Student loans are often top of mind for many of you in the early stages of a professional career. You’ve made an investment in yourself by getting a great education, and now you’ve got to make enough money to get that monkey off your back. You’ve made a bet on yourself that you’ll get enough return on the expense of education to repay the loans. The main piece of advice we give most of our clients with student debt is not about numbers; it’s about overcoming the feeling that this debt is a burden that seems, at times, insurmountable. If you’re in that camp, there is good news.
1. Your student loans can get paid off, so you can stop worrying. That’s right. Tools required? Some good ol’ discipline and consistency. Create a plan to pay down your student loans. Most importantly, stick with the plan. If you know that paying $600 per month for 15 years will pay off your loans, then simply stay the course. Decide on a monthly number and don’t revisit it until the end. They big key is to not let your loans tyrannize you. Here is a helpful student loan payoff calculator.
2. You have options that may help. See below.
For purposes of this article, the question of how to tackle your student debt may depend on your career route – public or private sector.
Public Sector Career
A recent study released by Junior Achievement and PricewaterhouseCoopers US found that 24% of millennials believe their student loans will be forgiven at some point (1). Scary, yes. However, before you write millennials off as pathetically naïve, this statistic is actually not too far from reality. This is close to the percentage of the U.S. workforce that’s employed in the public sector. In a number of these public sector jobs, employees are eligible for loan forgiveness if certain criteria are met. For instance, if you work for the right public employer, and you consistently pay the required amount every month over 10 years (or 120 on-time payments) the balance of your loan will be wiped out. For more on this, and which loans qualify, visit the Department of Education.
Private Sector Career
For most of us, we’ll establish our careers in the private sector where there are options for a higher earnings potential over your lifetime. While options for loan forgiveness are not broadly available, refinancing your loan may be a good plan if the loan outstanding is big enough, you have good credit, and have some employment history. In some cases, you just need proof of future employment. If you currently have a high interest rate, there are good companies out there such as Sofi* that can help you reduce the amount of interest you pay on the life of your loan. You don’t have to be in financial hardship to consolidate loans. Make sure you understand the terms, but on principle consolidating large loans at a lower rate is just common sense.
–Jonathan Cameron, CFP®
*While not a recommendation of Sofi, I mention them as a leading provider for refinancing student loans.