Professor Erkis, I am concerned about my student loans after graduation. I have loans from multiple companies, and I am wondering if I should try to consolidate them into one loan payment. -Robert J. ’20, marketing major
Erkis: Paying off student loans after graduation is a concern for many students. Student loan debt can feel overwhelming and having to make payments to multiple companies can add to one’s anxiety levels.
It is important to look at what you will be required to pay each month relative to what you will be making in your first job. As was discussed previously in Money Matters, your credit score will be negatively impacted if you miss debt payments. We do not want that to happen. Since money will likely be tight when you are first starting out, your student loan payments need to be included in your post-graduation plans.
Having a budget is important. St. Joe’s Office of Financial Aid will be holding a session on Feb. 24, from 4:00-5:00 p.m. in Doyle Banquet Hall South on budgeting. This session is part of a program called Hawkcents, where they offer regular events to discuss relevant financial topics like budgeting and credit.
Also, St. Joe’s is a member of Cashcourse allowing students to create a free account and use all of the tools offered on their website. Cashcourse has a very useful section, “5 Options for Student Loan Relief,” which discusses consolidation, deferment and other possible ways to get a reduced monthly payment. I strongly recommend reading it. www.Studentaid.gov is also a helpful website showing student loan repayment and refinancing options.
To answer your question directly, it is convenient to have only one loan payment instead of making multiple payments. However, you need to understand the financial trade offs of consolidating your loans.
A few things to look out for are:
1. Loans with longer terms than you have now. Longer terms will lower the monthly payment, but you will pay more interest and have the debt for a longer period of time.
2. A loan with a variable rate. A fixed interest rate is more predictable and often better over the long run. If rates increase in the future, your monthly payment will increase with a variable rate loan.
3. A “grace period” or deferment from making payments. Some lenders may allow you not to make any payments for a period of time but will still charge you interest. I recommend paying at least the interest due during a deferment so your debt does not grow.
Lubomirski: To help figure out my own path, I went to Cashcourse. You can input your own financial stats to better understand your budget and loan schedule and there are lessons about personal finance. Although I am not graduating this year, I still found these lessons to be helpful. As I think about graduation approaching, using the budget calculator is a great way to feel more organized and reduce any anxiety about paying off student loans. Preparation is key; and for that, I recommend taking advantage of Cashcourse as a resource.
