As of this writing, I currently have $11,625 in student loan debt to pay off, and in just a few years it will be completely gone. Debt sucks, but I'm not sweating about it anymore. Years ago I negotiated my interest rate down to just above 2%. The monthly payment is doable. I could fully pay it off now with funds from my high-yield savings account, but since that account offers me 4.3% APY, I'd rather keep my cushion.
Before I graduated, my student loan debt was much higher and I had not yet learned about the process of renegotiating to a lower, fixed interest rate. I potentially saw myself paying off high interest debt for years, and the payment taken out each month made me wonder if my degree (and career for that matter) was worth it.
If I could go back in time to advise my younger self, I would have made different financial choices regarding my college education. When I was a kid I saw college as a potential escape from my high school days. I didn't appreciate that the work I'd be doing then would be laying the foundation for the rest of my professional life.
If you're a high schooler or college student reading this, consider the following before taking on student loans:
Really ask yourself what you're wanting out of college and your degree. What can you see yourself professionally doing for a long time?
If you compare your student loan debt to your potential salary, will the return on your investment be worth it?
Can you qualify for scholarships, aid, or stipends? Explore all options before taking on student loan debt.
Is college your only option? (Not all careers require a college degree...)
Important things to consider before and after taking on student loan debt:
Fully understand the terms of your loans. Before signing anything, research and explore your options. Ask people you trust for advice. Gather information on the loan, the interest rate, and payback terms. Explore all student loan debt strategies available to you.
Create a budget. If you're a student, you're likely growing accustomed to the "bare bones" frugal budget lifestyle. If you do not yet have a budget, get a good idea on your living expenses, income, and debts. This is especially critical for managing student debt.
Live frugally. Consider your time in school as a solid investment in your future. You can still do the fun college things like go to parties, travel, etc. However, cut out any unnecessary expenses. If you need some inspiration, my absolute favorite blog on frugality is Frugalwoods.com, written by a couple who achieved FIRE with the help of a frugal lifestyle.
Consider what repayment options work best for you. You may be able to do an income-driven repayment (IDR) plan, which can be a far more affordable option.
Apply for scholarships. If you can fully fund your education with scholarships, kudos to you! Explore other options such as stipends, fellowships, etc.
Avoid taking on additional debt. Depending on your circumstances, you might have to take out a loan for something like a car (especially if you need to get to school or work) or if an emergency comes up. However, do not do something stupid like wrack up credit card debt for things that you do not need. (NOTE: If you do ever find yourself in this position, check out my post on getting out of debt.)
Consolidate and/or refinance your debt. Personally, I refinanced my own student loan twice, each time to reduce the interest rate. I was able to do so with good credit and a history of on-time payments. Consolidating might also help to simplify loans into one payment. However, make sure that you consider the pros and cons of each option. Each time you do this, it becomes a part of your credit history.
Set up automatic payments. Depending on the provider, you might actually get a small discount by enrolling in things like automatic payments and electronic-only notices. This will help you to avoid missing payments; however, make sure that you have enough funds ready in your checking account.
Make extra payments. Extra payments towards the principal will help to reduce the amount of interest that you owe over time.
Research loan forgiveness programs. Read more about the Public Service Loan Forgiveness or other programs to see if you qualify.
Find ways to increase your income; devote the extra pay towards student loans. Take on a job while you're in school or work a side gig. If you're already working in your career, seek out promotions or higher-paying positions.
Be a responsible borrower. If you ever face a financial hardship, avoid defaulting on the loan(s) by speaking with a loan officer. Explore what options might be available to you. Be clear about any potential changes made to the terms of your loan. If you are absolutely struggling, it may help to invest in financial counselor or coach to create a manageable plan to knock out the debt.
Be consistent, stay positive, and remind yourself what you're working for. When I speak to fellow healthcare workers who feel defeated by student loans before even starting their school program, I sometimes ask them about their "whys". A lot of them acknowledge that while it may take years to pay off their loans, they usually say that it's worth it. Find your "whys" and keep going.
Do you have any thoughts or recommendations when it comes to student loan debt? Feel free to share your story.
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