According to CNBC, there is more than $1.2 trillion in outstanding student loan debt, owed by 40 million borrowers, who have an average balance of $29,000. * Do you have student loan stress?
Large student loan balances can be a significant cause of stress. Stress over loans can lead to resignation. “I’ll have student debt forever” is a refrain I hear from some clients. Resignation leads to denial and even inaction. Where are you in this progression? Does this sound like you or someone you know? Are you a number of years out college or graduate school, yet it doesn’t seem like your loan balance is coming down?
Until recently, the economic environment hasn’t been the best for many new entrants into the workforce. You’ve taken on more debt at a younger age than the previous generation. Also, it’s tougher to find the higher-paying jobs required to pay off those loans. So what can you do?
Student loan stress: don’t live in denial, own it
Your mindset about student loans is crucial. Most importantly, own it. The loans are yours. You chose to make a strategic investment in yourself by taking on student loans. Accept this fact, and make a plan of attack to repay the loans. The # 1 piece of advice I give clients who have student loans is, “Don’t allow your debt to oppress you.” Self-oppression will hinder you not only from paying down debt faster, but it causes stress that adversely affects other areas of life. By making a plan, you’ve addressed one of the most significant causes of student loan stress – not knowing.
Be in control of your student loans, rather than letting loans control you. Even if it takes 20-30 years to pay your balance off, just work the plan. Leave it boxed up on the top closet shelf. Don’t revisit it until you get a raise (or your cash flow has increased in some other way) or you’re rid of it. You may have no option but to live with your loan for many years, but you’re either in control or you’re not.
Paying $150 more per month could chop off 11 years of payments!
For example, say you’re 30 years old and have a loan balance of $100,000 at a rate of 6.7%. If you paid $650 per month you’d pay off the loan in approximately 29 years. Maybe that’s all you can afford for now. It’s tough to swallow, but do what you can and work the plan. Maybe you’ll get a pay raise next year, or you change jobs. Now you can put away $800 per month. That $150 difference just chopped off 11+ years of payments! That’s huge!
Student loan forgiveness for government workers
For those who work in government jobs there are programs available to help you address student loan payments and even satisfy entire loan balances after working 10 years and demonstrating a track record of on-time payments. See my blog post on student loan forgiveness. If you work in private industry, sometimes it may be beneficial to consolidate student debt at lower interest rates. The point is you have options.
If you need help, meet with someone who can guide you to develop a plan of attack. You’ve invested in yourself and your education is of tremendous value. Don’t let stress over loans dominate your better judgement.
Jonathan Cameron is a Co-founder and CERTIFIED FINANCIAL PLANNER™ at CameronDowning, a Registered Investment Advisory firm that works with young professionals. He provides targeted financial advice to young professionals on building personal wealth, student loans, employer benefits/401ks, planning for a first home purchase, estate planning, and basic insurances. He lives and works in Miami, FL. Check out his video on how to get the student loan monkey off your back (below) and connect with him on Facebook, Linkedin, and Twitter.