KNOXVILLE (WATE) — Who can’t appreciate that life changing moment when you’re filled with emotion as you walk across the stage at graduation.
Shortly after that, the clock on that grace period starts ticking and before you know it, all that money you took out in student loans is ready to be paid back whether you’re ready or not.
Mounting college debt is something many students in the U.S. face.
“The first thing they need to do is put together a budget,” said Lecturer Susan Murphy with the Haslam College of Business at the University of Tennessee.
Exactly what you probably didn’t want to hear after just spending years micro-managing every penny to your name, but it’s true.
“This is not a new thing and it’s because the cost of education has gone up so much that students, if they want to get a college education they have to take out student loans,” Murphy said.
If you did have to borrow money and the time has come to pay it back, where do you even begin?
You can start by making a budget, knowing what you have can be crucial when fixing your finances.
Then, you can select a payment plan. At this point you’ll know if your loan payments are high compared to your income, if they are, you may want to look into an income-driven repayment plan.
If you have multiple loans with multiple interest rates, you may want to look into consolidating your loans into one big one, which can simplify your payments but can also cost you some benefits.
Speaking of payments, never miss one!
“Once you miss that payment, you’re in big trouble,” says Murphy.
Murphy says missing a payment could reflect negatively on your credit score, and it can also affect your eligibility when it comes to certain income driven repayment plans.
“If possible, and this seems like daunting to some students, if you can make one extra payment per year, that will go towards the principal of the loan and you’ll pay off that loan a lot quicker,” Murphy said.
Also, knowing how much you borrowed and which lender you borrowed from can help too.
If you took out one loan each semester and you were in school for four years, that’s eight loans with eight interest rates. Knowing how much you’re in debt and who you owe as graduation time approaches, or that repayment period starts, can help with organizing your finances.
“When they take out the loans, they sometimes forget that there is going to be payback period and it’s going to cost a lot more than what they originally thought it was going to cost,” says Murphy.