I'm almost embarrassed to admit it, but when I graduated from college with my music education degree, I can honestly say I didn't know anything about federal student loans. Unfortunately, like most people my age, the high school and college that I attended didn't exactly go out of their way to teach me about debt or finances. I was pushed through the standardized test factory like everyone else in the early 2000's.
Here are 6 things I wish I had known about my federal student loans:
You can (and should) make payments during the grace period.
Grace is such a pretty word, right? This is the 6 month period that you “gracefully” sit around on the couch at your parent's house and hope that you can find a job. I looked for a part time job during this time, but honestly not that hard. I knew I didn't have to make any payments for a while, and I figured I'd get a good job soon anyways…so why not relax a little after college?
Welp, that only cost me a few thousand dollars.
Get a part time job and start making payments to avoid the accruing interest on your loans. Even an interest only payment every month will keep a lot of cash in your pocket later.
I didn't know what interest was.
Yeah, I know. Lame. I knew that interest was how Sallie Mae would make money off of me, but I can honestly say I didn't understand the mechanics of it. I DEFINITELY had no idea that federal student loans are calculated with simple interest instead of compound interest.
I didn't know my interest rate either.
Most people with federal student loans that I talk to don't really know this one off the top of their head either, but they should. Mine was around 6.8%, and I could have saved myself a lot of money had I known that number. This leads to the next thing…
Refinancing your student loans can really HELP you.
When I started MillennialMoneyMan.com, I was literally anti-refinance. I didn't know anything about it after college, but once I heard that a refi could keep you in debt for longer I was totally against it.
The truth is that you can save a lot of money by refinancing your student loans, but you shouldn't do it for a smaller monthly payment. You should actually try to make your payment bigger or keep it the same with a lower interest rate. I didn't know my interest rate anyways, so I guess it really didn't matter regardless.
Credit. All things credit.
FICO scores, how to read a credit report, what makes credit go up or down, how federal student loans fit in to the bigger picture…I knew nothing. Fortunately I was timely on my payments, because I didn't really know how screwed you can be if you aren't. Making on time payments can do some really nice things for your credit score. Take some time and learn how to read your credit report when you get a few minutes!
Minimum payments suck.
After I graduated, I actually made minimum payments on my $40,000 of student loans for a few months. You're probably thinking: What? The Millennial Money Man made minimum payments?? Yes. I didn't know any better. I was stupid. Or still am. Whatever.
If you can, find every extra dollar in your budget and throw it at your loans. Minimum payments are for people that don't mind being in debt, or have crazy low interest rates on their student loans (I've met a few since I started blogging). Hopefully by reading this, you should realize that even morons like me can figure out how to become debt free and start building wealth at a young age.
Live differently, your bank accounts will thank me later. -M$M
Featured image via Flickr