Getting Cozy With Your Student Loan Debt

Recent grads, we feel you. It’s that time of year when you’re likely staring down your very first student loan payment. The fun [aka your grace period] is coming to an end, and if you’re like many of us, you’re a little worried, a little anxious…maybe even confused.

The good news? With some careful planning, preparation, and the right expectations – you might even find the process to be somewhat gratifying. Yes, you read that right: gratifying.

So read on, brave grad – let’s get cozy with your student loan debt.

Budget for accrued interest

Accrued interest is too often the elephant in the room. It’s important to remember that in the case of private, federal unsubsidized, and some federal subsidized loans, you’ll accrue interest during your grace period. If you can, try to use this period to get ahead by starting your payments. If you can’t, bite the bullet and budget ahead of time for this additional cost.

• What you can do right now: Consider making your first interest payment before the end of your grace period. 

Review your federal loan options

This website from the Federal Student Aid office of the US Department of Education (ED) offers a solid breakdown of the different federal repayment plans available to you. These range from the standard 10-year plan, to pay-as-you-earn (PAYE) and other income-driven (IDR) plans offering a wide range of flexibility. Explore the options and see where your needs fit.

• What you can do right now: Compare your refinanced rates against the federal options to see how your monthly and lifetime payments might vary based on your personal info.

Learn about refinancing

Consolidating your private and federal loans into one single private loan could have a couple of distinct advantages, You could bundle your private and federal loans together into one new loan with a potentially lower interest rate, or switch to a shorter repayment term. All of this depends on your unique financial situation and should be carefully considered with your projected future income, goals, and current financial resources in mind. Also, note that if you refinance federal student loans with a private lender you will lose access to federal programs, such as Income-Driven Repayment (IDR), federal forbearance, and any other benefits offered to federal borrowers. Learn more at studentaid.gov.

• What you can do right now: Get your personalized rate and read our resources to see if refinancing makes sense for you. You can also schedule a free 30-minute consultation with one of our student loan specialists at GradFin¹ who can help you understand all of your student loan repayment options and make a plan.

Form the habit

Here’s a tip: Get in the groove of budgeting for your monthly loan payment before that first bill arrives. Make it a habit—no exceptions. The discipline required to pay off your loans in a timely, responsible manner takes time to develop. But rest assured—once you’ve got the rhythm down and start to see those numbers dwindle away, you’ll be three steps ahead of the hare to the finish line.

• What you can do right now: Figure out how much you’ll owe for your first bill and set it aside in your savings or emergency account. Take stock of your new balance and let the numbers sink in. Think about how this could affect your future budget.

Be the tortoise – not the hare

You’re a dreamer. You’ve got big plans and you’re ready to take action. But tread carefully—slow, steady steps toward paying down your debt adds fuel to your fire and shape to your ambition. We may be preaching to the choir here, but we believe a realistic outlook and an unflagging commitment to a strict budget goes a long, long way.

• What you can do right now: Settle in and start getting comfortable with the long-road view. Your goals may materialize more noticeably when your expectations align with reality.

Life happens – just keep showing up

At Laurel Road, we want to see you succeed in all aspects of your life. We’re always ready to chat about refinancing options that could help you. The subject of student loan debt weighs heavy on many, and isn’t always fun to talk about. But here you are. You showed up. And each small step you take, starting today, is something to be proud of.