Dealing With Student Loan Debt


Are you one of over 44 million Americans with student loan debt?  The total student loan debt in America is now over $1.48 Trillion according to statistics released by the Federal Reserve on May 7, 2018.  Yes, that is trillion with a “T.”   Just as the number feels daunting, it can feel overwhelming to deal with your student debt payments on top of all your other financial responsibilities and goals.

The first step is to understand your student loan debt.  Are they federal or private loans?  What is the interest rate? How long will it take to pay off the debt with your current payments?  Are you eligible for a debt consolidation loan?  Once you have a clear understanding of your debt you can plan accordingly and make informed decisions on repayment options or potentially qualifying for loan forgiveness. 

Consolidating your student loans can result in more manageable payments and/or better interest rates.  However, consolidation can also result in the loss of some benefits so do your research before pulling the trigger.   Check out for more information on loan consolidation.

Another option to consider is paying more than the minimum payment.  Paying down the principal amount you owe will reduce the total amount paid over the course of the loan.  Make sure the extra payment is being credited toward principal.   Extra payments may be treated by your loan services as simply paying early and not be attributed to principal reduction.   And if you have the potential to qualify for loan forgiveness at some point it may not be the best use of your resources.  It is important not to evaluate paying down principle in isolation, rather such action should be reviewed in the context of your overall financial plan.  For example, it you have to choose between deferring income into a 401(k) with an employer match versus paying down the principal, it may make more sense to defer income into your 401(k). 


If you have a job in public service work or teaching you may, after a period of time, qualify for forgiveness of your student loans. They key here is understanding the rules and making sure you are on track for the loan forgiveness.  Missing any payments or refinancing may disqualify you and you usually have to work in the profession for 10 years.  Check out the student aid website for more information on loan forgiveness:

If you are not eligible for loan forgiveness and making regular extra payments does not fit into your current budget, consider making a pact or commitment with yourself to use a percentage or all of any cash windfall you receive in the future to pay down the principal on your student loan debt.  This could be money from an inheritance, selling current belongings, or a bonus at work.  The same idea could be applied to getting a raise at work.  Increase the amount of your loan payment based on your raise.

We all have many financial commitments and goals.  Paying off student loan debt is a common goal.  There are a several options you should consider for dealing with your student loan debt.  Working with a Certified Financial Planner™ will help you tackle this goal in the big picture context of your overall financial plan.

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