Handling student loan debt is a big challenge for anyone. We often receive very basic student loan questions from very well educated people with large amounts of debt. The sad fact is that very few student loan borrowers truly understand their options. Even fewer have put a strategy in place to pay off their loans as efficiently as possible.
Most people make one of two common mistakes. Some are lucky enough to afford the student loan bills that come in the mail, so they just pay what the bill says each month and never give it a second thought. Others realize they cannot afford the bills coming each month, so they find ways to get lower payments and once the payment is affordable, the student loan investigation stops. Sadly, both mistakes can be very expensive.
Getting Educated is Hard
One of the big struggles for borrowers is understanding their options. It isn’t lack of efforts or smarts, it is a lack of available information for individual situations. The federal government website is one of the better resources available, but it only explains the many repayment plans. There is little information covering strategy or the financial implications of certain options.
Making matters more complicated is the fact that student loan planning is a moving target. If you are barely getting by, strategy and program availability is much different than it is for people who can easily afford their payments. Similarly, if you change jobs the best student loan strategy may also change.
Finally, even if the finances for two people are identical, the best student loan plans for these individuals may be entirely different. This is because people may have very different financial goals. Some might be targeting buying a house, while others are more focused on the day-to-day expenses. Additionally, people have different risk aversions. Some might want to aggressively pay off debt leaving little money in reserve, while others are more worried about being prepared for a rainy day.
Because there is no definitive source for student loan information and advice, the best way to learn is to constantly be exploring options and sources of information.
The following sources can all be good sources of information:
- Phone calls to your lender to discuss repayment options
- Google searches on certain issues
- Conversations with friends, co-workers, and family
Unfortunately, all three methods of acquiring information can also lead to mistakes. In many cases, it isn’t because somebody is blatantly wrong, but it could simply be that there was a miscommunication.
As a result, the best way to deal with student debt is to be constantly learning. Keep an eye on the news for new federal repayment plans and talk with coworkers who are in similar financial situations. Always be asking questions.
Most importantly, when your financial circumstances change, see how it affects your student loans. If you got a raise or improve your credit score, you might be able to get lower interest rates on your loans. If you changed jobs or employers, you may qualify for a student loan forgiveness program. If your pay got cut, there are ways to get lower payments without simply delaying repayment for another day.
Each life change brings new hurdles and new opportunities.
The Bottom Line
You don’t have to pay an expert to manage your debt, but you do need to be willing to roll up your sleeves and investigate. If you find yourself stuck, feel free to send us a question.