It’s that time of the year again folks; the end of finals for the Class of [insert this year here]. If you’re part of the graduating class, you likely have your Commencement soon or have already taken the walk of glory to get your degree. Congratulations!
This post is devoted to you (yes, you!) to make sure that you start off your life as a degree holder right, with as little financial confusion or anxiety as possible. To get started, I recommend you take a second to read my blog post on exit counseling.
Once you have chosen your repayment plan, it is time to consider your current financial picture. Do you have a full-time job lined up already? If not, are you working part-time?
More than likely, you will have some sort of job when you graduate… so the question becomes one of how much can you afford in living expenses per month. Depending on the amount (and type) of loans you took out for school and the repayment plan you selected, the monthly payments may still be out of your reach by the end of your grace period.
Do I have any alternatives if I can’t afford my payments? Absolutely. A student loan consolidation can significantly reduce your monthly payments at the expense of lengthening the repayment term for your loans. For federal loans, if you selected the “extended repayment plan”, this won’t really apply to you. Where consolidation really shines is private student loans.
Depending on your credit (or with the help of a creditworthy co-signer), a private student loan consolidation can net you an excellent variable interest rate with a longer repayment plan. The result: lower monthly payments, but more interest paid overall.
Although this trade-off might leave you wondering which is the lesser of the two evils, I say with certainty (being extremely familiar with the process and how personal finance works) that it is in your best interest to be able to make your monthly payments consistently every month instead of letting any of your loans go delinquent or even drop into default. The latter will do nothing but destroy your credit and leave you in a tough situation for years.
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