Don’t just hope for the best
While a “set it and forget it” mindset is great for not missing a payment, it doesn’t always bode well for ensuring your finances are aligned with your current situation. Sometimes, recent grads receive their first bill, set up their recurring online payment, and cross their fingers that they can make it work.
Before you set up your payments, you should be sitting down and making sure you know exactly which kinds of loans you have — are they subsidized, unsubsidized, private, a combination of multiple loans? You should also create a budget to get a handle on what’s coming in and going out. Look at your expenses and net pay — how much do you spend on rent? Do you have a car payment? Can you afford these expenses once your loan payment begins?
You’re not alone if your paycheck isn’t stretching as far as you thought it would. Sometimes, that first full-time salary seems substantial compared to previous summer jobs or part-time on-campus work, but when you add all your other new expenses in, the money can go quickly.
What do you do if you realize the numbers aren’t adding up?
Whether you’re realizing this while setting up an initial budget or after a few months (or even years) of making payments, it’s important to know you have options. While your budget may have seemed substantial, throw in traveling for multiple weddings in one summer, an unexpected medical bill, an expensive dental procedure — you name it — and suddenly you’re sliding expenses onto a credit card. It’s time to take a look at your full financial picture.
You don’t want to fall into a spiraling cycle of debt. And not all debt is created equal. Here are some questions to ask yourself:
- What is the interest rate on your current student loan(s)?
- Is there an option for an income-based repayment plan that could potentially lower your monthly payments?
- Does consolidating or refinancing make sense?
If you consolidate debt with a private lender, the refinanced funds could potentially end up with a higher interest rate and become ineligible for income-driven plans. Before making any decisions, find out if the rate is locked in or adjustable.
Use your resources
Student loans can get complicated fast. From new laws to news about loan forgiveness to repayment tips and tricks, information about student loans is constantly circulating. Sometimes, it’s hard to determine credibility and accuracy.
So what’s the source of truth? If you’re stuck, the first step is to call your loan servicer. You can also visit the Federal Student Aid website for information about repayment options, loan forgiveness, deferment, and more. There’s a loan simulator that helps you estimate monthly payments, compare repayment strategies, and decide whether consolidating would be beneficial.
If you find yourself struggling to balance your student loans with the rest of your finances, don’t stay quiet. Ask for help. The worst thing you can do is to default on your loans or to simultaneously build up other debt while continuing to pay down your student debt. Taking control of the situation early on is always a better option than avoidance.
Your Wintrust Community Bank is another great resource for financial advice. Book an appointment to speak with a banker about budgeting or financial planning. You invested in yourself by furthering your education, now you want to ensure you’re paying that investment back as efficiently and cost-effectively as possible. Carving out time for your finances is the next step in investing in yourself.
