Smart Ways to Use Your Money After Graduation, Before Student Loan Payments Begin

Graduating from college can be one of the most exciting events in your life, but navigating everything that comes after — finding an apartment, paying bills, and going to work every day — can be a challenge.

Plus, many graduates’ student loans start coming due. After you graduate, leave school, or drop below half-time enrollment, you typically have a six-month grace period before you must begin making payments on your federal student loans. The grace period for private student loans varies by individual lender.

There’s no one “best” way to handle finances after graduation, but some tips can help you think through both short- and long-term goals and make some solid financial plans. Let’s take a look at a few tips on managing your money after graduation.

Why the First 6-9 Months After Graduation Matter Financially

Think of the first six to nine months after graduation as the time you take to build a good financial footing, particularly if you have impending student loans. The habits you put into place now can help propel you in the right direction later, including setting you up for solid lifelong money habits.

For example, putting together a budget, saving money, and aiming to spend less than you make can serve you well for the rest of your life.

8 Smart Financial Moves to Make Before Full Repayment Begins

What types of financial moves should you make before your student loan payments start? Let’s take a look.

Build an Emergency Fund

An emergency fund is your backup in case something surprising happens, like a car breakdown, a sudden medical bill, or another (hopefully temporary) disaster. Without an emergency fund, you may be forced to rely on credit cards or payday loans to pick up the slack, which could put you into an undesirable debt cycle.

How much should you save? This amount depends on your specific lifestyle. What expenses have cropped up in the past? Knowing that number can help you set a savings goal. Many experts also suggest setting enough aside to be able to cover three to six months’ of living expenses. You can calculate your living expenses by adding up all your expenses (rent, insurance, utilities, phone, transportation, credit card payments, etc.) and deducting that amount from your take-home pay.

Even if you don’t think you can save much, try setting any small amount aside to help pad your emergency fund.

Recommended: How to Build an Emergency Fund in 6 Steps

Start Budgeting with Confidence

Ideally, budgeting should give you freedom, not leave you feeling restricted. Think of a budget as a roadmap for where your money goes. Here are the steps to create a budget:

•  Calculate your income. Add up your income based on your paystub or other earnings, such as money from a side hustle or second job. (Yes, even Doordash gigs count!)

•  Know how much you spend. Know how much goes out of your account each month, through loans, insurance, housing, utilities, food, health care, transportation, etc. Don’t forget to include the fun stuff — entertainment, eating out, etc.

•  Choose your budgeting method. You can choose from several budgeting methods. One method allows you to allocate your money into different categories (needs, wants, and savings and goals) which correspond to percentages: 50/30/20 or 70/20/10. (For example, 50% goes toward things you need, 30% goes toward things you want, and 20% goes toward savings and goals.) You can also opt for a zero-based budget, where every dollar gets assigned a job before the month begins. You subtract from your income until you get to $0 with a zero-based budget.

•  Make adjustments: Do you need to change anything with your budget as you’re working through it? Consider adding a buffer in your budget to accommodate any financial challenges, such as a cracked car windshield or an emergency dental visit. Your budget will likely change from month to month, so don’t be afraid to tweak your spending (or up your income due to a lucrative side gig!).

Open a High-Yield Savings Account

Savings accounts can be a good place to park money you want to save for emergencies or for building up savings. High-yield savings accounts can offer new graduates a higher interest rate compared to regular savings accounts. Regular savings accounts average just 0.38% as of August 2025. High-yield savings account returns vary, but they can be as high as 5.00%.

Pay Down High-Interest Debt

High-interest debt usually exceeds the rates for mortgages and student loans, often carrying interest rates above 8.00%. Credit card debt is a common example of high-interest debt. The higher your interest rate, the longer it can take to pay off what you owe, especially if you only make the minimum payments. Paying down debt more quickly can help you make an impact on the amount you owe.

Making more than the minimum payments or trying the debt avalanche method can help you get rid of your debt faster. The debt avalanche method involves paying off the debt with the highest interest rate first, then moving on to the debt with the next-highest interest rate until you pay off all your debts.

Start a Roth IRA or Contribute to Retirement

A Roth IRA is an individual retirement account in which qualified distributions are tax-free. This means when you take money out in retirement, you won’t have to pay any tax on it.

The IRA contribution limit is $7,000 in 2025 for those under age 50. Assuming you invested the full amount ($583.33 per month) every year starting at age 22, you could retire at age 67 with $6,114,761 — even if you never invested more than $7,000 each year (assuming a 10% growth rate).

You can also contribute to an employer-sponsored retirement plan. One of the best reasons to invest in a workplace plan is the employer match, meaning your company will contribute funds to your retirement account as well. For example, your company might match dollar-for-dollar up to 3% of your salary or 50 cents per dollar on contributions up to 6%. The type of retirement plan you have determines the amount you can contribute. The longer you leave money in your plan, the more ownership you have of your account, and the more you’ll earn over time.

Whether you invest in your employer’s plan or a Roth IRA (or both!), you can use the power of compound interest to build a large nest egg for retirement.

Invest Small, Learn Fast

Even if you have limited funds after graduation, investing small amounts can still add up and grow significantly over time. Compound interest means you earn interest on the money you save, and in turn, that money earns interest. Over time, any amount of money you invest can grow.

Learn as much as you can about investing in the stock market to pick up the basics, formulate a plan, and stick to it. Doing so can help you build financial security and build your retirement.

Recommended: How to Start Investing: A Beginner’s Guide

Upskill with Online Courses or Certifications

Online courses and certifications are great ways to learn how to invest or learn more about the stock market. For example, the Wharton School at the University of Pennsylvania offers an online class and certificate program about value investing. The class teaches you how to invest in undervalued stocks and how to put specific investing strategies into place. At $4,800 for an 8-week class, it’s an investment in itself.

However, plenty of free courses can be found through platforms like Udemy, Coursera, Morningstar, Khan Academy, and MIT’s Open CourseWare. Just make sure you’re choosing a course from a reliable, trusted source.

Save Toward Big Life Milestones

What do you dream about accomplishing someday? Your list might include:

•  Save for a car

•  Go to graduate school

•  Save for a down payment on a house

•  Get married

•  Start a business

•  Have kids and save for their college

•  Retire by a certain age

No matter your goal, it’s a good idea to write down the amount you think you might need for each and then put a savings plan into action to make it happen. Writing down your goals is one of the best ways to ensure you achieve them; you’re 42% more likely to achieve your goals if you write them down.

What to Avoid During the Grace Period

You have a short time before the student loan grace period ends. What should you avoid doing with your money? Let’s take a look.

Avoid Delaying All Financial Planning

Don’t skip financial planning during the grace period. In other words, you want to take advantage of the time you have to figure out exactly how much you can spend per month on housing, food, transportation, and other expenses. How do those numbers match up with your first job?

The more time you spend crunching the numbers, the more quickly you can determine how to comfortably live within your new take-home pay. The grace period offers an advantage in that it allows you a bit of a buffer as you’re experimenting. For example, if you go slightly over your grocery budget in the second month after graduation, you can adjust more easily since you still have some flexibility before student loan payments begin.

No matter what, start planning right away with the numbers at your disposal.

Avoid Overspending Due to Lower Payments

When figuring out how much you can spend per month, you may be tempted to overspend in other areas of your life. You may also be tempted to make just the minimum payments on debt, particularly credit card debt. Making just the minimum payments on a credit card can turn small purchases into years and years of payments.

For example, if you have a $5,000 credit card balance with a 23.00% APR and minimum payment of $100, it would take 14 years to pay off the card balance and you would owe over $11,739 in interest alone.

Even though you have the option to make the minimum payment (and potentially overspend in other areas), it isn’t in your best interest. Keep your expenses low and make more than the minimum payment.

What Is an Interest-Only Student Loan Repayment Plan?

Paying interest-only means you make only the interest payments on a student loan. Student loans are broken up into the following: the principal balance, the interest, and the fees. Here’s a quick definition of each:

•   Principal: The amount you borrowed

•   Interest: The continuous cost of borrowing the original principal amount

•   Fees: The one-time, upfront charges for lender services like processing the loan

You must make a minimum payment when you repay your student loans, which goes toward both principal and interest. More goes toward interest rather than principal at the beginning, but eventually, you shift toward paying more toward principal.

You can pay down interest or make prepayments on student loans while you’re in school or during the grace period, especially on Federal Direct Unsubsidized Loans, which accrue interest while you’re in school. Making these payments can lower your overall balance and shorten the amount of time you pay back your loan.

How Interest-Only Repayment Can Help You Save Early On

Making payments before they’re due or paying more than the amount you owe each month can reduce the interest you pay over time and reduce your overall loan amount. Check with your loan servicer to learn more about how to make prepayments.

Recommended: How to Live with Student Loan Debt

Refinancing Student Loans

Refinancing student loans can be a smart financial move for many graduates. By refinancing, you can potentially lower your interest rate, which can reduce your monthly payments and the total amount of interest you pay over the life of the loan. Refinancing also allows you to consolidate multiple loans into a single payment, simplifying your debt management and making it easier to keep track of your financial obligations.

However, refinancing isn’t without its drawbacks. When you refinance federal student loans with a private lender, you lose access to federal benefits such as income-driven repayment, loan forgiveness programs, and deferment options. It’s important to weigh these potential losses against the savings you might gain from a lower interest rate.

Before making a decision, consider consulting with a financial advisor to ensure that refinancing aligns with your long-term financial goals and current financial situation.

💡 Quick Tip: Refinancing comes with a lot of specific terms. If you want a quick refresher, the Student Loan Refinancing Glossary can help you understand the essentials.

The Takeaway

Now that you know what to do after college and before student loan payments start, a quick reminder: There’s no right or wrong way to handle your money after graduation. However, one of the best things you can do is to get a bird’s eye view of your finances. What will you have coming in, and what will come out of your paycheck each month?

Whenever you can, look to the future. Think past what’s right in front of you and make smart moves toward the next big thing, whether it’s saving for a car or paying off your student loans. It’s exciting to think about all your future goals. You can achieve them, especially if you break them down into smaller savings goals.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

What are the smartest ways to use your money after graduating college?

You can use your money in several ways after graduating college. However, you may want to prioritize saving for an emergency fund and using money to pay off any existing debt. For example, if you have $1,000 in credit card debt, you may want to consider getting the credit card debt paid off and then saving three to six months’ worth of expenses in an emergency fund. Try being as financially responsible as possible before your loan grace period ends.

Why is the student loan grace period important for financial planning?

You can use the student loan grace period to plan how you’ll handle your money before your student loan payments come due. For example, you can budget and live as if you actually do have a payment, even though you won’t owe anything for several months. Doing so can help you gauge how well you’re handling money, from budgeting for groceries to figuring out how much you can spend each month for entertainment. The earlier you can get a handle on how you’ll spend your money, the better off you’ll be in the long run.

Should I start making student loan payments during the grace period?

You can start making student loan payments during the grace period if you choose. Making student loan payments during this time can help shorten your loan term or reduce the amount you’ll owe overall. Even if it seems like a small amount, applying extra money toward your loans consistently over time can save you money.

Is it a good idea to open a Roth IRA right after graduation?

The earlier and more consistently you start saving for retirement, the more money you’ll have in your nest egg sooner. However, it’s more important to ensure you have the essentials covered, like food and shelter. Once you know you’ll have enough money for the necessities, then you can start investing in a Roth IRA.

What financial mistakes should recent college graduates avoid?

New college graduates should avoid paying bills late or not paying them at all, and racking up debt (credit cards, a new car). And the earlier grads can get to a few key financial to-dos, the better: budgeting, creating an emergency fund, and paying down existing debt. Get a handle on your money and put financial responsibility first on your priority list. Doing so can help set you up for financial success.

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Photo Credit: iStock/nirat

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