They say taxes and death are the two things you can always count on. For college graduates, it is more like student loans and taxes. Statistics show that the vast majority of students graduate with heavy loan debt, which must be repaid.
Receiving your first student loan repayment invoices can be a shocker. When did I borrow so much money? Who in their right mind gave it to me!? The panic will subside once you put together a plan, but it can certain be a rude introduction to the life of an adult.
Receiving your first student loan repayment invoice in the mail can be a real shocker. Ah, but you have a second whammy coming down the line. Yes, I am talking about the joys of paying taxes now that you have some real income. It can be slightly depressing. Regardless, Uncle Sam is going to help you out.
The repayment of student loans is such a hot issue that there are millions of strategies out there for dealing with them. All of them take years to work, unfortunately. The good news is your repayment efforts will generate a tax break for you during the same period.
Student loan payments are comprised of principal and interest. The interest you repay is a tax deduction you can use year after year while repaying your loans. That deduction is capped at twenty five hundred dollars, but that is still a lot.
This large deduction can have an interesting impact on financial plans. Many graduates decide to only make the minimum payments on their loans. This is okay if you save up the extra money and invest it, but not if you blow it on toys.
In fact, there are a number of things you should do with that extra money. Buying a plasma television is not one of them. The initial step, instead, is to create an emergency fund that has enough money to cover you for sixteen weeks.
Hide that money away. Now take a look at those credit card bills. Take your credit cards out of your wallet and store them away for emergencies. Now start paying off those cards. Start with the smallest balances and move to the biggest
After you have an emergency fund built, and you have paid off those credit cards, you can then start to invest. While you cannot escape loans and taxes, you can thank your dear Uncle Sam for the hefty student loan interest deduction by claiming it each year on your taxes.
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