The Reality of Your Student Debt

There are very few people who can afford going to college without taking out a student loan. Higher education is expensive and by the time a student graduates after four years, there is a sizeable debt to repay. The average student loan debt is now at around $25,000. Repaying this debt should be of the highest priority for graduates. The quicker the loan is paid off, the cheaper it will be in the long run. This is because interest rates on loans tend to be fairly steep and if not repaid quickly, this can add thousands of dollars in interest over the life of the loan.

Watch Your Rating

When graduates do not make regular payments on their loan, they can develop a bad credit rating. This means that they may not be able to get a regular credit card and they may have to resort to obtaining bad credit credit cards. There are companies that offer these cards and make it possible for people with outstanding loans to obtain financing.

It is important to pay off at least the interest on the loan during the time the student is still in school. This helps to avoid negative amortization and will help the student to pay off the debt sooner. Many students work part time and this is a good way to reduce debt and reduce the amount of loan that has to be taken out to cover school costs. It may not be easy to work a job and engage in studies, but it will give the student a better head start.

Graduating and having large amounts of student debt is very stressful for the new graduate. Graduates are just starting out in their career and, therefore, will not be earning as much as the more seasoned professionals in their field of study. Paying off this debt should be a priority, or it could well be something that the student carries around for a decade or more. Students who take their doctorates have even higher debt amounts because they are in school several years longer than the average student.

Budget Well

The cost of student loan repayment is added to the cost of rent and utilities, as well as any credit card debt and other loans that may be outstanding. Graduates with loan debt should sit down and figure out their monthly budget. Once a job is obtained, there will be a steady inflow of cash and this should be weighed against the monthly cash outflow. It may be necessary to forego items such as coffee at the upscale coffee shop, in order to save extra money.

The graduate, serious about getting a handle on the debt, should try to put as much money aside every month as possible. Making a detailed plan on how much money needs to be paid down to clear the loan quickly is a good idea and can greatly reduce the number of years it takes to pay off the student loan. Instead of looking at the whole loan amount and panicking, it is wise to focus on how much can realistically be put aside every month to make the most impact on debt. Once this is worked out, it is then a matter of regularly and systematically paying off the loan.

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At Monday, January 23, 2012 10:38:00 AM , Anonymous Daniel Milstein said...

That is so true. As an author and business man, I can relate to how you said "It may be necessary to forego items such as coffee at the upscale coffee shop, in order to save extra money". I hope more people discover your blog because you really know what you're talking about. Can't wait to read more from you!


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