November is time for sweater weather, Election Day and turkey. And for many recent graduates, it also means student loans are coming due.
If you earned your diploma in May, your typical six-month student loan grace period ends this month. We know you’d rather cozy up with a good book and a pumpkin spice latte than face debt repayments, so we came up with three ways you can get started with minimal pain.
1. Learn the lingo
The student loan world has its own vocabulary. Understanding just a few key terms will make managing your debt a lot easier. Here are some to know:
- Principal = The total amount you originally borrowed, plus any capitalized interest.
- Interest = The percentage of your remaining principal that you pay each month in exchange for the loan.
- Income-driven repayment = Federal payment plans that can lower your monthly payment. Keep in mind, though, that they also extend your term from the standard 10 years to 20 or 25 years, which means you’ll pay more in interest over time.
2. Disregard student loan rumors
There are a slew of student loan myths floating around, including this one: Consolidating your debt will solve all of your student loan problems. That’s not true.
Contrary to popular belief, federal student loan consolidation doesn’t save you money. And it’s likely unnecessary if you have federal direct loans and a single loan servicer.
The rumor is perpetuated because many companies that offer student loan refinancing call the process “consolidation.” But unlike federal consolidation, refinancing saves you money by lowering your interest rate. You don’t need to consider refinancing yet, but it could be a good move in a few years if you have a stellar credit score or a co-signer who does. However, it will also make your federal loans ineligible for benefits such as income-driven repayment plans and forgiveness programs, some of which could be helpful now. Carefully weigh the trade-offs before you refinance federal loans.
3. Set it and forget it
You can automate just about everything these days, including your monthly Amazon order of household necessities and healthy meal kit deliveries. So why not automate your minimum monthly student loan payments? Most lenders will give you a 0.25% interest rate discount if you do. Just make sure you always have enough cash in your bank account when the payment is due, or you might get hit with overdraft fees.
With these tips, your new student loan payment doesn’t have to ruin your November, or any other month for that matter. And once you master your payments, you can tackle other important new-grad money moves, including learning your credit score and paying down credit card debt. After that, treat yourself to another PSL.