Education comes with a hefty price tag, making it difficult for most students to pay for school unless they have assistance through federal or private loans. Many students are eligible for loans with affordable interest rates and special payment terms, including a grace period that allows you to wait before paying back your loans. The low interest rates and easy access to funds allows students to pursue degrees that would have otherwise been unaffordable.
The process of paying back student loans takes time, energy and determination.
You can become a responsible borrower by putting money aside as soon as high school graduation ends, making intentional budgeting decisions, never borrowing more than you need and making every single monthly loan payment a priority.
Saving After High School Graduation
It is essential for students to develop a saving mentality from the moment they take out their loans. Once students develop a focus on saving, every dollar they earn has the potential to be used for future loan payments and to prevent acquiring more debt.
Loan money is often disbursed into a student account, which allows students to withdraw cash and use money as they please. Some students misuse the loan privilege and make their focus entertainment and careless spending, rather than saving, forcing them to take out more loans and adding to the amount they already borrowed.
Ideally, the money from student loans should go directly to tuition and living expenses without leaving any extra around to whittle away. Borrowing the minimum amount needed to make it through school is the first way to start saving.
Earning Money While in College
Even if the job is two nights a week or eight hours on Saturdays, a tiny income during the four years in school will go a long way toward paying back loans. Combine this with the money students can earn through summer jobs and, by graduation, there will be a significant lump sum to assist with finances.
Take your earnings and put them in a savings account to be used as an emergency fund of easy to access cash. This money can save students from taking out more loans when their cars break down or they have an unplanned visit to the emergency room.
Any leftover money that is not used for emergency can stay in savings and earn interest until it comes time to make loan payments.
Managing Payments after College
Following graduation, it is important for students to learn how to depend on themselves for survival, rather than on their parents or guardians. As soon as school ends and students have a reliable source of income, it is time to address loans head-on. Take the initiative to make a budget and plan your finances by dividing up earnings for loan payments, bills for living expenses and saving for the future.
As time goes on, responsibilities and bills will only increase, making it harder to repay loans. So instead of putting the inevitable to the side, get started making payments immediately.
Sticking to Payments
Ignoring calls from creditors and making loan payments your lowest priority can have serious consequences. From late fees to raised interest rates, missing payments will cost you.
Lenders may alert credit bureaus when a student defaults on loans for an extended period of time. As a result, the credit score of the student can plummet. With a low credit score, financing for major purchases later in life may be difficult and some jobs may not hire candidates with lower scores.
If a student is unable or unwilling to pay their outstanding student loan debt, some financial institutions will come after debtors and possibly pursue a judgment in court.
It is never too early to start saving the future. Taking out student loans is a commitment that requires immediate action, from the day you sign the paper work to the day you pay the last cent owed to the lender that made your financial path to education possible.
This is a guest post provided by Alanna Ritchie. Alanna is a content writer for Debt.org, where she writes about personal finance and little smart ways to spend (and save) money. Alanna has an English degree from Rollins College. Feel to join our conversation on twitter debt.org.
No More Struggling To Keep Your Home Clean
Subscribe to get your copy of this Weekly Cleaning Schedule Printable.