Often the articles we write for the Planting Seeds blog come from trending financial topics, personal experiences, or in last year’s case, my daunting idea to have an article for every letter of the alphabet. The point is we have a mission to write topics that most consumers can relate to.
This week, while researching trending topics, I came across an article from Forbes.com called 5 Key Strategies to Deal with Student Loans. Attached to the bottom, were related articles; 5 Tools, Tips and Resources to Help you Tackle Student Loans, Why you Should Rarely Pay Extra Toward your Student Loans, and they just kept going. Needless to say, I went spiraling down the rabbit hole.
In order to help summarize my research, let’s get personal. I went to a 4-year university and studied Elementary Education. Neither myself nor my parents could afford the tuition, so just like thousands of other students, I applied for student loans. Fast forward past 3.5 years of school, sleepless nights of studying, numerous panic attacks related to “Am I making the right decision for my future”, and I decided to take a break. Yes, with only one semester between me and my degree, I hit my breaking point.
One thing they don’t tell you (ok, they do and my 18-year-old brain didn’t listen) is that if you take an extended break from school, you have to start paying back your student loans. What?! When my first notice came in the mail and I saw the amount I was supposed to pay EVERY MONTH, I couldn’t believe what I had gotten myself into. Now, my solution to the stress was to throw the very tearable letter in the trash and start practicing the art of avoidance. I DO NOT recommend anyone try this at home. I really set myself (and my credit score) back. I was misinformed on the negative consequences of not paying or even what options I had available to me to transition or delay paying my loans.
My story may sound familiar, which is why I’m here to help you avoid the same mistakes I did. So from the numerous articles I’ve read, I’ve consolidated them into two main topics of suggestion:
Know your Options
Don’t make a decision regarding payment options on your own like I did. Know the options, and the consequences of those options, before moving forward. There are many levels of repayment and even options for not paying anything. Just like I recommend when dealing with collection agencies. Call them! Call the loan servicer, tell them your situation, and they will work with you. One thing to remember, if you pay little to nothing, your loans will grow, and you will end up owing more in the end.
Pay more if you can, but reasonably.
I’ve seen many related headlines that suggest paying more and it isn’t a bad idea. One thing I would caution, is to prioritize any extra income. Let’s take the season we are in now, for example. TAX SEASON! For those that get refunds, might be tempted to throw it all to student loans. While the logic behind this is very smart, take a look at other areas that might need some work too. Do you have medical or credit card debt that could hurt your credit report in the near future? Do you have an emergency fund established, or savings? These things are also important to maintain while you are young, so they should be considered too.
Thankfully I was able to clean up my mess. I returned to school, changed my degree, graduated, and discussed my options for repayment with my loan servicer. Part of cleaning my mess did include taking accountability, which is why I’m here many MANY years later and still paying off my loans, but I am on a successful path to the finish line. Reading this article just might be your push onto the same path!