Your 20s are a time of education, growth, fun, and change. I’m 28 now, and it’s hard to believe that in the last 8 years, I’ve graduated from college, finished graduate school, gotten married, started a business, and had two children.
That’s a lot for one short period of time, and when I put it like that, it sounds as though the last 8 years have been pretty successful. What you don’t know, though, is that I made some big mistakes.
I made several big student loan mistakes. I borrowed way too much, around $39,000 actually, and now—at 28—I’m trying hard to pay it all back. The reason I consider this too much money is because my degrees are in history, a traditionally low-paying field.
My first job out of graduate school paid $25,000 a year, and on such a low salary, the $300/month payments were difficult. I’m not alone.
A 2012 New York Times article showed that 66% of students took out federal or private loans for college, and the number is only growing.
So, if you’re one of the many people in your 20s taking out student loans, make sure that you’re avoiding the following four big student loan mistakes so you can enjoy your 20s and not be burdened by too much debt when you graduate.
1. Being Unaware of Your Loan Balance
When I graduated from college, I decided to finally sit down and figure out how many student loans I had.
At first, I didn’t even know how to find out. Did I call my school? Did I just check my credit report? I honestly had no idea where to start. After a few calls to financial aid, I got all the information I needed from the Federal Student Aid database.
Then, I learned I had taken out $14,000 in undergraduate loans. Somehow, the $1,000 here and $2,000 there throughout my college didn’t seem like $14,000, but it added up.
I ended up going to graduate school before I had to make a payment, but I had no idea that that $14,000 would turn into a payment of around $100 or more depending on my repayment plan after I graduated.
Don’t make this mistake. Even if you’re nervous about it or know the number is large when you graduate, sit down and calculate your debt anyway. It’s the first step you need to take to begin to pay it off.
2. Ignoring Student Loan Payments
When you graduate from college, you will eventually start to get bills for your student loans. Many students get these bills and don’t pay attention to due dates. Many more see those high figures and get scared they won’t be able to pay it, so they ignore their student loans thinking they’ll just go away. Please don’t do this.
Remember, there are many different repayment options when it comes to federal student loans, including income-driven plans. So if the number on your bill is larger than what you can afford, call your loan servicer. Work with them to find a way to lower your payments until you can increase your income.
I know it’s a difficult call to make, but it’s better than ignoring it. The last thing you want is for your student loans to go into default because you haven’t paid them. This can have serious repercussions, including wage garnishment. It can also ruin your credit, and that, in turn, can have negative effects in the future when you want to buy a car or a house.
3. Choosing the Wrong Repayment Plan
There are so many different types of repayment plans available to graduates that I didn’t even know existed. In fact, choosing the wrong repayment plan is one of the biggest student loan mistakes graduates make.
If I had known about this strategy, I might have enrolled in a graduated repayment plan to give myself time until my income increased. After all, it’s much better to have a payment you can afford instead of going into default.
You also want to see if your job qualifies for certain types of loan forgiveness such as Public Service Loan Forgiveness and Teacher Loan Forgiveness. There are even loan forgiveness options for people who go on to professional schools like medical school and law school.
Don’t assume that you will have to pay high student loan payments every month for years on end. Instead, take the time to do the research and find out how you can reduce your student loan payments if you’re struggling, or spend some time getting your finances in order so that you can pay off those pesky student loans quickly.
4. Using Your Student Loans for Spring Break
My husband jokingly called us “fake rich” when our student loans came through—it sure felt that way when several thousand dollars got deposited in our account in one day. Having a large lump sum in your account is not a problem when you know how much you’re going to have to allocate to books, housing, and other academic expenses.
It is a problem, though, when you use your student loan balance for things that aren’t exactly school related—like spring break, nice clothes, or big nights out on the town.
The truth is many students use their student loans as spending money, and that’s definitely a mistake. You don’t want to buy clothes or pay for outings that aren’t school related with your loans because you’ll be paying for those things for years after you graduate.
Instead, try to work a side job in college and use that money to pay for life’s little and not-so-little extras. Then, keep your student loan balance as low as possible and only pay for necessary expenses.
Have you made any student loan mistakes yourself?
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.57% – 6.97%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|