Pay Before They Add the Hidden Interest

Okay, you've finally graduated. The exams have left you tired and you have to find a job. The last thing you want to think about now is student loans. So you're relieved to hear that – for the first six months after school ends – you won't have to make any payments.

It sounds like someone's doing you a favour. But it's not as big a favour as you think.

You see, the government won't cover the interest on your loan once classes end. That means an interest-meter will be ticking away for a whole six months, with you completely unaware. By the time you have to start paying, that unpaid interest will be added to your loan amount (aka loan principal), making your debt bigger.

You might think, "Okay, I'll save up during my grace period, and then I'll pay it and cut down on the principal."

The mistake with that approach is waiting until the end of your grace period. You get more bang for your buck by paying at the start. Before the start, actually. Pay what you can by the end of your last month in school.

And keep paying over the next six months, throwing whatever you can at your principal. Don't wait for hidden interest charges to make your student loan suddenly grow bigger.