Student Loan Repayment: The Importance of Budgeting

Student loan repayment can be a burden to a new graduate. Often it can be difficult to find a job, or the first job is low paying. Student loans are often the first financial responsibility a new graduate will have. It is very important to pay on time every month. Defaulting on a student loan will keep you from being able to get a federal mortgage or work for the federal government, and it will stay with you forever, never being discharged in a bankruptcy. A simple budget can keep you paying on time every month.

Develop a Monthly Budget

When you are a new graduate with a new job, you need to examine your income and expenses. Determine how much you will  make after all taxes and with holdings. Remember to contribute to your company 401k first. Then look at your monthly expense. Some of your expenses, like rent, car payments and other debts, are fixed. Other expenses, such as gas, electricity and food, are variables. Estimate your total expenses and deduct them from your income. If you have money left over, then you should be saving and investing. If you are in a negative balance, then you need to cut back somewhere in order to make ends meet.

Needs vs. Wants

When you are learning to budget, you need to determine what are needs and what are wants. Housing, food and health care are needs. A car, cable and Internet are wants. Every month, first pay everything that is a necessity. Then pay all debts, and if there is money left over, you can buy things you want. Consider using the envelope system to help budget your expenditures. The envelope system uses cash only, and you designate a certain amount every month for each expense like food and gas. When the money is gone, you cannot spend any more on that category.

Get Your Payments to an Affordable Amount

Part of budgeting is making your expenses affordable on your salary. If you are having trouble with high student loan payments, call your lender. You can extend the repayment time from ten to twenty-five years, which will make your payments much lower. You can also request a sliding scale payment, which will allow your payments to adjust up and down with your income.

Set up Automated Payments

A great way to be sure you pay on time every month is to automate your payments. You can sign up with your lender for bank withdrawals before the due date every month. Some lenders will even give you a monthly discount for doing this, since this ensures they will get their money on time every month. Another option is to have your bank automatically send a check every month to your lender.

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