Budgeting & Saving

9 Steps to Take After Graduating with Student Loans

There is no doubt that student loan debt has become a bigger and bigger problem in recent years. According to College Board, about 57% of public, four-year college students graduate with debt. So if you have student loan debt, you are not alone. I also fall in that group of college graduates with student loan debt. And though I ask myself each day when I look at my student loan balance if college was worth it, I always repeat the same words to myself. “Stop procrastinating and pay off that debt!”

I would like to help you pay off your student loan debt as well so I’ve come up with 9 clear steps to take after graduating with student loans. And in an educational fashion, each step takes us through the first 9 letters of the alphabet.

Assess the Situation

I have a friend that told me how she was scared to look at her student loan balance. She only cared that she did not yet have to pay them. Well, the day will come when she will have to start paying those loans back. If she asks for my thoughts I will recommend starting with this first step of assessing the situation. Figure out what student loan servicer has your loans. You’ve likely received an email or letter from them that lists your loan balances and due dates.

If you have multiple loans, like I did, then look into consolidation. Often, making one payment is easier than trying to make 7 different payments. Head over to and login to your account if you have no clue where to start. If you have private loans then contact your private loan servicer. You can be sure they have contacted you.

Begin Career

While you have been assessing the situation, you’ve also been looking for a job right? Hopefully you had internships and made a great impression. You’ve compiled your resume and you interviewed like a pro, landing your first career job. You’re earning the expected entry-level salary for your major and you can’t wait to get your first paycheck.

Celebrate Success

Now it’s time to celebrate! I always think getting a new job deserves a happy dance but maybe that’s just me. Grab your closest friends and head out for a night on the town. Enjoy the moment and revel in your success because after this night of enjoyment, it’s time to buckle down.

Determine a Budget

The first budget that you create based on your brand new job is going to be pretty simple. Check out your employer sponsored retirement plan and see if they offer a matching program. Many employers will offer to contribute 50 cents for every dollar that you contribute to your retirement plan. They will typically do this up to a percentage of your pay, usually 3-6%. Your first step in budgeting for student loan debt repayment is to take advantage of this free money.
Next you will determine how you want to live. If you can bring home a decent pay but still manage to live like a college student, you will have no problem paying off your debt.
A general rule of thumb is to allow for 31% of your paycheck for debt repayments. That includes credit cards (which you hopefully do not have), student loans and miscellaneous debts.

Evaluate Options

If you have started your budget and you determine that 31% of your take home pay is not enough to cover the student loan payment, start evaluating your payment options. Public loans offer Income Based Repayment, Income Contingent Repayment and Pay as You Earn as ways to lower your payment. If you realize that you truly cannot begin paying immediately, look at deferment or forbearance as an option. These options will allow you to stall your payments though you may have to pay interest that accrues.

Figure the First Payment Date

Now that you have your options fully locked into place it’s time to decide when you are going to begin paying your loans. When I graduated college, student borrowers were allowed a 6 month grace period before we had to start paying back our student loan debt. I decided to use deferment and forbearance time to stall even more. Once you have your budget and your payment plan, you can begin paying right away if you choose.

Grow Emergency Savings

Congrats on paying your loans! Each month that you pay, remind yourself that your college degree was worth it. But don’t neglect your savings. If you have extra cash that you can contribute to your loan pay off, I encourage you to put that into an emergency fund instead. Paying off student loans is a worthy endeavour, but keep in mind that emergencies may pop up as well. Make it a point to stash some cash for a rainy day.

Halt Lifestyle Inflation

As you continue to work in your brand new career, you are likely to receive an increase in pay. It’s easy to take these increases and inflate your lifestyle. A small apartment turns into a bigger apartment. One night out a week turns into happy hour each day after work. Keep an eye out for these budget busters!
I used a very simple method to combat the lifestyle inflation creep. Each time I received salary percentage increase at my company, I simply increased my contributions by the same percentage increase to my company sponsored 401k. I saved more and because they were pre-tax contributions, my paycheck was roughly the same.

Ignore Doubts

It’s easy to look at your student loan debt balance and feel like it is insurmountable. Instead, surround yourself with supportive friends and family. A strong support team will make paying off that debt much easier. I know you can do it! You made it through college, right?

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Originally posted 2014-05-21 06:00:49.

Young Finances

Parents! Know This Before Borrowing Students Loans for Your Child

It’s almost time for the back to school discussions and families are gearing up to chat about one of the most important topics, money. As students get ready to enter college for the first time, the cost of tuition, books, and room and board is a concern for many parents and students. As a parent of a new college student, here are the top 4 things you should know about paying for college.

1. Discover the Options Available

When I graduated high school I had no idea what career I wanted to pursue, but I knew that I wanted to go to college. My parents agreed. According to a recent study by Discover Student Loans 81% of adults with college age children feel that college is very important to their children’s future. The concrete data supports this emotion. The overall employment rate for those with a college education (72.5%) is higher than for those with only a high school diploma (54.6%). (Source)

Researching the available options is the first step to helping your child fund a college education. According to the Discover Student Loans survey, only 9% of parents say they can afford all of their child’s education. To cover the costs, you may need to look into financial aid and other borrowing options.

2. Understand Co-Sign versus Parent Loan

While it may be tempting to borrow the full cost of your child’s college education on your own, it’s important to understand the difference between co-signing a loan and borrowing a federal Parent PLUS loan.

An option from financial aid is a federal Parent PLUS loan. However, many people don’t realize there are limits to federal student loans. The limit to what you can borrow is determined by the school and factors in any other financial aid your child may receive.

To help your child with expenses, you can also co-sign a private student loan for your child. When you co-sign a loan, you agree to joint liability for the loan. While your child will be responsible for payments, you are guaranteeing that those payments will continue. Be sure that you are ready to take on full responsibility for the loan if your child cannot make payments. It is important to look for the right loan for your situation. In addition, search for loans that offer rewards for good grades, on-time payments, and zero fees.

3. Encourage Alternative Funding Options

Before you immediately reach for a student loan to cover all expenses, take the time to maximize grants, scholarships, and other free financial aid. I applied for scholarships and used those funds to offset the cost of college. There are also work-study programs to help with college costs. If your child is not eligible for work-study programs, consider suggesting a part time job to help with costs.

4. Help Your Child Research Majors

Choosing a major is just as important if not more important than choosing what college to attend. A study from shows that one-third of college-educated workers do not work in occupations related to their degree. In order to make sure your child does not leave school with a degree they won’t use and will likely not appreciate, it’s important to research majors to find one that fits passions with desired lifestyle.

Watch this video to discover what college majors yield high paying salaries.

The decision to attend college is a large one and it comes with a subsequent conversation about how to pay for college. There are many options and it is important to research them fully. Check into financial aid, grants, scholarships, and finally look into private student loan options to help cover the costs. Making the decision is not easy but there is no doubt that a college degree is worth it. See more from the Discover Student Loan study by clicking here.

This post was created as a part of the Discover partnership program.

Originally posted 2015-07-30 10:00:05.

Young Finances

Should I Pay Off Student Loans or Invest?

As a recent college graduate, it’s likely that you have student loan debt. According to the National Center for Education Statistics,

“From academic years 2006-07 to 2010-11, the percentage of first-time, full-time undergraduate students at 4-year degree-granting institutions receiving any financial aid increased from 75 to 85 percent.”

With an average 4-year tuition cost of 21,000 dollars, and more and more students taking on student loan debt; a portion of your salary will go directly to paying of this debt. (Source)

However, if you research investment strategies, you’ll see the same advice over and over again. Start early and use time to your advantage.

Starting early puts the power of compounding on your side. That means more money. That also means that you are faced with a difficult question. Should you pay off student loans first or invest?

Before you can answer that question, you should evaluation your personal situation.

Do you have any other debt?

Do you have any other debt aside from student loans such as credit card debt, car loans, or medical bills? Even though your balance of student loan debt will typically be higher, these types of debt often have a higher interest rate. In order to save money on fees and interest. You should work on paying these off first. In addition, student loans give you more flexibility in terms of deferring payments whereas, waiting to pay credit card debt will most certainly affect your credit score negatively.

How much money do you have saved?

If you lack emergency savings, and you have an unexpected expense, you will cause yourself more stress than necessary. Emergency savings of 2-3 months of expenses as a bare minimum will help you manage most unexpected expenses such as hospital bills or car accidents. Take some time to build up an emergency savings fund first before you consider investing.

If you have all other debts in check and you have already set aside your emergency cash, now you can consider if it is better for you to pay off student loans or invest.

What types of loans do you have?

Typically, government issued loans have a fixed interest rate. If you do not have a fixed interest rate, then it would definitely be much wiser to pay off that loan as much as possible (or entirely) before you consider putting your money into investments. This is because when it comes to finances, figuring out what is certain and what is uncertain will help you determine where to put your efforts.

Are you ready to risk investing?

There is no such thing as a safe investment. The market can crash and businesses can go under at any time. Some investments are safer than others. When investing, there is a trade off between the risk you take and the reward you earn. The higher the risk becomes, more money will be returned on the investment. Only you can determine what types of risks you’re willing to take in your investing.

One final consideration is how you feel about your student debt. If you are the type of person who is uncomfortable with knowing that you owe someone a lot of money, or you have concerns about making that payment every month, then the answer should be obvious. Pay off your student loans.

There were many questions posed in this article. That is because there are many things to consider with a question such as this. You are the only person who can determine which choice is the correct choice. Evaluate your situation carefully, and make a decision that works best for you and causes you the least amount of worry.

This post was originally published as a part of the PNC Achievement Sessions helping you get smarter about money. Click here for more articles.

Originally posted 2014-08-20 06:00:42.