Finally, you are done with school, you got a great job, and your parents cut the financial umbilical cord. You’re finally on your own, but those student loans that you took out for “school necessities” want their money back. Now it’s time to prepare a smart plan to pay back your debt. What are your options? What are the terms that you quickly signed? How much money will it really cost you? These are relevant questions that I will answer and some of the best ways to get started on your student loan pay-back journey.

First, I must say that student loans are usually a great debt to have if you used the money wisely. This loan is one of the best investments you will ever make. Some of you might be saying “Jeremie, what do you mean? I took out a loan. How can that be a great investment?” The reason why student loans are such a great investment is because you invested the money in your education. In other words, the money you will receive having a college degree is higher than just having a high school diploma. According to the Census Bureau, college graduates receive over one million dollars more than a high school graduate. Now isn’t that a great return on investment? There are many other advantages to higher education. Check them out here.

Your options after taking out the loans could take many hours of reading so I picked out the real important ones. One of the first things you do is decide whether or not to consolidate your student loans. This is a no brainer. If you consolidate all of your Federal Stafford loans (the most common student loan) you will lock in a good interest rate, good repayment options, and save a ton of money.

Choosing your repayment schedule is a very hard thing to decide when you consolidate. The terms are usually ten to thirty years. The shorter the term, the higher the payments, but the less interest you will pay over the life of the loan. If your loan has a longer term, you will have lower payments and pay more interest over the life of the loan.

Example: Loan amount $35,000/ Interest 4.25%/ Term 10, 20& 30 years.
10 years your monthly payment would be $358.53 and total interest would be $8,024
20 years your monthly payment would be $216.73 and total interest would be $17,016
30 years your monthly payment would be $172.18 and total interest would be $26,984.

You will have to decide whether or not you can afford the larger payments. I recommend going for the 20 year term and paying it off in 15 years if you can.

*This example was taken out of one the best personal finance books for younger people. “Suze Orman’s The Money Book for the Young Fabulous & Broke” This is a MANDOTORY must read. She’s one of my favorite authors and coaches, so please buy the book and start watching her show.*

Do you have a huge student loan over $50,000.0 and you just can’t afford the monthly payments? Do you feel like you are drowning in debt, and you feel like you cannot get out? Well, unfortunately you cannot file for bankruptcy and get rid of this debt. It stays with you till the day you die. So pay it off. This is an contract you signed when you agreed to the terms of the loan. Be good to the student loan people and they will be good to you. If you cannot afford the payments call and ask if there is a flexible payment plan that they can qualify you for. *Remember if you took out a loan have the common courtesy to pay it all back.* If you don’t think you are ready to get yourself in that kind of debt do not get a student loan.

Here are some great ways to save even more money with student loans. Have them auto debit your checking account to save .25% If you also make three years of consecutive on time payments your interest rate will drop a whole percentage point. That’s a 1.25% reduction for doing almost nothing. Another thing to remember is that a lot of the interest on your student loan is tax deductible. Make sure you talk with your tax advisor to see if you qualify for this incredible deduction. *Most people will qualify for this deduction unless you make over $50,000 *

This should lead you in a good direction on how to handle student loan debt. Like I said before, read Suze Orman’s book “The Money Book for the Young Fabulous & Broke” and actually use the advice she gives in the book. If you apply the tactics she writes about correctly, there is almost no chance you will retire broke. Remember there are three organizations you don’t mess around with. The IRS, the Mafia (ha), and The Student Loan Lenders.