Setting yourself up for financial success after graduation

How to lower your monthly student loan payments AND save for your future

We all know it’s important to pay off your student loan debt.  But what if there was a way you could do that while lowering your monthly payments and saving for your future? There is.  It’s called the Pay As You Earn (PAYE) program.

In this program, you catch a huge break on your monthly bills because you only have to pay as much as you can afford, calculated by the Department of Education, according to your current income.  If you’ve just graduated, and you haven’t found a career yet, this can be a huge relief.

For example, if you have $27K in student loan debt and you’re single with an income of $20K per year, your payments can be as low as $21 – $200 a month, and nearly $25K worth of interest and principal debt will be forgiven at the end of the 240 month program.  To see how much you can lower your monthly payment on the PAYE program, visit this convenient loan calculator.

How does the PAYE program help me save for retirement?

240 months may sound like a long time.  But look at it this way:  If you can use the PAYE program to balance your budget, stay out of credit card trouble, and actually have enough money left over at the end of the month, you can start saving for your future – and start using compound interest on a savings account or other investment, to your advantage.

In this example, you can see what 7% compound interest on a savings account or investment looks like when a 20-year old, 40-year old and 60-year old each invest $1,020 a year (just $85 a month) up to the age of 65.