This article is part of the Student Loan Debt Movement, which is encouraging people to pay off their student loans.
I haven’t talked about my student loans on here yet but there’s no time like the present. Last August, I decided that I wanted to pay off my student loans in the next 3 years but as I started to help my son with his college applications and scholarship search, I decided to push back my start date until he left for college. I wanted to focus on helping him find scholarships and I wasn’t sure I would be able to do that if I was in full on hustle mode, so starting in September, it’s on!!!
Recently my son received a financial aid reward letter from one of the colleges that accepted him and we had a discussion about student loans and some of the mistakes I made when it came to my student loans and I thought it would be great to share these mistakes with you. Hopefully, my mistakes can help you or someone you know.
The first mistake I made was not understanding how the interest works on subsidized and unsubsidized student loans. My first year of college, I took all of the loans available to me, and my parents still cut a check. I thought that the interest on subsidized and the unsubsidized loans would not start accruing until the 6-month grace period was over (after I graduated) but that not the case. The interest on the subsidized loan does not start accruing until after the 6-month grace period. The interest on an unsubsidized starts accruing as soon as the loan is disbursed. If I would have understood that the interest started immediately on my unsubsidized loans I would not have taken any unsubsidized loans. By the time my brother went to college, my parents learned from me and he did not take any unsubsidized loans.
Another mistake I made was not understanding the payment options available to me when I graduated from my MBA program (it’s really important to pay attention to the student loan exit counseling). When I graduated I just assumed that I didn’t qualify for the income-based repayment plan. After making the standard payment for a while I reached out to my student loan servicer because I decided to find out what my options were instead of listening to what my friends & co-workers were saying. There are about eight different payment plans for Federal Direct and Federal Family Education Loans, even if you have been making payments, it doesn’t hurt to research your payment options on the Federal Student Aid website and/or to call your student loan servicer. I was able to change to an income-based repayment plan and use the saving to help pay off my consumer debt and once that was paid off I put the savings towards the principal on my student loans.
The last mistake I made was not paying at least the interest on my unsubsidized student loans while they were deferred due to being in school. The interest on most student loans compounds daily and I didn't realize it until I reviewed my loan statements after graduating with my MBA. I was still working full-time while attending school so I was able to pay the interest (actually the whole payment) but I didn’t know the benefits of paying more because I did not take the time to understand my student loans.
If you didn’t notice there is a common theme here, I didn’t take the time to understand my student loans which caused me to make mistakes that cost me more money in the long run. It’s important to understand all of your financial obligations so you are able to free up cash flow and pay off your debt.
If you are interested in paying off your student loans, sign up for the student loan movement.
