The college class of 2019 has graduated and now is off to the real world. Many of these former students have loads of student debt that most of them aren’t contemplating how to deal with yet. Undoubtedly, most of these graduates will also elect to take the 6-month allowable deferment (grace period) on Federal Stafford student loan payments and (pretend to) forget about them until judgement day comes in the form of a bill.
I can understand wanting to know what your cash flow situation will be like (and maybe some of these graduates don’t even have a job yet), but I’m going to argue for beginning payments as soon as possible instead of deferring them as long as possible. There are a couple of reasons for this.
Unsubsidized Loans
Many of these student loans are likely to be unsubsidized. This means that interest has been accruing on the balances since the day they were originated. If you have unsubsidized loans, then your balances are already higher than when you took them out due to interest accruing while you were in school. Conversely, Federally subsidized loans have not had interest accruing on them because the government has paid (subsidized) those payments for you.
Continuing to defer payments on unsubsidized loans means that you’re just going to have more interest to pay once deferment is over.
Learn to Live Within Your Means
“Living within your means” means that you spend less money than you bring home. Beginning to pay your student loans as soon as you graduate can help you to learn to live within your means. If you prioritize making loan payments, then the money won’t be there to spend on something else. This idea is similar to that of “pay yourself first” – setting automatic savings so the money never hits your bank account and you’re never tempted to spend it. Developing these habits as early as possible is extremely beneficial to long-term financial success (Hint: a great time to start is when you get your first job out of college).
The best time to begin being serious about your finances was yesterday, but the second-best time is today. This also means that you should plan your new budget and expenses with these payments (and any extra that you’ll pay above the minimum) in mind. Living in a luxury apartment, buying a new car, and going out with your friends and eating at nice restaurants sounds like a lot of fun but what isn’t a lot of fun is still paying on your student loans when you’re 50.
Pay It Today Or Pay It Tomorrow
Deferring your student loans is just delaying the inevitable and, even worse, adding to the balance. You know that they’re going to have to be paid at some point, so you might as well start as soon as possible and not pay the unnecessary extra interest that comes with deferring your payments. If you can’t afford your current payment, then you can look into other options such as income-based repayment or other alternatives that may make it more manageable for you. Making a smaller payment through one of these plans is still likely going to be more beneficial to you than letting your debt balances grow.
