If you're staring down the barrel of considerable student loan debt, you're not alone. The United States' student debt has doubled since the recession (1), ramping up to a hefty $1.5 trillion worth of loans spread among 44 million Americans (2). These numbers are frightening for many - significant debt often means forestalling making other important financial decisions, such as buying a house or starting a family. In the worst case scenarios, overwhelming debt can lead to delinquency and even default on student loans, making repayment even more stressful.
Having the right tools and education for managing your student debt can make all the difference when it comes to repayment. With some careful preparation, you can develop a realistic plan for paying off your loan debt and getting on with the more exciting parts of your life. But with debt and other obligations crowding your view, it can be difficult to see the right path toward getting a handle on your student loans. So where do you begin? We spoke with financial advisor Meagan Landress for a few tips on how to get started.
A great first step to understanding your student loans is to get them organized. This means listing out your loans, finding out how much you owe, and finding out their individual interest rates. It also means distinguishing your private loans from your federal loans.
Understanding your loan balances and visualizing how much you owe can be a great starting point for planning for repayment. It can help you gain perspective on your student loans, and can even make the idea of repaying your debt seem less intimidating. When you know what you're up against, it can help you start to create a map to manage your loans and set achievable goals.
2. Identify Your Goals
Your goals for student debt repayment are unique to you. That's why it's important to figure out what your personal priorities are, and how you are going to fit your student loans into the body of your financial objectives as a whole.
Are you trying to pay your student loan debt off as quickly as possible? Do you want to place repayment at the forefront of your financial strategy? Or are you prioritizing other financial obligations, and looking for a repayment plan that fits within your broader financial goals? Identifying where you stand in terms of managing your student debt along with your other responsibilities can help you in the process of understanding your loans and working to repay them.
3. Map Out Your Income Potential
What do you expect to make over the next 5, 10, 15 years? Figuring out your income potential can help determine how soon you expect to pay off your loans.
As you begin to earn more, you have the ability to make higher payments on your student debt. Getting an idea of what your income will look like within the next few years can help you develop a realistic view of repayment.
4. Create a Budget
Creating a budget isn't the most exciting activity, but it can be integral to creating a workable financial strategy. This can include calculating your expenses, determining your income, recording spending, creating savings goals, and finally, factoring in debt repayment. Sitting down and finding out where your money is going can help you immensely when it comes to paying off student loans.
You can create a budget with something as simple as a spreadsheet. This will help you get an idea of what your cash flow truly looks like, and how much you can afford to put towards your debt each month.
5. Get Familiar With Repayment Plans
Repayment plans can vary greatly from federal to private loans, and it can be difficult to know which one is right for you. That's why it can be helpful to familiarize yourself with the different plan choices. In doing so, you can determine whether or not it may be helpful to accelerate your payments, or even look into refinancing options.
To look into different repayment plans, you can find information on the Federal Student Aid website. For more help, you can contact a financial advisor who can analyze and develop strategies for helping to manage debt.
Are you ready to get serious about tackling your debt? Get in contact with Meagan here.
(1) Tanzi, Alexandre. "U.S. Student Loan Debt Sets Record, Doubling Since Recession." Bloomberg.com, Bloomberg, www.bloomberg.com/news/articles/2018-12-17/u-s-student-loan-debt-sets-record-doubling-since-recession.
(2) "U.S. Student Loan Debt Statistics for 2019." Student Loan Hero, studentloanhero.com/student-loan-debt-statistics/.