3 tips for paying back student loans
1. Pretend you’re already paying and start your emergency fund. Log in to your accounts now and find out what your payment will be. Next, create a budget where you start setting that much aside each month in a separate savings account. Not only will this help make the payments less stressful when they’re due, but it will also help you establish the start of your emergency fund, one of the pillars of financial security. Experts advise building up three to six months’ worth of living expenses, but it will depend upon your situation. However, any emergency fund is better than no emergency fund, so don’t let the higher amount scare you into not saving at all.
2. Choose your repayment plan wisely. Federal student loans have a variety of repayment plans available. Before opting for the lowest payment, pay attention to the amount of interest you'll pay over the life of the loan. The standard repayment plan of 10 years of level payments may be the highest amount per month, but it's also the lowest amount of interest (meaning less money overall out of your pocket). Try for that option if you can. If you simply can't afford that monthly payment, it's OK to choose an income-based or graduated plan. Remember you can always pay more than your monthly payment if you find extra money in your budget.
3. Try not to stress about your loans. Depending on the total amount of loans you have outstanding, your balance or payments could feel overwhelming, especially when you think about what else that dollar amount could buy. Try not to focus on that and instead remember what it did buy: Your education and ability to earn a higher income throughout your life. While it may seem to limit your financial goals, especially early in your career, student loan debits an investment—much like a mortgage is an investment in a home. It will pay off for the rest of your life, so next time you find yourself stressing about those big numbers, remember what you'll be able to accomplish because of your education.
For more money tips, follow the Oklahoma Society of CPAs on Facebook, Twitter and Instagram. For personalized financial assistance, contact your CPA. Don’t have one? Go to www.FindYourCPA.com where you can get a free referral and free 30-minute consultation.
For more money tips, follow the Oklahoma Society of CPAs on Facebook, Twitter and Instagram.