By Gail MarksJarvis
WWR Article Summary (tl;dr) This is a very thorough article by Gail MarksJarvis about how to avoid major blunders when paying off your school loans. From asking for a long repayment plan to “not” paying a little extra when you can, MarkJarvis has some solid advice on how to manage the debt.
If you’ve just finished college and are spooked by your student loans, you probably don’t have to be.
Assuming you haven’t already committed a big student loan borrowing mistake, like piling up loans without finishing college or borrowing extensively from private lenders rather than the federal government, there’s no rush to pay off your loans. What’s more important is paying them off wisely, and avoiding one of these four deadly college debt sins.
The first sin: Hanging on to private loans.
If you have Stafford or Perkins loans, those are federal government student loans, the most lenient student loans you can get. Private loans typically cost more and are tougher on borrowers. If you are going to try to get rid of student loans fast, retire the private loans first.
With the federal loans, you will be paying interest but you probably will be OK paying them off over the next 10 years. There’s a rule of thumb in student loan borrowing: Don’t have a total in loans that is greater than your starting salary out of college. And since the average borrowing among recent graduates has been $30,000, and the average starting salary reported by the National Association of College Employers has been $47,000, the numbers work.
Of course, many college graduates don’t have jobs when they graduate or have pay far below the average. But if you have federal Stafford or Perkins loans, you still don’t need to fret. With these federal loans, if you run into trouble making monthly payments because you lose your job or your job doesn’t pay enough, the federal government will cut you a break, reducing your payments temporarily.