How will you repay your student loans after graduation?

There are a lot of things to consider before going to college. What should you study? Which school should you go to? Should you go now or take a year off first? However, there is another big question that arises: will it be worth it in the end? A lot of people graduate with five-figure debt. Fortunately, a college degree is often a ticket to a secure, well-paying job. It gives you a decent income to pay off your debt and enjoy a higher standard of living. Still, there are other things to think about, especially if you’re about to graduate. For example, when do you start paying off your student loans? Does everyone pay the same amount? And what if you’re late or can’t make payments? Find the answers with this guide to paying off your student loans after graduation.

How long does it take to pay off your student debt?

The US Federal Student Loan Repayment Plan does its math based on the expectation that people will pay off debt within ten years of graduation. Thanks to the higher earning potential of a college degree from a good school, many graduates are debt free within ten years. However, there are programs for those who need more time to pay. the income based repayment plan allows borrowers to pay over 20 years instead. Payments are based on your income and expenses, such as looking after a young family. Payments vary between 10% and 20% of your monthly discretionary income. In some cases, they can be reduced to zero until your income increases.

Is Student Debt a Bad Thing?

“The debt-free mindset is largely the product of emotion,” writes American wealth planner Phil Cook. “Good debt gives you leverage that helps you increase your net worth over the long term.” In other words, debt isn’t necessarily a bad thing. Responsible credit systems are major engines of economic growth and opportunity, especially for young people from economically less advantaged backgrounds. If there were no student loan funding, only a privileged few could afford a college education. This is why many young people see student debt as an investment in itself that will pay off in the future.

They are not wrong. According to the latest data, graduates earn around $ 32,000 more per year than those with only a high school diploma. A study by the Georgetown University Center on Education and the Workforce calculated the potential return on an investment in a student loan. Over the course of your working life, you could earn $ 2 million more than the amount of debt incurred to finance your education. The figure is even higher for people with a postgraduate degree, such as a doctorate and an MBA.

University graduates are also more protected from the shocks of an economic crisis. After the 2008 credit crunch, the unemployment rate for young workers in the United States peaked at 15.8%. This figure was only 6.9% among recent college graduates. We will likely see something similar as we emerge from the current slowdown caused by COVID-19. Lockdowns have created an increased demand for digital services for which highly skilled university-educated employees, especially coders, engineers, and software developers, are generally well trained.

Being in debt during a global pandemic

COVID-19 has hit the global economy hard – and caused student debt to rise. None of this makes for a good read, but the help is already there. Many private lenders have offered a three-month forbearance, some going further by deferring interest. In addition, the latest COVID-19 economic relief package said the Internal Revenue Service (IRS) would not collect income tax on canceled student loan balances between 2021 and 2026. The student loan forgiveness is available for graduates who become totally or permanently disabled or are working full-time for eligible public or non-profit employers. According to a rough estimate by higher education expert Mark Kantrowitz, this could save some graduates as much as $ 10,000.

Ask for help

If you are falling behind on your payments, seek help as soon as possible. Burying your head in the sand is the worst possible approach to dealing with unpaid debt. Scott Buchanan, Executive Director of the Student Loan Servicing Alliance, said, “Call your loan manager to explore your options. Be prepared to discuss your financial situation. Then say what has changed in your situation, what is short term and what may be long term.” If you need short-term assistance, the lender can suspend or reduce your payment for an agreed period. This can last anywhere from three months to a full year. Keep in mind that the interest on your loan will continue to accumulate during any payment interruption.

You can find more information about managing payment arrears on sites such as This is a free online resource with a helpful FAQ section and step-by-step guides on student rebate programs, refinancing, debt consolidation, and savings plans that help prepare for the future while paying off existing debt. There is also a regularly updated blog by student loans expert and licensed attorney Michael Lux, whose writings on student debt management have appeared in US News & World Report, Forbes and The Wall Street Journal. The Sherpa Student Loan includes information on how to contact the Office of Final Consumer Protection and the Department of Education. These organizations provide support to people who feel they have been treated unfairly by their loan providers.

Free yourself from your debts

Melanie Lockert paid off his $ 100,000 student debt in just nine years. She shared the experience in her 2016 book Dear Debt: A Story About Breaking Up With Debt. The first thing she did was write a “debt freedom dream list,” which included a dream vacation and buying a home in Los Angeles to be closer to her family. “I realized I had to stay focused to have a better future,” Lockert says. “Writing your dream brings them more to the world. It makes them achievable.” Repayment begins at the end of your student loan grace period, which is typically six months after your graduation date. This means that you will have plenty of time to define your own goals.

Once her goals were set, it was time for Mélanie to start repaying part of her debt. Although she was careful with money, Lockert did not focus on reducing her cost of living. Instead, she looked for ways to increase her income. She took odd jobs and side scrambles, using freelance sites like TaskRabbit to find gigs. She sold water at raves, threw birthday parties, and did more than her fair share of pet sitting. She also opened a student debt savings account with her bank. She put away small amounts every week. Sometimes it was as little as $ 20. It doesn’t sound like much, but at the end of the year, she still had $ 1,000 to contribute to her repayment plan.

More importantly, Lockert rewarded herself every time she took a big step, like paying an extra $ 5,000. The rewards were usually small, like a meal with friends or a new pair of shoes, but they helped keep Melanie motivated. Additionally, Mélanie has never been too hard on herself when things haven’t gone as planned, and has realized that enjoying the little things in life can make a huge difference to our personal well-being. “It’s not worth burning yourself out to try and get out of debt. We have to try to enjoy the trip. So take care of your sanity, because nothing else in your life will work if it isn’t. not intact, “writes Lockert. “If you start to feel anxious or stressed about debt, pause and say, ‘I’m healthy, I’m safe, I have a roof over my head.’ In today’s world, it’s rich. “

Accepting any type of debt is a serious decision. However, as long as you choose the right course and have a clear career path after graduation, student funding is one of those “good debts” that can help build a better future.

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Louis Miller

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