I officially graduated from The University of North Carolina at Chapel Hill with my Masters in Business Administration on April 10th. It was an exciting day for me, the final day of my 2.25 years of blood, sweat and (literal) tears with my family and friends who traveled from New York, Boston and Las Vegas to celebrate with me and my classmates.
That day was also the beginning of a ticking time bomb – the start of when my student loans would become real. Or so I thought. What I didn’t realize was that my student loans had already been real, from the first day I started the program. I made some serious mistakes by not educating myself about financing my education before I got into now what is a financial nightmare. A lot were unbeknownst to me until just recently, when I started researching how to start paying this bad mamma jamma off. Thanks to Better Money Habits I was in for a rude awakening. At least, better late than never?
- My interest started accruing from day one. And I have to pay for it. I did not understand the difference between subsidized and unsubsidized loans. Because I did not meet the financial requirements of getting the better subsidized government loans, I took out unsubsidized loans. This means that the government is not paying for my interest, and I am responsible for that interest. And it started accruing from day 1 to what now equates to almost $9/day of JUST INTEREST for every day I continue to have my loans in its current form of over $70K. That’s almost two five dollar footlongs I am throwing down the drain on just interest alone. This nauseates me.
- A grace period means you don’t have to start repaying yet, but your interest continues to grow. I had the equivalent of a small seizure when I learned about the interest and started panicking as to how to start paying my debt off IMMEDIATELY. The first thing my friends and family told me was “Don’t worry! You’ve got that grace period for six months!” Again, unless all your friends and family are financially independent, they are just as clueless as you are. The grace period simply means I am not obligated to start paying my student loans. However that doesn’t stop the interest from continuing to grow. So, even with a grace period, every day that passes by, my debt only grows bigger.
- You can (and should) start paying back your student loans when you’re still in school, if you can. There were some instances that I took out the loans because I didn’t have the cash for tuition immediately, but I would have that cash available a few weeks later. If you are like me, who was still working full-time while in school, start paying those loans back before spending that money on those late night pizza cravings or that cute dress at the mall. Paying down that principal reduces the amount of interest you will get charged that you’ll just have to pay back later.
- You have 120 days after you take the loan out, to make it disappear. Again, I wish I had known this sooner, but at least I was able to make some use of this knowledge by getting rid of $5,000 worth of the last loan I took out because I paid it back within 120 days of when it was dispersed to me. This enabled me to wipe the slate clean of that particular loan, so that its evil and its interest will be as though it never existed.
- Consolidating loans aren’t always the best option. Because my loans were already with the same loan service, the simplicity of paying them back would not have been easier consolidating them (one of the main benefits of consolidating). If you do consolidate your loans, the bank combines the amounts, takes the weighted average of your interest rates and rounds UP to the next eighth of a percent. If you don’t consolidate your loans and have one agency like me, they take your principal payments and apply them to the loans with the highest interest rates and work down until you pay them all off. In this scenario, it’s more beneficial to me to keep the loans separate, as I plan to pay them off as quickly as possible, getting rid of the high interest rates first. Before you consolidate, really review what you can afford to pay off sooner and determine if you want to extend your repayment timeline. If you don’t have to, you will save money in the long run by not accruing tons of interest.
Morale of the story here kids? Know what you are signing up for when you sign those financial aid packages and have a plan on how to pay them back, even if you haven’t graduated yet.