When you finish college, you will typically have a grace period before you have to start making student loan payments. Most loans, including Federal Direct Loans (Subsidized and Unsubsidized) and Subsidized & Unsubsidized Federal Stafford Loans, will have a six-month grace period.
For other kinds of loans, you will have to check with your school’s financial aid office or your lender to find out what the grace period is, if any.
Whatever time you have between college and the start of your loan repayment is crucial. Use this time to establish a budget so you can afford the debt burden you will be carrying due to your student loans.
We offer a lot of information about budgeting, but there are some basic tips that everyone should bear in mind:
Get some income right away
Even if it’s not a job that is related to your degree, get some kind of employment to bring in steady income while you develop your career. Don’t waste the six months you have being picky and searching for the perfect job. Start working, start saving, and switch to your desired job when you get an offer.
Track your spending
When you have income coming in, then you’ll need to track what’s going out. Record your spending—every cent—for at least a month. Use a spreadsheet, smartphone app, save your receipts, carry a notebook, or do whatever works for you. At the end of a month, tally up your spending and see what state you are in financially.
Create a new budget
Most likely, tracking will show you some categories where you are spending more than you thought, and those will be easy candidates for cutbacks. You may find that getting your budget balanced is easier than you expected if your tracking is diligent.
If you still don’t have enough money after cutting the obvious things, it’s time to dig deeper, and try to get by with less. You may be on a diet of ramen noodles for longer than you’d like, until you’re able to increase your income. Getting rid of cellular data, cable TV, and other expenses can help you put together a workable budget in the short term. Remember, these cutbacks won’t be permanent. Eventually your college degree should start to pay off with better employment, and you can gradually adjust your budget. But for now, focus on spending as little as possible so you’re ready to tackle your student loans when the grace period ends.
Set aside your expected payment
Whatever your student loan payment will be, try to set aside that much money every month. This will establish that you are capable of paying your loans, and help you build a small financial cushion to weather potential financial setbacks.
If you continue to come up short financially, keep tinkering with your budget, and keep looking for better employment. Your finances will always be a work in progress that you have to adjust as your circumstances change.
Remember, there is on-demand financial counseling available from nonprofit organizations like ours. We have over 40 years of experience helping people make sense of their debts and manage their personal finances. Don’t be afraid to reach out for help if you feel overwhelmed.