Graduating from college is an exciting milestone. Not only are you ready to enter the workforce, but you’re also likely taking on some new financial responsibilities.
With your education as a solid base, you’re off to a great start in finding a career that gives you a good, steady income. However, if you took out any federal and/or private student loans to help finance your education, you’ll also need to contend with student loan repayments.
Managing student loans while starting your career can feel challenging. It’s a balancing act that requires careful planning. With the right strategies, you can prioritize both successfully, landing your first job and repaying your student loan debt, while also building a strong financial foundation for your future.
Student Loan Debt vs. Early Career Priorities
After you graduate from college, you’ll start establishing a career and, possibly, managing student loan payments. By implementing good financial habits from the start, you can create a balance between them.
A good, steady income is necessary to effectively manage student loan repayment and other financial responsibilities. However, you’ll have some new expenses if you’re living on your own: a car, an apartment or even a new pet. You’ll likely also want to have some fun, too—which often costs money.
Dealing with student loan payments on top of those new expenses can present an opportunity for creative solutions. You’ll need to allocate a portion of your income toward loan repayment. Early in your career, your earning potential isn't yet what it will be. But remember, timely debt repayment is essential for long-term financial wellness and stability.
Ultimately, it’s important to develop a comprehensive financial plan that accounts for student loan debt repayment while also affording your regular bills, fun lifestyle expenses and future financial considerations.
Smart Strategies to Repay Your Student Loan Debt
Paying back student loans efficiently—on time and in full each month—is the best approach. You want to ensure you’re managing your finances well so you can protect your credit history and your future buying power. This task is easier if you have a steady, reliable income and a realistic budget.
Here are a few actionable tips to help you get started:
- Understand your loans. Know the types of loans you have, their interest rates and the terms and conditions. Read all correspondence from your loan servicer, and keep detailed records of your loans, including your payment schedules. Some student loan forgiveness programs require years’ worth of consecutive on-time payments, so you should try not to miss any or pay late.
- Explore available repayment options. Federal student loans offer various repayment plans, including income-driven repayment options that tie your monthly payments to your income. These plans can make loan payments more manageable, especially if you’re starting with an entry-level salary.
- Prioritize high-interest loans. If you have multiple student loans, focus on paying down the loans with the highest interest rates first. Making extra payments toward these loans can save you money in the long run by reducing the overall interest you’ll pay.
- Look into refinancing. If you’re juggling payments on several private student loans, consider combining them. This can simplify bill time by giving you one single payment to make each month. Refinancing even just 1 education loan could help you lower your monthly payments, pay your loans off sooner or both. If you have federal student loans, keep in mind that refinancing these could make you ineligible for possible loan reduction or forgiveness. Be sure to research your options before making a decision.
Tips for New Grads to Create Financial Stability
Having real disposable income for the first time opens a lot of doors. However, without financial discipline, adjusting to the new responsibilities of paying bills can take some getting used to.
Here are some smart steps you can take to create a manageable debt repayment strategy:
- Create a budget. Start by tracking your income and expenses to get a sense of your financial situation. Decide what kind of budgeting plan fits your personality and lifestyle. Use an online tool such as a monthly budget tracker, and allocate a portion of your income to cover your loan payments in addition to your other essential expenses such as rent, utilities, groceries and transportation.
- Live within your means. Resist the temptation to immediately upgrade your lifestyle after landing your first job. Avoid excessive spending on non-essential items. Instead, focus on building a solid financial foundation and credit history.
- Build an emergency fund. Although you must tackle your student loans, it’s equally important to establish an emergency fund. You never know when an unexpected expense—like a medical emergency, a car repair or a late-night trip to the vet—will pop up. A savings account with some money set aside for these kinds of expenses can help you avoid relying too heavily on credit cards or loans in times of financial crisis. You could start putting aside small amounts of money and increase your contributions as your budget allows.
It’s Never Too Early to Look Ahead to Retirement
Though you probably have about 40 years to go until you're ready to retire, that's the best time to start planning!
Your education helped you land your job, and paying back student loans comes with the territory. Student loan payments might be your most immediate financial concern, but you also need to start thinking about long-term financial goals, such as saving for retirement.
If you start putting away money for retirement when you’re young—even a little bit at first—you’ll have more opportunity to grow your investments significantly over time, thanks to compounding interest.
Unlike student loans, which you can take out when you’re ready to go to school, you have to fund your own retirement well before it arrives. You also can’t get a loan for retirement, so it’s important to save as much money as possible throughout your career so you’ll have enough money when you want to retire.
The money you save and invest now will help you retire decades from now. Make sure you’re putting a portion of your new paycheck toward tax-advantaged retirement savings, such as an IRA or an employer-sponsored plan such as a 401(k) or 403(b).
When you’re young and early in your career, retirement savings may seem optional—especially when student loan payments loom large. Ideally, you’ll budget money for both of these financial obligations. Balancing your financial priorities will help you build stability and security—both now and in the future.
Start Your Next Chapter With Navy Federal
Using the strategies covered here, you can devise your personalized plan to balance your student loan payments with other financial obligations as you start your career. Learning financial responsibility is a journey, and making informed decisions now will set you on the path to financial freedom and stability.
Navy Federal Credit Union’s financial tools, information and services can help set you up for success. That includes being able to refinance your loan from another lender! Stop by one or our branches or reach out today to learn more about how to tackle your student loans strategically.
This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.