When Should I Start Paying Off Debt?

3 Dec

College is a time when students worry less about incurring debt and more about learning and enjoying new-found freedom. But as graduation nears, you’ll have to test the debts you’ve taken on during school.

Getting out from underneath debt

Graduate carrying heavy debt load

If you’re like most students, you’ll have thousands of dollars in student loan debt. You might also have some credit card debt or a car loan to pay off. Becoming debt-free is made even more challenging because you may not yet be settled in a permanent job or career. Just remember that countless other new graduates are in the same place. While many young adults go about debt payment in less-than-ideal ways, this is your opportunity to get out of debt, develop good financial habits and possibly even save money along the way.

Plan of Attack

Before you start repaying your debts, go over what types of debts you have and find out when payments will be due. If you have credit card debts, you probably already know that you have to start making payments immediately.

Student loan lenders understand that graduates often need time to find jobs and begin earning a steady income. Because of this, there’s almost always a grace period, a time of about six to nine months between your graduation date and the date your first payment is due. Even during the grace period, however, you may still be responsible for paying interest charges. Check the details of your loan to find out when you’ll be responsible for paying interest.

Once you understand the bills you face, you’ll be better prepared to create a plan of attack.  Decide how much money you can afford to put toward paying down your debts. You’ll need to cover at least the minimum payments each month on your debts. If you haven’t found a job yet, are using savings to pay down debts or are borrowing from your parents, it’s usually best to keep your focus on the minimum payment.

Paying Down Debt

Paying down debt

counting money

Reevaluate these payments after you begin earning an income. Once you have a job, make it a goal to start making significant progress on your debts rather than just paying the minimum amounts. It’s helpful to keep in mind that for each month you stay in debt, it actually costs you more money by accruing interest. So if you make larger payments each month, you’ll get out of debt faster and save more money in interest.

You’ll need to once again reevaluate your monthly payments after the grace period ends on your student loans. Having this additional financial responsibility will usurp some of your monthly funds, taking away from your ability to pay down your other debts like an auto loan and credit card debts.

Even so, if you still have credit card debt, this should be your top priority; credit cards usually come with inordinately high interest rates, so this type of debt will end up costing you a much higher percentage of your original loan. Until you have credit card debt under control, pay just the minimum on your student loans and divide any extra money toward reducing your credit card bill.

Again, reevaluate your monthly payments if there are any changes in your finances. You’ll have to adjust your budget, for example, if you finish paying off your credit card debt, earn a promotion or receive a raise.


Katherine Pilnick writes and blogs about issues touching on personal financial well-being and issues that influence it for Debt.org, America’s Debt Help Organization.

One Response to “When Should I Start Paying Off Debt?”


  1. Budget Review - December - Budget|Strong : Budget|Strong - January 19, 2013

    […] When Should I Start Paying Off Debt? […]


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