5 Worst Strategies for Paying Off Your Student Loans

NEW YORK (TheStreet) -- Although you may be eager to pay down your student loans and become debt free as soon as possible, some payment strategies can destroy your long-term financial future. Experts weigh in on six extreme student loan payment strategies that are far worse than having debt:

1. Paying too much, too soon

In the first few months after graduation, you shouldn’t set up an overly aggressive payment plan, says Reyna Gobel, author of CliffsNotes Graduation Debt, 2nd Edition.

“You really don’t know what your income is going to be or how far it’s going to go,” she says. “Graduates have a grace period of six months before they have to start paying. Use that time to figure out your strategy.”

Many grads get excited with the prospect of spending $20 a week on groceries and $800 a month paying down their loans, but that’s not realistic, Gobel says. The worst thing you can do is get locked into a payment plan you can’t sustain.

“A lot of grads think they can continue living off ramen noodles for the next five or 10 years, but then they start looking at their new expenses like rent, electricity, the gas to get to and from work, and they realize that the real world is more expensive than they thought.”

For the first six months after graduation, don’t sign up for a payment plan, but do deposit the amount you think you’d like to pay into a savings account and see how you manage, Gobel suggests.

“Act as if you’re making those payments and see how it works for you. You may find that you can’t pay as much as you thought, or you may find you can pay more. In either case, after a few months you’ll have a job and you’ll know what’s going to fit with your life.”

2. Getting on a payment plan without looking up all your loans first

“I ended up with a default because I missed a loan I didn’t know I had. You might not know you’ve lost one unless you look everything up in the National Student Loan Data System,” Gobel says.

Also see: What to Do When Your First College Bills Are Shockingly High

Sometimes loans can get lost in the consolidation process, or if you move after graduation, notification on one of your loans can get lost in the mail. It happens more than you might think, she says.

“There is still a 15% default rate on student loans within the first three years, and a lot of those are due to a lack of awareness. It takes two seconds to look at the NSLDS website and see what the status of each loan is.”

Some graduates may have consolidated their loans several times and may have both subsidized loans and non-subsidized loans, which will always be listed separately. Although it is possible to recover from a default -- Gobel did -- it’s not something you want to go through if you can avoid it, she says.

“A lot of people get scared when talking about student loans and just want to hide under the couch. Don’t hide. Double-checking what you know about your loans is electronic and it’s easy. You don’t want a default on your credit report.”

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