Graduating with Student Loans

Graduation Game Plan: How to Get a Head Start on Student Loans

I graduated from college in 2011 with a dual degree in History and Teaching Social Studies. At that time, I was actually already working in a middle school as a paraprofessional. It wasn’t quite my dream job, but I was crazy happy to be working at a school right out of college, especially one that I loved!

It was a great stepping stone to my current position as a full time teacher at the same local charter school. At the time, I was in bliss making more money than any job I ever had with summer vacation right around the corner. I had sunshine, the beach, and fun times on my mind when I walked across the stage to get my diploma. I didn’t have a clue for the hurt I had coming my way.

Basically, I felt like I had it made. That is, until my student loan grace period was up. I quickly realized that my student loan payments were WAY more than I could afford on my current lifestyle and income. As a paraprofessional, I made about $23,000 a year before taxes. So naturally, in all of my 24 year old wisdom, I switched to an extended repayment, adding 15 years to my current plan. It was a lot easier than changing my lifestyle (apparently I hadn’t figured out the “do whatever it takes” mindset).

Looking back, I really wish I had planned ahead so I had a realistic picture of post-college bills and how student loans would impact my expenses. Instead, I did what a lot of college graduates do. I got comfortable with a lot of debt because well, that is just what you do to pay for college. I barely survived the minimum payments (on an extended repayment plan), saved no money, and set my sights on this wonderful picture of “someday” when I would eventually have no student loan debt. Of course if I would have stayed on that course, I wouldn’t be debt free until I was in my 50s!

Make a Plan!

Getting back on topic, if you are a recent college grad (or still in college but graduating soon) with a crap ton of student loan debt, now is the perfect time to make a plan and set goals to pay it off as soon as possible. Let’s get you to graduation with a firm grasp of the reality of post college expenses with student loans!

The Blur of University Exit Counseling

In order to actually graduate, you of course need to pass all of your classes, but if you took out any federal student loans, you have an extra step of loan exit counseling. In my opinion, this is one of the most important steps of the graduation process! You spent at least four years collecting a pile of debt to accompany your degree, and you finally have a chance to figure out what it all means and how to pay it off! In my experience, it was a huge let down.

The meeting only lasted about 20-30 minutes and in that time, the counselor went a mile a minute through interest rates, the loan websites, different length repayment plans, and all other sorts of fine print. I walked out of this meeting with a folder full of papers, more confused than before. The only thing I really remember is that as a teacher, I might qualify for loan forgiveness if I meet some specific criteria.

If you want to get a firm grasp on your student loans, I think you are better off figuring out the major details on your own.

Exit Counseling Round 2: The Do It Yourself Version

After you get done with your exit counseling, take the time to sit down with all of your loan paperwork and sort through it. Make a separate pile for each loan you have and go through them one by one, finding key details to help navigate these murky waters.

The two most important numbers for each loan is the total amount owed and the interest rate. If you want to be really organized, write these numbers straight into a spreadsheet so you can begin making your debt log, a tool to help you see your total debt and calculate how long it will take to pay off. (For a complete guide to the debt log, click here) Each website you visit will ask you to create a username and password, so make sure you keep this information written down some place so you remember it each month you log in to make a payment.

Repayment Options

Next, you want to check the repayment plan. The standard will be a 10 year schedule so you repay your loan in full, plus interest, in 10 years. There are other options available if you can’t afford to make the minimum payments. As I mentioned above, the Extended Plan stretches your loan over 25 years, lowering the monthly amount, but increasing the total amount paid through interest. Other low monthly payment options include Income Based and Pay as You Earn. All of these options will extend the length of your loan, making it more expensive in the long run.

The next part is extremely important. Listen closely. DON’T CHANGE YOUR REPAYMENT PLAN! NOT EVER! DON’T EXTEND YOUR PLAN!!! There, I said it. Extending my repayment period was the worst mistake I ever made with student loans because while it lowered my monthly payment, I got charged a butt load of interest over the years. In each payment of $220, only about $50 went towards my principle!

At that rate, it would have taken me forever to pay it off, well really 25 years, but that seems like forever to pay back money I borrowed to pay for college. I could have been paying back my loans at the same times my future kids would be in college, yikes! Again, I highly recommend keeping your repayment plan at 10 years, and then work hard to pay it off in less than that. I will talk more about how to do that later.

You Might Qualify For Loan Forgiveness

In some cases, you might not have to pay off your entire student loan. Depending on your career and type of loan, you might qualify for loan forgiveness. A lot of these programs I have heard of relate to service professions, such as teaching. My wife and I are both teachers, and luckily qualify for loan forgiveness.

For one of Jenna’s loans, she needs to teach in a low income school as a teacher for five consecutive years and $17,500 of her Federal Loan will be forgiven! That is crazy to me! I also qualify for a similar forgiveness plan, but since I teach History and not Science or Math, I only qualify for $5,000 (lame huh!?).

It’s actually faster for us to just pay mine off instead of stalling for five years, haha. My point is, it’s a great idea to learn if any of your loans qualify for forgiveness. It can save you a lot of money in the long run and is worth exploring and filling out the paperwork.

Grace Periods are NOT for Relaxing

I’m sure you already know this, but each loan has a grace period after you graduate. When you graduate, or before, figure out how long your grace periods are because it might be different for each loan. One of mine was six months, while the rest were nine months. During this time you aren’t required to make any payments, except maybe on interest.

This is a beautiful time, especially since you may not have a career job immediately after graduation. It gives you a chance to get your feet on the ground so to speak and start making a good income. But just because you don’t need to make payments, doesn’t mean you can’t. If you’ve taken the time to look up your interest rates, loan amounts, and calculated your monthly payments, you might as well start making payments.

It will be such a benefit to get a head start and possibly cut down years over the length of your repayment. Learn about a debt snowball to accelerate your loan repayment!

Get Ready to Work Your Butt Off

The best piece of advice I can give for getting ready for student loan repayment is to mentally and physically prepare to work hard! If you are determined to pay off your loans early, you will need to be willing to do what others won’t do. Even if you can easily make your monthly payments, I highly recommend finding ways to increase your income so you can pay more each month and pay your loans off faster.

There is no shame in getting a 2nd job working weekends to make more money. The restaurant business is a great way to do this! For just a few hours you can walk away with over $100 in cash tips. A few hundred extra dollars a month goes a long way to becoming debt free. My wife and I have been working at a restaurant for the past two years and it has saved our finances!

The reality is student loan debt sucks the life out of your post college dreams of travel, buying a house, and starting a family. I know first hand. My wife and I have poured so much hard work into paying off our student loans in the last four years. When all’s said and done, we will have paid off $90,000 in a little under four years. Compare that to ten years, or 25 years after choosing the extended plan, if we stuck to the typical plan of making minimum payments. Yes it has been hard work, but we got 21 years back of debt free living. Our lives will be forever changed because of our choices to get out of debt.

Wrapping It Up

Student loans can be a giant, confusing mess. But they don’t have to be. Learn as much as you can from the University exit counseling, but then take matters into your own hands to figure out the nitty gritty details of your loans.

Let Me Know in the Comments

How are you preparing to pay off your loans? What advice do you have for new college grads? Are there any questions you still have that I didn’t answer?

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