You’re now a college graduate and on the hunt for that dream job. But this excitement is tempered by a reality check because you have hefty student loans to pay off and you don’t know when you’ll be able to pay on them. Thankfully most lenders offer graduates a grace period after graduation that lasts six months. You’re probably wondering when you should begin the payment process after the grace period ends. Ideally, you want to wait until you have a steady income so that you will not get into more debt by taking out a loan to repay the ones you have.
When is the right time?
For those who wish to pay off their student loans as early as possible, there are advantages and disadvantages. One advantage is that by paying them off early you can save thousands of dollars in interest payments and this means a better return on your investment. Another benefit of early payment is that you increase the ability to save up for long-term goals such as homeownership, entrepreneurship, starting a family or even returning to school for an advanced degree. A disadvantage of paying off student loan debt early is that you lose out on tax benefits. This is because the interest you pay on the loans is tax deductible.
You may say, “But I want to save up for retirement. Is it okay if I delay student loan repayment?” You can begin loan repayments now and worry about saving for retirement later but this is not a good idea because when you land that dream job, you should do what you can to reduce debt so that you will not stress out over how much you’ll need to save for retirement. In fact, it might be possible for you to pay off some of the student loans while saving income for retirement at the same time.
Once you decided that it is the right time to begin loan repayments, here is how you can pay them quicker. Talk with your lender to see if you can obtain income-based repayment. This is when your monthly payments are determined by how much you earn rather than the amount that is set by the lender. If you’re a student in your final stretch of school, then it’s a good idea to repay some of the loans now Another option is to get a consolidation loan. In conclusion, it’s never too early to start paying down student loan debt and if you ever get have an issue with late payments and need help to repair your credit score you can read our article here to help you out.