DISCLAIMER: This piece is strictly based on the opinions and experiences of the writer and should not be viewed as a substitute for professional financial advice.
Spending money is simple when it’s the occasional clothing purchase or treating yourself to take-out food, but individuals — specifically students — neglect to realize their biggest financial burden is lurking unnoticed; federal student loan debt.
At the end of 2023, 43.4 million Americans had federal student loan debt, according to the U.S. Department of Education. The same site reveals that 14.2 million borrowers are still paying off their loans well into their late-40s.
This statistic isn’t meant to scare you or deter you from borrowing, but simply to make you aware of a problem most are unaware of — and how to tackle it.
There are plenty of reasons why we see so much student loan debt. Sky-high college costs and pressure to compete in the job marketplace are big factors. Federal student loans are also the most common form of educational debt, which contributes to why the loans seem so intimidating to pay off.
Not all debt is scary. Federal student loans tend to have lower, fixed interest rates, so you can feel slightly assured about paying them off slowly while you save for other important goals. These could be large expenses such as medical procedures, purchasing a home — though in this crazy housing market that’s less likely — or retirement.
However, others prefer to aggressively pay down their student debt, which is the best option if you can afford it, per CNBC.
Most individuals reading this are college students, and if you’re paying off your loans yourself, chances are you do not have the funds nor the choice to aggressively pay your loans, as you’re prioritizing the cost of living and other expenses while at college.
Therefore, I offer you several alternatives for staying on top of your loan debt.
Investopedia recommends calculating your total debt and being familiar with all terms of your loan agreement. Also, review the loan’s grace periods, which are the length of time that you have post-graduation before you need to begin paying back. Furthermore, exploring loan forgiveness and payment plans is a good alternative.
Personally, the option I find easiest and most rewarding as a full-time student is paying down the principal. This is the initial amount of money borrowed, and determines your payment plan, interest rates and other factors of the loan. The faster you pay off your principal, the less interest you pay over the duration of the loan.
I decided to put a portion of my part-time job paycheck towards the principal of my loans, knowing that while I may have to say no to an excursion or a meal out here and there, in the long run I won’t be writing checks for my Quinnipiac tuition when my kids are applying for colleges.
Some other options include setting up automatic payments or consolidating your loans. Consolidating decreases the burden of your monthly payments when you do start to pay the loan off. Doing this can also lengthen your payoff period, giving you more time to pay the loan back.
You can also defer payments. Deferment is an option if you are not yet employed after school, and the federal government may even neglect to charge you interest during this time, depending on your loan type.
There are plenty of options to explore when it comes to tackling student loan debt, but the most important thing is to get ahead of it. If you can afford it, put $25-50 toward your principal each month, or some other form of payment that works for you.
I promise you’ll thank me later when you’re reaping the benefits of a cushy job post-graduation without having to worry about a massive, looming loan bill.
