Many millennials who are currently trying to enter the workforce can greatly benefit from a little student loan budget help. If you've recently graduated, or you're still enrolled in college and getting anxious about repaying your student loans once you've left college, here are a few ways to ease those worries.
Use your six month grace period wisely
After you graduate, you may be afforded a six month grace period before you start paying back your loans. This is to allow you time to find yourself a job, settle into your new career, and set yourself up financially. But many individuals struggle to find the job they feel is right for them within six months. Even if you're just working a part-time gig, it's a good idea to start squirreling away money for future student loan repayments. Budgeting is crucial during these first six months, so be sure to budget your finances carefully, and use all the free budget help you can get. We recommend these free online budgeting tools.
Understand the terms of your loans
Did your student loans come from private lenders like Sallie Mae, or did they come from the federal government? Review the terms of your loans, including interest rates, late payment penalties (if applicable), and repayment plan options. Try using this student loan Repayment Estimator on the U.S. Department of Education's Federal Student Aid website.
Prioritize your loans
If you have a mix of both private and federal loans, you'll probably want to prioritize paying off your private loans first, as the terms of these loans can be less generous and forgiving than federal loans.
Know what to do during times of financial hardship
If you are fully unprepared to start making the required payments, you have several options. You can apply for a loan deferment or temporary hardship forbearance from your lender. If you have secured regular employment, and you still feel your payments are too high and represent unnecessary strain on your financial situation, ask your lenders about your eligibility for the Income-Based Repayment Plan.
Educate yourself about the IBR
One of the biggest benefits of the much heralded Student Loan Reform Act of 2010 was the creation of the Income-Based Repayment Plan, or the “Pay As You Earn” program. The IBR/PAYE limits your student loan payments to 10 percent of your income “above a basic living allowance.'' They also allow the remainder of your student loan debt to be forgiven after 20 years of regular payments. (The IBR/PAYE options are not currently available for private loan borrowers.) You can find a wealth of info about income-driven repayment plans from the U.S. Department of Education's Federal Student Aid website.
Are you eligible for student loan forgiveness?
If you work in the public sector (i.e. if you work as a teacher or nurse, serve in the AmeriCorps or Peace Corps, or hold a job with a non-profit organization, or a local, state, federal, or tribal government), your loans may be forgiven in just 10 years through the Public Service Loan Forgiveness program.