After graduating from college, it’s time to start working to pay off those student loans. However, as a fresh graduate, you are also trying to balance your adult life and all of the bills come with it. At this time, the big question is, how much should you pay towards your student loan?
Should you try and pay off as much as you can as quickly as you can, or will the slow and steady approach work much better for you? There is no one answer for everybody.
Here are a few things you need to consider when deciding what is the right pace for you when paying off your student loans.
What is Your Living Situation?
Start by breaking down your living arrangements.
What kind of bills are you currently paying? Maybe you are still living at home and looking for a place, or maybe you still have roommates splitting rent with you so your living expenses are relatively low. If you take an assessment of your current living situation and find that your bills are minimal, it would be best to make larger payments towards your student loan.
If you do find yourself in a financially strapped position further down the road, you will be happy that you chose to make those larger payments when you could. This leaves you with a much lower amount to pay back, which also means less accrued interest to pay back. The fact of life is the older you get, the more life throws at you by way of bills, and the more the expenses seem to pile up. The more you can pay off while you have lesser financial responsibilities, the better.
Take Advantage of the Low Interest Rates of Student Loans
You may just want to pay off your student loans as quickly as possible just so you can get that load off your mind and hopefully save on those accruing interest rates. However, if you feel the minimum payment is all you can manage, don’t sweat it.
Most student loans (federally funded) have pretty low interest rates. Making just the minimum payments every month is not going to cost you millions in the long term.
Moreover, paying off the minimum every month gives you that much extra funds in your bank for your everyday living expenses.
Also, student loans do not affect your ability to obtain personal loans. They are not counted against you when looking to obtain another loan for something else like a car or house so you don’t need to worry about that either.
So, should you pay off your student loans ASAP or slowly and steadily? It all depends on your living and financial situation at any given time.
Make the best of your current living situation. If you can cut back on other expenses and pay more towards your loan repayment, you should do that so you are rid of that financial responsibility. However, don’t stress if a minimum payment is all you can afford. With the lower interest rates, it may make more financial sense for you to stretch the repayment period so you have money in hand for other purposes.
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