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In the fall of 2018, researchers predicted that there would be approximately 19.9 million fresh faces beginning their degrees at colleges all across America. Those almost 20 million students are sure to have taken out loans to attend their chosen school, adding to the $1.52 trillion of student loan debt.

With such a staggering amount of students needing loans to get an education, one might believe schools would teach the 411 on student loans: how interest rates work, how to pay them back, and most importantly, yet hardly discussed, when to pay them back. Sadly, many students enter into the realm of debt with little knowledge and therefore risk ending up in rather dismal financial dilemmas.

Since student loans allow students to wait until graduation to begin repayment, many students believe this is obviously the best way to go about the repayment process. However, that couldn’t be further from the truth. To understand the benefits of early repayment, you have to first understand interest and the way it affects your student loan balance.

Understanding Loans and Interest

In short, the interest rate on your student loan is the amount of money you’re paying the financial institution to loan you the money. Depending on the kind of loan, government subsidized direct loans or unsubsidized, the interest rate doesn’t begin to accrue until after you graduate.

If a student shows financial need, the government will offer subsidized direct loans in which they will pay the interest on the loan until the student graduates. Upon graduation, the interest is then the student’s responsibility.

Unsubsidized loans begin accruing interest at disbursement (the day the money is given). It isn’t required to start paying the loan back at disbursement, but if you don’t the interest will continue to build. Once you graduate, the amount to pay back can be exponentially higher than the amount you borrowed because of the interest that has accrued.

So, how do you avoid such a dilemma? You start paying back the loan, paying down the interest, as soon as possible.

Beating Interest By Paying Early

A student can avoid interest rates increasing their debt by beginning to pay back their loans before graduating. This may seem extremely difficult. After all, college is a lot of work. It takes up a lot of time, so how can one be expected to actually work at a job while trying to complete a degree.

Start looking into your college’s work-study program or search for part-time jobs where you could try to complete classwork while on the clock. Many campus-sponsored jobs are flexible with class schedules and understand that school work is a priority. Basically, look for opportunities that would allow you to put money towards paying off your loans. Because you’re paying before the repayment date begins, there is no minimum requirement or due date for the loan. This means that any amount of money you can afford to put towards the loan helps bring that balance down.

Bottom Line

If you begin the repayment process immediately upon starting college, small amounts of money you put into repaying your loan add up a lot faster than you might think over the course of four years. If you want to get them paid off completely before graduating (yes, it can be done), try using your loan provider’s repayment calculator to make a monthly plan. The key to being financially sound for years to come is to be proactive rather than reactive. Worry about the loans now and enjoy debt free life later.