Proverbial wisdom says that to know where you’re going in life you must first know where you’ve been. The same holds true for our paychecks.
By nature, I am the quintessential anti-budgeter. Whatever the genetic gem may be that triggers financial order, mine is a constant misfire. If you’re like me, the task of organizing one’s personal finances can feel like wrangling wild geese. The vicious kind – with enormous bills. Yet in my quest to combat this proclivity towards chaos again and again, I encounter the same, unavoidable first-step advice: get those ducks in a row. So here, in the first part of a series devoted to facing student loan debt today while also building tomorrow’s nest egg (I promise, no more avian puns) I’ll begin by addressing the sometimes overwhelming chore of detangling the financial present.
Caution: Don’t let the big-picture swallow you whole. For instance, I want to be student loan debt free. I imagine that final payment credited to my account, the zero balance shinning back in all her glory like the sun dappling a meadow that I can skip through, waving like the flowers, talking with the animals. This is a whopper of a goal, noble but currently impossible. And that’s when the big-picture starts closing in, the cloud of current balances passing over the sun like a thunderhead.
These big-picture goals are essential because they give us perspective, provide incentive for discipline and show us, in part, who we are by the values we assign. Such powerful dreams are not to be ignored, but it’s also crucial to remember that practicing patience and accountability (not as much fun as skipping through sunny grass, I’ll admit) make these larger goals attainable not by way of a single, great leap but with small, paced steps that incrementally move you nearer and nearer to that shiny zero on the horizon.
So let Goal #1 in our getting organized be Knowing Thy Student Loans. Are your student loans federal, or are they private? Federal student loans are subsidized and unsubsidized government loans lent to students by the Department of Education through a needs-based evaluation of the FAFSA (Free Application for Federal Student Aid.) There are two types of federal student loans: FFEL (Federal Family Education Loan Program) and Direct (William D. Ford Federal Direct Loan Program.) Even if all of your loans are federal loans they may be housed with a variety of federal loan servicers that change over time, so if you’re not sure where your loans are contact the Department of Education at 1-800-4-FED-AID or visit their website.
Contact your student loan servicer(s) as soon as possible to discuss the payment plan you’re enrolled in and to see if you would benefit from one of the many consolidation, income-based, or term-extension plans. The following is a list of repayment plans you might be eligible for with federal student loans (grab onto your chair- it’s a doozy): Standard, Extended, Graduated, Income-Contingent, Income-Sensitive, and Income-Based. The Department of Education also has a Federal Loan Consolidation program. Consolidation loans are lent to payoff pre-existing loan debt with a brand new loan that ideally makes repayment more manageable by having one loan instead of managing multiple loans. By consolidating you may also be extending the repayment term of your loan and/or lowering your monthly payment or interest rate. Bear in mind that you may pay more in interest over the life of the loan by extending the repayment term. Consolidation can have many positive effects on your finances, but more on this to come. Suffice to say there are also private student loan consolidation loans available. Consider reaching out to your lender to discuss the repayment and consolidation/refinance options you may have with your private student loans.
For some readers, this first goal may seem self-explanatory, small potatoes business. You don’t know what type of loans you have?! Geesh! I thought we were talking retirement planning here. To these readers I say: be patient and be kind. I have worked with many people consolidating student loan debt and have gone through the process myself. With knowledge comes confidence, and there is a lot to know when it comes to student loans. Of course, this might scare some away, but keep in mind that just because something is unfamiliar or complex does not mean we should hide from it. Quite the opposite, in fact. To meet our financial obligations now and to begin saving for the future, we must know where we stand as of right now. This leads me to introduce the next installment of this series. After getting chummy with our student loans our next step is to widen our view and place this specific debt into a broader context: our personal finances. Yes (cringe) we must track spending and build a budget. This may be more painful for me than it is for you. I am not always pleasantly surprised when I see exactly where my hard earned paycheck goes. I am, however, happy we will be in this together. Come rain, or—hopefully—come shine.