Now that you have your degree and job, it is time to start paying back student loans. While this may appear as a daunting task, look at it this way: without this company’s help, you wouldn’t have the education or job you currently have! Repaying loans can be complex, especially when multiple lenders are involved. Here are several mistakes you should try to avoid when repaying student loans.
1. Losing track of loans. While this may appear like a no brainer, but this is more common than you’d think. A website states “This can happen because a typical bachelor’s degree recipient graduates with 8-12 loans.” Even if you do not hear from the lender, these payments are still due and can put you in a financial bind if you do not repay them.
2. Don’t pay on time. Late payments are a simple way to completely derail one’s credit score, including student loan payments. A low credit score can limit you in multiple ways, including future purchases or loans.
3. Don’t include student loan interest on taxes. Borrowers can write off thousands of dollars in student loan interest deductions. This deduction doesn’t have to be itemized and can generate hundreds of dollars in tax savings.
4. Paying a consolidation fee. There are several websites that try to make a quick buck by charging to consolidate repayment, however borrowers can do this for free at studentloans.gov free of charge. Consolidating can help reduce the monthly payment as well as allow for alternative repayment plans.
5. Delay repayment without considering interest. Deferring payments until you’re on your feet may appear like a smarty plan, but many do not consider the power of interest. As interest accumulates, it is added to the loan balance, which can cause major implications for the borrower.
6. Having too long of a repayment plan. While extending repayment tends to decrease monthly payments, interest is still being accrued on the balance. You may end up paying a lot more than you originally would have if you extend your repayments.
Student loan repayment may appear stressful and tricky but avoiding these mistakes will help set you up for success in your repayment process.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through GWM Advisors, a registered investment advisor. GWM Advisors and Southern Point Investment Partners are separate entities from LPL Financial.