Home > Student Loans > Learning From Experience: My Favorite Student Loan Tips

Comments 1 Comment

When you are 18 years old and on the verge of starting your college experience, you often have no way of understanding the impact that student loan debt will have on your life (once you graduate from college).

In the eyes of the 18 year old, the numbers are abstract and don’t convey what it’s like to actually make payments on the loans each and every month.

I was lucky that my student loans were manageable, but even so it was a bit of a shock to realize how much harder it is to pay them off. Here are some of my tips from personal experience:

1. You Have to Wrap Your Mind Around the Numbers, No Matter How Big

There’s no way around it — you have to understand exactly what your student loan debt means on a monthly basis. And to do that, you need to compare your student loan payments to your monthly budget. Depending on how big of a percentage of your budget is represented by your student loan minimum payment, you will know what kind of plan is realistic for you.

If your payment is less than 10% of your total monthly budget, then you don’t have to worry about your ability to pay. And if your required student loan payment is somewhere between 10-20% of your budget, then most likely you can make your payments (and perhaps even add a little extra).

But if your minimum payment is above 20%, and especially if it’s more than 30%, then it is going to be a challenge for you to make that payment every month. If that’s the case, you will need to take advantage of the advice in the paragraph below.

2. If You Can’t Afford Your Payments, Don’t Give Up — Take Action!

It’s very important that you don’t simply give up if you feel that your monthly payment is too high for you to afford. Why? Because if you give up, you’ll risk becoming delinquent and perhaps eventually defaulting on your loan. Just like with credit cards, making one late payment can have serious consequences, including doing harm to your credit score and opening you up to being pursued by debt collectors or having your wages garnished (for federal loans).

Fortunately, you can avoid all that! There is a program called Income Based Repayment that allows you to get on a new repayment schedule where your monthly payments are capped at 15% of your monthly income. It does mean that your repayment timeline is extended to 25 years, so you’ll have to pay more interest in the long run, but that is a small price to pay if it allows you to get some breathing room from payments that are too high.

While the IBR program is only for federal loans, many private lenders have similar programs that will allow you to set up an extended repayment schedule. Just call your lender and ask.

3. Know Your Options and Your Rights

But what if you can’t make your payments at all? In that case, it’s still important to be proactive and make use of forbearance and/or deferment.

Forbearance means that your lender agrees to give you a certain period of time — perhaps 3 months — when you don’t have to make any payments on your student loan. This is often granted as a courtesy, especially when you don’t have any income and are not able to make a payment. But you have to ask for it and work out the arrangement with your lender! Simply ceasing to make payments without communicating with your lender will usually cause your loan to go into default.

Deferment can also be a great option and is usually available to those who are are in graduate school, unemployed, or on active duty in the military. Deferment means that you don’t have to make payments and it usually means that your loan(s) are not accumulating interest.

There are other options you should know about, including the Public Service Loan Forgiveness Program, which will forgive all your remaining student loan balances after 10 years for anyone who has worked in a qualifying public service job and consistently made payments during those 10 years.

4. Make a Plan and Stick With It

So once you’ve got a monthly payment and a plan that works with your budget, how do you make sure you stick with it? There are a few different tips I have learned that may come in handy. For one thing, tell your loved ones about your plan and ask them to encourage you along the way — the power of having emotional support from those you trust and care about may surprise you and will help you accomplish your goal.

I would also recommend that you use online tools to help you track your budget and manage your debt. This can help you avoid a situation where you can’t pay bills. These tools ensure that you stay on top of your plan and help you continue to be motivated by reminding you of your progress each month.

If you need extra money in any given month in order to stick with your goal, you can try freelancing — using sites like Elance.com, Odesk.com, or MechanicalTurk.com — and make some side money with a small investment of your time. Whether you like writing, designing, crafting or something else, you can probably find someone who is willing to pay for your skills and your time. And that extra money can go towards paying your student loan payments. Who knows, it may even help you pay off your loans early!

5. Stay Positive

This may be the most important of all. By maintaining a positive outlook and brushing off any negative incidents along the way, you will increase the likelihood that you pay off those loans and become debt free. There will always be some hurdles that interrupt your progress and make your path seem much more difficult, so don’t be hard on yourself when these things happen. Just accept that they are a part of the journey and “keep on truckin’.” Your positive attitude will ensure you continue to do the things necessary to reach your goal. And that will make all the difference!

Image: Shilad Sen, via Flickr

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team