Tips for Managing Student Loan Debt 1. Maintain the "Broke" Student Mentality The majority of people are unable to obtain great wealth because they are unable to control needless spending. This can be especially difficult for students who are just entering the job market, and are probably earning more money than they ever have before. However, when it comes to living frugally students have a major advantage over seasoned adults who are used to living an expensive lifestyle: most students are not used to doing so. Most students already live a frugal lifestyle, and that means it will be easier for them to maintain this lifestyle after they get out of school. Remember, $20 here and $10 there adds up over the course of a year. If you can control the "little" impulse purchases you will be in good shape. 2. Develop a Cash Flow Statement and a Budget and Stick to Them The use of some type of cash flow statement can be a major advantage to young people. Some system of keeping up with your cash flows allows you to see exactly where every dollar comes from and where it goes. When a cash flow statement is used in conjunction with a budget you then have the entire financial picture. You are able to see how much you thought you would spend on a certain thing, as well as what you actually spent. These two sources of financial information are probably the most important tools young people have at their disposal. You can track your expenses online for free at sites such as mint.com and yodlee.com. 3. Monitor Your Credit Report Your credit will affect many aspects of your adult life such as whether you can get a car loan, a mortgage, and even some jobs. That is why it is very important to keep an eye on your credit score and your credit report. Make sure that you are paying your bills on time, and make sure you are not approaching the upper bounds of your credit limits. You should utilize sites that offer free tips on how to improvement your credit score on a regular basis. 4. Learn About Your Student Loans and Your Repayment Options There are three main repayment plans for most student loans: graduated, extended, and income-based repayment. Each of these plans offers different features that will cater to different needs. If you believe your salary is going to increase rapidly then a graduated plan may be best for you. If you are not able to make the recommended payments, an extended or income-based plan may be best. Learn about the different options available to you, and choose the one that puts you in the best financial position going forward. 5. Think About Lowering Your Interest Rate with Student Loan Consolidation Programs There is a new consolidation program available to students that will last until the end of June. It allows you to lower your interest rate by 0.25% for consolidating, as well as another 0.25% if you choose to make automatic payments each month. This is a great way to lower your total costs even if it is only 0.25% - 0.50%. Every little bit helps, especially with larger loan balances. 6. ALWAYS Pay Off Your Higher Interest Loans First Today, most student loans have low interest rates thanks to tax payer subsidies. Students who are graduating with other debt on top of student loan debt should always compare interest rates and pay off the debt with the highest rate of interest FIRST. It makes less than no sense to pay off a loan with a 4% interest rate while a line of credit sits and accumulates interest at 19% a year. Pay attention to interest rates, and you will save yourself a lot of money. 7. Defer Payments if Necessary. Do Not Default. If you are in a position where you are having trouble making payments on a line of credit or your student loans call the lender and ask about deferment or forbearance. In times such as these, lenders with be willing to work with you as long as you have continually made the effort to pay your bills. Default should be the final option only when there is no other. Default not only hurts your official credit, it also hurts your social credit. People will be much less likely to do business with you or help you out in a pinch if they know that in the past you simply walked away from your obligations. This is a situation to be avoided at all costs. If you follow these tips you will be well on your way to a sound financial future.
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