequently than you're scheduled to. So, if you find yourself in the enviable position of having more cash than you expected, it's a smart idea to use it to pay down your loans, rather than spending it elsewhere. Also, if you're able to make bi-weekly rather than monthly payments, you could end up cutting down your repayment term by as much as fifty per cent.
Employer Assistance
Some employers have programs to assist recent graduates with paying back student loans. This may be a benefit mentioned in your employment contract, and if so, don't be shy to take advantage of it. While the benefit may expire within a few years, employer-paid student loan assistance can be of great help in the early years of your career.
Paying back student loans starts with finding the right job. Check out these strategies for showcasing your skills, and search here to find the best engineering jobs by category or location. With your career on track, you can focus on the best ways to take years off your student loan payment terms, and potentially save thousands of dollars.