The best strategy with any debt is to get out of them, sort of like wet jeans – a good strategy to live by.
But in all seriousness, student loans may be necessary for you to get that great education to get your dream job. It can be a necessary evil.
Before signing anything check what you are signing. This debt may be with you for many years, do not be afraid to ask the right questions. Some main areas of concern will be what are the rates that will be applied to you. When are payments due and a critical one (but often overlooked) will there be any penalties for paying early. Hence, if your ideal job starts paying you tons of cash, can you pay your loan at once and if you do, will there be some penalties.
Some companies will charge you to pay off early. Some companies may even require you to pay all the interest that would have accrued to them. These are companies that you want to avoid at all costs. Read the fine print and get answers in writing. Do not sign anything that you have not read!
Some good tips to follow:
Tip #1: Do Your Own homework on the loan
Not all loans are created equally. Some of them, offer good benefits during school as well as after graduation in the form of repayment incentives, while other do not. Some may have a grace period or interest free period. Make sure that the interest paid later is not super high. Ideally you want to be paying less than 6 – 8% overall. This would be the maximum. Do not get tricked into signing a no interest loan for three years and then rates as high as 12 – 15%.
Tip #2: Check your mail and email
Every borrower receives some critical information regarding the student loan he or she took out. It is vital that you read all of the materials you receive carefully. If you have questions, the source of the materials is available to welcome you with your questions. As stated earlier if you are unsure then ask the question, and never ignore the correspondence or you may miss out a very vital deadlines or details about your loans.
Tip #3: Get Organized
Save all of your correspondence in one file and make scanned copies. This will be good back up in case of any disputes. You should save hard copies and also scan them and save in a folder. You can email them to yourself so you can access anywhere or save on cloud. Just because you are not paying off the loan currently, does not mean you should not save the correspondence you receive.
What you should keep:
Your student loan applications, promissory notes, disbursement and disclosure statements, as well as loan transfer notices.
All correspondences between you and your student loan lender, loan holder, and/or services, including your school’s financial aid office.
Current contact info for the financial institution.
Details of names and dates of any conversations with individuals from the institution.
Tip #4: Manage your money like a professional
It is important that you know and understand how to handle your money while you are attending school. Then take that learning and apply it to after school life:
Start to make budgets and forecasts. Look on our post on how to budget, find it here:
Learn to live as frugally as you can. Always remember that you are just a student. You will enjoy a more comfortable lifestyle once you’ve graduated especially if you lessen your borrowing while you are in school. Some easy tips, do not take up smoking or quit smoking. Eat and drink at home for the most part.
Credit cards have a very high interest, do not have any debt there, pay them off immediately.
Make and follow your budget.
See if you can find a part time job or start a side hustle.
Tip #5: Take Advantage of Tax Savings
You may qualify for tax credits because of this loan. Check how that works and speak to a friend who is studying to be a CPA or find some free advice somewhere.
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Tip #6: When Repaying
As you enter the phase where you are repaying your loan, it is critical to be aware of all facets of this loan. Do not get into default. May sure you make your payments on time, you want to avoid any penalties.
As you enter this phase, you should start doing the following:
Make your payments religiously, never be late and try to get an automatic payment set up with your bank.
Understand your options, can you pay it off immediately? Are there any penalties for paying off early or paying in advance.
Can you delay payments or is there any grace periods available.
Do you understand your total interest rate per year and average interest rate over the life of the loan. You should calculate this yourself and verify it with what is stated by the institution.
Remember that the loan consolidation and its repayment options have its pros and cons. So, understand them.
As mentioned previously, check all correspondence and make sure they correspond with up to date addresses and emails.
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