So it’s six months after you graduated and all you’ve got is an unpaid internship that’s going to turn into a job…eventually. You have to start paying back your student loans and your parents just decided to cut you off. No more money? But you’re trying to become who you are, you yell dramatically, making a scene in a crowded restaurant. Well, you’re probably not Lena Dunham. But you still need to figure out how to pay of your student loan before the growing interest sets fire to your credit score.
The average undergrad student comes out of university with $23,000 in student loans. And probably some credit card debt from all those textbooks you never wanted, maybe never opened. So how do you tackle this huge hole you’re just shoveling yourself deeper into? It’s not easy, but the answer is little by little.
The first thing you should do is crack open your excel worksheet and pound it out. And don’t worry; no one likes budgeting. So it’s not just you. You should be getting a package in the mail outlining your repayment schedule. The payments need to start going out at the end of the seventh month after graduation. Figure out the minimum amount you need each month to cover all your bills.
Here’s a good tip: If possible set aside an extra 20 percent for your monthly student loan payment. By showing that you aren’t just making the minimum payment but pushing it up that extra little bit, you can increase your credit score while you’re still in debt. Try to do the same with your credit card payments.
Make lump sum payments
Cash goes fast, especially in the hands of a recent grad. So when you do have some extra cash hanging around after you’ve paid all the bills, throw some more at your loan. I know it’s nice to have an extra cushion, and you should budget for that. But if you suddenly inherit some money from an uncle you didn’t know you had, or grandma passes you cash under the table, make a lump sum payment.
Increase the size of your monthly
This one’s obvious, guys. If you suddenly get a better job and you’re able to make bigger monthly payments, do it. In a couple years you could be saving for a down payment on your first house and want this loan out of the way. And now’s the time to do it. If you wait too long, you could have a lot more responsibilities and a lot less cash flow.
Any time you’re struggling to make payments you can defer them. And if you’re still struggling after five years, you can apply for debt reduction. It used to be that you could apply for debt reduction every six months, but the rules have changed. Make sure you have up to date information on your loan process.
Make more, spend less
Here’s another obvious one. Do you everything in your power to make more money and spend less. Reduce your expenses even if it means moving back in with your parents. Do every job you can get your hands on. Curb your shoe buying addiction. If you do everything in your power you’ll come out the other end bragging about how you paid off your student loan. And it might just make for a good story.