Great Advice for Grads 2021


In 2013, I was laid off by the local news outlet I worked for. The next day, I applied for an unemployment deferment to temporarily pause my payments. In the six months after I was laid off, I left New York for San Diego, landed a job and was able to end the deferment. When repayment restarted, $724 in interest was added to my debt. Right now, federal loan borrowers have an interest-free forbearance until September 30, due to the coronavirus pandemic. But any time you experience a significant change in income, a deferment or forbearance can help you ride out the financial difficulty.


I was six years in when I realized my graduated loan payment was on schedule to increase to an unaffordable amount. Switching to an income-driven repayment plan set my payments at 10% of my discretionary income and extended my loan term by 20 years. My loans were consolidated, and I had a new $242 payment that I could afford. Since I recertified each year, my payments grew with my salary. For many borrowers, this is the best plan to start on. Higher payments that were still affordable helped me knock down my loan principal faster.


I never made an extra payment until the last big one. Doing so can help you pay off your debt even faster, but it wasn’t my priority. There’s a hierarchy we recommend when it comes to managing your finances. Student loans, which are relatively low interest, rarely top that list. It’s better to pay off high-interest debt and build savings instead. I signed up for an employer-sponsored retirement plan and gradually increased the percentage I contributed. I also saved about three months of expenses in an emergency fund. I wasn’t willing to sacrifice everything. That included my bad habit of moving each year, including three long-distance moves. I also wasn’t willing to forgo a vacation to Italy, participating in four weddings or getting an auto loan. My credit card took a hit with every event, so I prioritized paying that off instead of making extra student loan payments.



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