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Author: TchrP Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 8138  
Subject: Re: Paying Off College Loans Date: 4/29/1998 10:02 PM
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>> I am going to graduate in one week and my student loans will need to be paid off. Do you have any foolish ideas as to how this debt should be budgeted into my personal finiancial plan?
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You may also want to ask this question on the Credit Cards board... that may seem like a peculiar place for it, but that board tends to focus more generally on reducing and avoiding debt of all kinds, and there has been some recent discussion of student loans.

The basic principle is the same for any kind of debt: set aside funds from every paycheck (do you have a job yet?) in sufficient amounts to meet the payment schedule. Student loans can be especially tricky because often the payment schedule is quarterly, not monthly. If that's the case, put 1/3 of the quarterly payment away every month.

A question, however, is how quickly you should try to pay off the debt. In an important sense, student loans are "healthy debt" because the interest rate usually isn't too high, and because you used the loans for something that helps you to earn money (everyone hopes). Thus, there isn't necessarily the pressure to pay student loans off more rapidly than the payment schedule actually requires.

For a new graduate, probably the most important thing is to control your living expenses. It is very easy to spend all of one's new paycheck and a bit more, especially if a first job requires moving to another city, furnishing an apartment, buying clothes that are suitable for the work, and so forth. (Been there, done that.)

I'd also advise being really, really careful about the repayment schedule, and making the payments when they are due even if the loan agency doesn't bill you appropriately. In my experience, student loan organizations and the companies that handle the collections have a tendency to "forget" to bill you or defer payment when they shouldn't, and then demand that you make it all up overnight. If there is an option to have the payments made automatically by monthly debit, I'd consider using it.
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