After a college student leaves school, one of the major factors in their budgeting may be student loan debt.
It appears as though future students will be put at even more of a disadvantage, with the interest rates on new subsidized Stafford loans expected to jump from 3.4 percent to 6.8 percent on July 1, unless the Senate is able to reach a compromise, according to CNBC.
Mark Kantrowitz, founder of FinAid.org and senior vice president and publisher of Edvisors.com, told the source that there needs to be focus on the amount of debt students are leaving school with, not just the interest rates on loans.
"Each year the average cost of graduation goes up by about $1,000 or more," he said. "And having less expensive debt is not going to make much of a difference if the total amount owed keeps on going up."
Not matter how much student debt Americans leave school with, they need to know how to responsibly reduce their balances once entering the real world.
1. Be aware of your grace period – One of the most important things to know about your student loans is the grace period, according to The Project on Student Debt. Some have six month periods, and some have nine month periods. The major reason you need to know when your grace period is up is to ensure that you don't miss your first payment, as this can impact your credit score.
2. Pick the right repayment plan – Another important factor when paying down your student loans is your repayment plan. These can vary based on where you obtained your loans, but the general repayment plan is around 10 years. However, the federal government offers extended plans that can go as long as 25 years, with any debt remaining after this period being forgiven. That being said, you should do your research during your grace period so you can choose the plan that best suits your needs.
3. Avoid other debts – While paying down your student loans, it would be wise to avoid any other type of debt. For example, getting yourself in trouble with credit card debt while attempting to reduce your student loan balances could lead to a difficult financial situation. To prevent this from happening, you may want to stash your plastic until your student debt is paid off.