LITTLE ROCK, Ark. — October 1 is nearing, which means that student loan repayments are too. Anyone with student loans remaining after the 3-year pause may have noticed that those loans began gaining interest back on September 1.
However, the time has come to set a plan to factor that extra bill into your budget— which, according to experts, is necessary.
“The best thing you can do is just go at it head-on,” said Thomas Williams, a Community Development Mortgage Lender with Arvest Bank.
It's time to make sure everything is on the right track as repayments are set to begin again.
“Make the phone call to your lender and see how much the loan is,” Williams said. “Come up with a game plan to make the monthly payment every month and come up with a game plan to pay it off."
He added that once a monthly payment amount is known, the planning can, and must, start.
“It's vital that you put it into your budget,” Williams said.
He advised writing down every large payment that comes out of the monthly income, including things such as mortgage or rent, cell phone payments, and insurance. After that, add the repayment amount and calculate.
“This will help. You will know if your payment will be okay with your new budget,” Williams explained.
Mark Wilson, COO of First Arkansas Bank and Trust, echoed this plan of action. He added that the most important things to pay are yourself and your debt.
“By saying "pay yourself first" I mean, save for the future,” Wilson explained. “It's important to sacrifice early so that you can live better in the future and not have that burden of debt hanging over your head all the time.”
He added that there are more ways to not only prepare for loan repayments but pay those loans off.
“Paying extra reduces your debt without costing you in interest,” Wilson said. “The extra that you pay, pays down the principal which is the actual money that you owe.”
However, if the full amount is simply too much all at once, split it up.
“Say you know your payment is going to be $300 every month, well whenever you get paid slot $150 over into another checking account,” Williams said.
By doing this, when the time comes to submit that month’s full payment the money is already there.
Both Wilson and Williams agree that sacrifices may have to be made to stay on top of repaying student loans.
“It's very important to watch every dollar and don't live above your means,” Wilson said.
Williams also advised cutting out extra entertainment purchases.
“Yes, we want to have fun, but you must make your student loan payment, you borrowed the money it’s time to pay it back,” he said.
As for the next generation of "could-be" borrowers, Wilson said to think before you borrow.
“The best way to avoid student loan problems is to avoid student loans in the first place,” he said. “Make sure you're borrowing money for an education that will support a career that will give you fulfillment and satisfaction.”
Wilson added that there are opportunities for loan forgiveness, like working public sector jobs, working for government agencies, or serving in the military. These outlets can either lead to reduced or eliminated student loan debt.
The final piece of advice, and possibly the most important, is to pay the loan back no matter what.
“Never just walk away from a loan, because that can haunt you either in your taxes or just down the road on the results that hit your credit report,” Wilson said. “So, make sure you make your payments.”
Contact your loan lender to find out your loan repayment amount.