The Silver Lining to Managing Student Debt

The Silver Lining to Managing Student Debt

One point six trillion dollars. That’s how big the student debt crisis is in the U.S. 

Do you know how big 1.6 trillion dollars is? Probably not. Our brains just aren’t wired that way.

To help put it into perspective, think of it this way: one trillion is made up of one million millions.

Now, with a million dollars, you could buy a mansion in Austin, Texas. But with a million million dollars, you could afford to buy everyone in Austin (population: 950,715) a mansion and still have money left over for an epic house-warming party.

Knowing this large number is attached to student loans may be depressing, even if your debt is a tiny fraction of it. But don’t let these figures let your good mood evaporate. Let’s focus on the silver linings.

Student debt

It Helps Builds Credit History

If you ever want to lease a car, buy a home, or simply take out a credit card for the cash-back possibilities after graduation, your credit score is the key. This little number impacts your chance of success of getting any of these loans — and more! Financial institutions use it to see if you’re creditworthy, and they’ll set rates and terms that reflect your financial profile.

If they don’t like what they see, you may end up being denied. Or you may get a loan with less forgiving terms than your student ones.

Doing everything you can to build a positive credit history will help impress lenders and lock down affordable financing.  

You can build credit with your student loans. Whether federal or private, these loans report your repayment history to one of the major credit agencies. This means how well you pay your bills will impact your history. Paying your student loans on or before the due date is one of the best ways to build up positive history.

This same rule of thumb applies to any credit card or personal line of credit you have in your name. It depends on how they report your payments. If your personal line of credit comes from an institution like CreditFresh, your payment history may be reported to TransUnion. Other financial organizations may report payments to Equifax or Experian.

TransUnion, Equifax, or Experian — it doesn’t matter which one, as long as one company receives payment information from your financial institution. If they receive data that says you’re on top of your monthly payments for loan, personal line of credit, and credit card, you’ll be contributing good credit entries to your report.

It Forces You to Budget

Making sure you hit every payment isn’t easy, especially if you don’t get a high-paying job straight out of college. That’s where the second silver-lining comes into play: your budgeting skills.

Grads and people who live paycheck to paycheck stand to benefit the most from learning how to budget. A budget is an amazing tool that can help you understand the value of your dollar, making sure you spend your money wisely.

It all starts by tracking your expenses and eliminating (or cutting out entirely) those bad spending habits that eat into your debt-reduction money. You probably already know the ones — things like $30 sushi lunches, $70 concert tickets, and $100 shoes.

Although it’s okay to splurge every once in a while, indulging in these wants all the time is a bad idea. Use your budget to portion your money, so you can meet your priorities (like paying rent, groceries, and student loans) before moving onto concert tickets.

Learning how to prioritize your finances like this is an important skill that can help you long after you pay off your student loans. From buying your first home to planning your retirement and even going on vacation, your budget is the tool that can help you achieve your goals.

Student Loans Suck But…

There’s no argument, student loans are a frustrating and costly consequence of going to school. But you already knew that. And in a world seemingly full of bad news, it’s not great for your mental health to focus on this too long.

So take a break from focusing on all the bad stuff that comes from lugging around student debt, and take a glass-half-full approach to your loans. You’ll realize there are some perks to managing your debt responsibly.