Flickr user Merrimack College
A student loan grace period sounds pleasant, doesn’t it? But what is a student loan grace period? It’s six months where you don’t have to make student loan payments after you graduate from college. But that doesn’t mean you should sit idle. A grace period is the perfect time to make a plan for your financial future.
Find Out What You Owe
First up: Know exactly what you owe, and who you owe it to. Organize and lay out your federal loans, private loans, and their terms / current repayment plans. Understanding the loans you have now is crucial in making a debt repayment plan.
Secure a Job
This one may feel like a “No duh” sort of entry, but there are a number of reasons why securing a full-time job right out of college is critical. One: income. You’ll need a paycheck in order to pay off your debt. Two: income based repayment plans. If you have a federal loan eligible for this option, your monthly payments will be calculated based on how much you earn. Three: interest rates. With a steady paying job in hand, you can potentially earn a lower interest rate if you refinance your student loans.
Speak with Your Lender
Even if you’re certain of your loans and terms, it’s a good idea to get into contact with your lender anyway. Review your current status, and ask them about any options you may have when it comes to repayment. That may include refinance or consolidation options, or changing repayment terms. Exploring your options may result in good things, like a lowered interest rate.
Consider Refinance and / or Consolidation
There are two very popular options when it comes to managing student loan debt: refinance and consolidation. Refinancing essentially replaces your current loan plan with a brand new one. It may change your interest rate, monthly payment amount, or other terms. On the other hand, consolidation combines multiple loans into a single one, averaging out the interest rates, and making it much easier to manage.
It’s worthwhile to wait to refinance or consolidate until after the grace period, when you have secured a full-time job and established a line of good credit—this will help lower your interest rates. All the same, it’s a good idea to have refinance and consolidation on your radar even if you don’t want or need them right away.
Make a Plan
A student loan grace period is ideal time for planning. This is where research comes into play. With all your information laid out and a job in hand, it’s time to create a personal budget. You need to plot out when and how you’ll make your payments. Determine if refi or consolidation is right for you, and compare lender offers to find the best match. (Keep in mind: refinancing or consolidating federal loans will eliminate any federal benefits they had, such as student loan forgiveness).
With a plan in hand, you can conquer your student loan debt.
