Student Loans: You Graduated, Now What?

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Point of Interest

Creating a plan for your student loans after college involves budgeting, knowing your options and preparing for all financial climates. 

A student loan is a powerful borrowing tool that countless people have used to help pay for higher education or other job training. According to a study conducted by the Federal Reserve Bank, 43% of people who attend college have incurred some form of educational debt, which means almost half of the people who attend training after high school will have loans to pay back. 

If you’re one of the people who’s used student loans to fund your education, you’ll need to have a plan for how to pay them off after you’re done with school. How you approach them, though, will depend on your future career and life plans.

5 steps to take after graduation

As you begin your career and head toward financial stability, creating a plan for your student debt is paramount. While you don’t have to pay everything off immediately, a well thought out plan to handle your student loans after college is a must. To start, you should:

  • Create a repayment plan. You should know exactly how much you owe on your student loans when you graduate. Create a budget and a plan to stay ahead of your financial obligations. Doing so will help to protect your credit score and move you closer to financial stability.
  • Look for ways to pay extra. Unless your student loans have a prepayment penalty, you should look for opportunities to pay extra toward the principal. The sooner you can pay off your student loans, the quicker you won’t have that debt hanging over your head. Look for ways to cut costs, earn extra at your job or pick up extra work on the side.
  • Consider refinancing if it makes sense. If rates have changed since you took out your loan, you may be able to refinance and save significantly on interest costs. Check with lenders to see if options are available that make sense. If you’re struggling to find work, you may be able to refinance to lower your payments.
  • Research any safety nets. Some lenders will have plans in place to help you out if times get tough. You may be financially stable now, but you should still take the time to learn what options exist in case things ever take a turn. If you have federal student loans, look at the different repayment plans that are available. These options can help out in tougher financial times.
  • Build your emergency savings. Before you start paying extra on your loans, stock away several months’ worth of payments for your loans. If times get tough, you can use that money to stay current on your loans while working to improve your financial situation.

What happens if you can’t pay your loans after you graduate?

In a perfect world, everyone would graduate from college and walk right into the cushy job of their dreams. In reality, that is not always the case — especially in these tough economic times. You’re still required to live up to your financial obligations either way, though, if you want to protect your financial picture.

Failure to pay your student loans after college can result in your credit score dropping significantly. The later you are on payments — or if you reach default — the worse it will get. Your lender may turn your loan over to collections or even sue you for the money. 

If you find yourself in this bind, there are options.

  • Student loan forbearance — Many lenders have plans in place that allow you to put off payments for a period of time if you lose your job or fall on hard financial times. Reach out to your lender to see what options are available.
  • Change of repayment plan (federal loans) — Federal loans give you the option to change how your payment is calculated. When you are having trouble making payments, one of the best options is an income-driven repayment plan that calculates what you can afford to pay based on how much money you are making.
  • Additional lender options — Many student loan lenders have additional plans in place to help when you aren’t able to pay. The lender doesn’t want you to default because then it doesn’t get paid. Lenders understand the challenges of life and often have plans in place to help.

Tip: If you are having trouble making payments, ask the lender for help before the payments are late.

FAQs

How soon after graduation are student loans due?

Private student loans may be due immediately after graduation or you may be afforded a grace period depending on your lender. Federal student loans have a grace period of up to 6 months to allow you to find a job and begin making payments. Most student loans will roll into the repayment phase if you leave school or drop from full- to part-time enrollment. 

Can you get a student loan after graduation?

You can get a student loan after graduation if you are using it for another form of higher education. Student loans are designed solely for covering education expenses, so these loans are only available for this purpose.

How do you pay off student loans after college?

After college, student loans are paid off on a monthly basis according to the repayment scheduled outlined in your loan contract. You can make one-off payments or set up auto-payments from a checking account in most cases.

Tip: Some student loan lenders will give you a rate discount for setting up auto-payments.

The final word

Your student loans helped you get the education you needed to prepare for your career. Once you graduate, it’s time to set up the right plan to repay and make good on your financial obligations. By taking a few proactive steps and educating yourself, you will be prepared to do just that.