How to Start Paying Your Student Loans in School
She tore open the envelope and her eyes lit up when she saw the check. “Cool beans! I’ve got free money!”, she shouted to her college roommates.
She forgot an important life rule: There is no such thing as a free lunch. Student loan refund checks are not free money. This scenario happens to college students across the nation and what they don’t realize is that interest has already started to accrue on that student loan, and it accrues on that refund money too.
If you can live with delayed gratification, you can graduate college with considerably less debt and some students may graduate debt free. If you can begin your schooling with the end in mind, you can finish up with a fresher beginning for your new life as a college graduate. Let’s explore how you can make it happen.
Remember, No Free Lunch
Since it’s such a temptation and a very common scenario, let’s begin with the refund check. When you fill out your financial aid forms and apply for a student loan there’s a good chance that you may get approved for more money than you need. For some students, this is a sizable amount of money. While it may feel like it is “free money,” it is still part of that loan and as such interest is accruing on it. What this means is that over the course of 4 years, interest is adding up on that money that you thought was “free.”
A better way to handle the refund check is to return it if you truly don’t need it. If the extra money is going toward necessary expenses like books or rent, then hang on to it and use it wisely. If all those necessary expenses are covered, then seriously consider returning the excess.
Need vs Want
Figure out what you will truly need to make it in school. Make a list of your necessary expenses – tuition, the cost of books, room and board, school fees, lab fees and a little extra for those midnight snacks. Once you’ve determined the amount you need to borrow, take out your loan with that figure in mind even if you have been approved for more.
If you’ve received a refund check and decide to return it, check to find out what steps you need to take. It isn’t always just a matter of sending the check back. Consult with your student aid office to make sure that you don’t need the extra money. That person can also tell you what you need to do to return the excess amount.
Live Within Your Means
It’s okay to live like a student and do what you can to save money. Being frugal now will help you later. Not only will you have less to pay back on student loans, you’ll also have established good financial habits. The ability to live within one’s means is not all that common, but cultivating that skill is important.
Try looking at life in terms of value meals. A five-dollar value meal isn’t so bad. Ten days of those meals and you’ve spent $50. If you do that every weekday for a month, that’s $100 a month. At the end of a year that’s $1,200 you’ve spent on value meals. Now imagine how far ahead of the game you’d be if you put that money toward your school loans.
Your Budget is Your Friend
Budgeting is one of the major life skills that can make an enormous difference. It’s also one of the skills that few people exercise. If you learn to live on a budget and account for every dollar that comes in and goes out, you will be ahead financially by the time you graduate. Your budget will help you figure out what your expenses are and how much you can put toward paying off your debt while you are still in school. Stick to the budget and your debt load can be considerably less when you march down the aisle for your degree.
Pay off the Interest on Your Loans
In most instances, your loans won’t come due until after you’re finished with school. While that sounds good, keep in mind that while you are in school your unsubsidized and private loans are racking up interest. If you can manage to pay the interest on these loans while you’re still a student, you can keep the interest from accruing over your school years. Talk with your loan officer to find out if you have the option to pay the interest while you’re still a student. If it is an option, take advantage of it.
Starting post-grad life under a burden of debt is not fun. Some people realize after graduation that they may still be paying off student loans when they reach middle age. You don’t have to be one of those people if you make wise choices from the outset.
Thinking of refinancing your home to help pay for schooling? Talk to one of the loan officers at Galaxy Lending Group. Our knowledgeable loan officers will help you calculate the amount that’s needed. Give us a call or contact us through our online chat. We have team members ready to talk to you about your loan options.