What You Don’t Know About Student Loans…But Should

Student loans. You likely have them; consider yourself extremely lucky if you don’t. Student loans are also technically considered “good debt” because in taking them out, you’re investing in yourself, which, in theory, will give you the tools to pay the debt off many times over. Think of student loans as the avocados of the loan world: like avocados are “good fat,” which nourishes your body, student loans are “good debt,” which expands your knowledge and (hopefully) furthers your career. But like avocados are still fat, student loans are still debt…so don’t gorge on them!

Here are four things you may not know about student loans, but should if you want to make informed decisions about your education (and your hard-earned money, too):

The amount of student loan debt has skyrocketed.

The average student debt load in this country is $30,000. Let’s put that number into perspective: If you have that much debt and are on a ten-year repayment plan at 7%, you will be paying around $11,000 in interest. If you are on a twenty-year plan at 7%, you’re paying around $25,000 in interest—and on the hook for about $55,000 when all is said and done. You’ll be paying off mostly interest. …in the beginning, at least. Unless you’re lucky enough to land a job with a big fat salary right out of the gate, it’ll probably be a few years before you can afford to increase your payments to knock down some of the principal, too. So, when you’re making diddly-squat, you’re working your tush off without paying back what you actually borrowed in the first place. That’s just the way most payments are structured. Ouch, right?

Slow and steady wins the race.

You will pay two to three times the principal you started with to finish off the loan. But if you keep calm and plan smartly, you can outsmart the repayment process—and in this case, slow and steady really does win the race. Let’s say you got a raise at work or inherited some money. So maybe you’re thinking, “Time to get this student debt monkey off my back.” But sometimes, this can bite you in the backside instead. Ramp up payments only if you’re prepared to sustain that amount for a while, not just one beefy hit-and run check. If you drastically increase payment from what you’ve paid in the past only to lower it again, this can look bad to the credit agencies. Not totally sure you can keep up with the higher payment? Go for a more manageable payment amount, one that you can stick to in the long-term.

The grace period is your friend.

But timing is everything. If you can, wait until you’ve graduated before consolidating your student loans, but don’t wait too long. Typically, you get a six-month grace period when you graduate before you have to start repaying your student loans. And that’s where the sweet spot is: you can often get a lower interest rate for repayment if you consolidate during the grace period. (And a quick side note: if overall interest rates are high during your grace period sweet spot, it might be better to jump into paying (or trying your best to pay) right off the bat and then wait for rates to come down before considering consolidation.

You’re not alone!

Student loans don’t affect just one income bracket. They’re the great (and crappy) equalizer. Yes, I’ve been there, but so have really famous, smart people. President Obama and First Lady Michelle Obama finished paying off their student loan debt just before he entered the Oval Office, and one-in-ten of all members of the US Congress currently carry student debt. High-powered (and, as is the case for many, affluent) members of society are still burdened by student loans, too.

Think of student loans as the avocados of the loan world: avocados are “good fat,” which nourishes your body, student loans are “good debt,” which expands your knowledge & (hopefully) furthers your career. But avocados are still fat,… Click To Tweet


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