Few things are more exhilarating than graduating from college.
Too bad it's so closely followed by something else: your first student loan bill.
Seven in 10 seniors graduate with debt, owing about $30,100 per borrower, according to the most recent data from the Institute for College Access & Success.
For this year's graduates, including those who don't have a job yet, the repayment process is about to begin.
Employed or not, starting out with such a hefty debt load is overwhelming. Many grads said they don't even know what they owe on their student loans, what interest rate they are paying or whether college was even worth it, according to a survey by Citizens Bank.
On the upside, for federal loans at least, which make up the bulk of student debt, there is usually a six-to-eight-month grace period before the first payment is due. Private loans, though, can start even sooner or immediately. That makes this the best time for graduates to "get their ducks in a row," Andrew Josuweit,
Here's where to start:
Many student borrowers have several loans, each potentially with a different interest rate, monthly due date and repayment period.
Go to the Department of Education's central database for student aid to get a handle on repayment options and terms for federal student loans. Sites like Student Loan Hero can also provide a dashboard-type overview for borrowers. Or create a simple spreadsheet to keep track, advised David Weliver, founder of the site Money Under 30.
Chances are you've moved, changed your email address and have a new
Take your income minus expenses, including your rent and monthly loan tab, to determine if you can afford your loan payments.
If you can't, look into federal income-based repayment programs, which allow you to pay a percentage of your income rather than a flat rate, as long as you are under a certain income threshold. Generally, you'll qualify if your federal student loan debt is higher than your annual discretionary income, according to the Education Department.
If you don't have a job
In each case, borrowers must apply for permission to postpone payments. With private lenders, there is some flexibility but also subjectivity,
"Check with each lender to ask if they will work with you," he said.
If you can afford your payments, sign up for autopay. An automatic program will decrease your chances of missing a payment and may come with the added perk of an interest rate deduction on your loan.
If you do have a
Once you have a steady job, a salary and a credit history, call a few lenders or talk to a financial advisor about your options. If you have several different loans, you might consider consolidating them. Or you may be able to refinance at a lower interest rate. You also could choose to extend the terms beyond the standard 10 years to lower your monthly payments, Josuweit said.
But weigh the options first, he cautioned. Consolidating or refinancing to a private loan will forgo the safety nets that come with a federal loan, including income-based repayment programs and loan forgiveness, for those who would qualify. Additionally, extending the term of the loan means you ultimately will pay more interest on the balance.
But first things first,
"Focus on finding a job and setting up a life," he said.
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