The 2 biggest mistakes recent grads make when it comes time to start repaying student loans

Many class of 2015 graduates with federal student loans will face an important milestone this November: The six-month grace period on their loans will expire, meaning they will need to start making payments unless they’re entering the military or enrolling in school at least part time.

We asked Brendan Coughlin, president of Consumer Lending for Citizens Bank, for one of the biggest mistakes he sees among recent grads who start making loan payments.

He said the biggest one is directly related to a second, so there are two: Being unprepared, and making big decisions before you’re on top of your loans.

Students — with or without loans — can start preparing to make their payments well before they graduate by keeping a budget and getting used to managing their money.

“The grace period happens to be timed with the other transitions out of college,” Coughlin says. “Between getting a job and moving away from school into the working world, it comes back to a sound budget, making sure your commitments are as affordable as possible, and that you’re not stretching beyond your means.”

Students who don’t prepare, he explains, tend to snowball into the second mistake: making choices that commit them to costs they can’t afford without taking their loans into account. For instance, if you sign an apartment lease or buy a car without taking your loan payments into account to figure out how much you can comfortably afford, “it’s not uncommon to see a little buyer’s remorse,” Coughlin says.

To steer clear of these common mistakes, Coughlin recommends getting a copy of all of your statements and adding up all of your payments, and “then go back to the basics of budgeting: Look at what you owe and the money you’re going to make from your job, budget that in, and figure out where that leaves you,” he says. “Are you in the position to rent an apartment, or do you need to stay with your parents for a while?”

Admittedly, these mistakes are common for a reason. “It’s easier said than done,” he says. “It requires some focus from students.”

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