Student Loan Payments vs. Saving

SavingsFor many people, the choice between making a student loan payment and putting food on the table is an all too real reality. For others, the financial choices are a more mild form of indecision; such as saving for retirement or paying off student loans.  While these choices may not always be avoidable, there are some important things to know before stepping foot into a university.

Reduce Costs Early

Most college hopefuls have a “dream school” in mind where they envision themselves experiencing dorm life and attending college football games. While that experience is one to be treasured, it does not have to come at the expense of thousands of dollars in debt. Instead of attending a fancy, expensive college look for more affordable institutions with the degree of choice. There are plenty of prestigious schools out there that significantly less than others. If that fancy school is a must have, attend the first two years at a community college before transferring, it could save thousands in unnecessary borrowing.

Save and Contribute

These days  not all corporate employers are matching 401(k) contributions. If your employer does offer this benefit, make sure to match it to the fullest right away. The earlier you start making contributions to your retirement plan, the more you can earn in interest over the life of the plan. If your employer does not offer matching 401(k) benefits, start your own account by looking for a high yield account at a  private firm.

Don’t Delay Payments

Some students continue to take one class or ask for deferments in their payments. If you can pay, you should. Save the request for a deferment or forbearance for a rainy day; you never know when financial hardship will strike and some lenders are not open to approving these often. Contact your loan servicer right away and begin negotiations for payment arrangements. Chances are your default payment amount is higher than what is technically the minimum for repayment. Again, if you can afford it pay as much as you can. The faster you get out of student loan debt the faster you can start building your savings.