- PPF Points
- 5,709
The best strategy is to have a plan going in, as in, before you go into debt, whether it’s for your education or anything else for that matter. Before starting out, you should have done a deep dive into the profession you seek to have. Does it really require a degree? What is the starting wage, not nationally, but in the location you seek to live in after graduation? Is the field showing growth in demand or is it a dying field? Will the degree actually lead you to employment that will allow you to service the debt? [You may love a subject like…history. There is nothing wrong with that, but jobs for history majors are in really short supply, even if you have a teaching certificate attached to it. If you do find work with it, you have to again look at the starting salary, even or especially with a teaching certificate as many teaching jobs at entry level are low pay. Yes, over time, teachers make very good salaries, but not so much in the beginning. Those early years in any profession are what will be used to pay down the debt.]
With that in mind, the first best plan is to get your education without incurring any debt. It’s paid as you are going through, you have grants, scholarships, one time gifts, you get the idea.
Next, and this is critical, if you do have to take on student loans only use them for tuition and fees. Never use them for room and board. What is interesting about the student loan debacle today is that the average balance on the loans as students leave university, is typically just about what they were charged for room and board. No matter if you go to university or take any other path, you have to eat and live somewhere. Any financial planner will tell you to never go in debt for your ongoing daily living expenses, so why would you do this as a student. If you are reasonably skilled in studying, it is likely you can get enough in grants and scholarships to cover tuition and fees at most universities, especially state funded establishments.
Ok, so grants and scholarships haven’t quite covered all of the tuition and fees. You can either go on a payment plan, some universities do offer then, or take a loan to cover the balance of your tuition and fees. Resist the temptation to take any additional money. Again, as we covered above, never borrow for room and board. By only covering the tuition gap, you will minimize the balance due when you leave university.
Ok, so you managed to pay your room and board as you went along, you borrowed the least amount possible and you’ve graduated or left school. So you’re 6 months out and it’s time to go into repayment. The typical federally backed loan is automatically set up on a 10 year schedule of repayment. If you’ve followed the advice above, you will likely have less than $10,000 in student loan debt so your payments will be quite low and you will have a salary that will cover the loan and the living expenses of the life you are starting as an adult. Of course, once you turned 18 you were considered an adult in the US, it’s just that in the US they don’t treat young people in this manner. Better to enslave them with burdensome debt with the myth that education is the golden ticket to stellar salaries, no matter the degree.
Now for repaying the debt:
Hope this helps.
With that in mind, the first best plan is to get your education without incurring any debt. It’s paid as you are going through, you have grants, scholarships, one time gifts, you get the idea.
Next, and this is critical, if you do have to take on student loans only use them for tuition and fees. Never use them for room and board. What is interesting about the student loan debacle today is that the average balance on the loans as students leave university, is typically just about what they were charged for room and board. No matter if you go to university or take any other path, you have to eat and live somewhere. Any financial planner will tell you to never go in debt for your ongoing daily living expenses, so why would you do this as a student. If you are reasonably skilled in studying, it is likely you can get enough in grants and scholarships to cover tuition and fees at most universities, especially state funded establishments.
Ok, so grants and scholarships haven’t quite covered all of the tuition and fees. You can either go on a payment plan, some universities do offer then, or take a loan to cover the balance of your tuition and fees. Resist the temptation to take any additional money. Again, as we covered above, never borrow for room and board. By only covering the tuition gap, you will minimize the balance due when you leave university.
Ok, so you managed to pay your room and board as you went along, you borrowed the least amount possible and you’ve graduated or left school. So you’re 6 months out and it’s time to go into repayment. The typical federally backed loan is automatically set up on a 10 year schedule of repayment. If you’ve followed the advice above, you will likely have less than $10,000 in student loan debt so your payments will be quite low and you will have a salary that will cover the loan and the living expenses of the life you are starting as an adult. Of course, once you turned 18 you were considered an adult in the US, it’s just that in the US they don’t treat young people in this manner. Better to enslave them with burdensome debt with the myth that education is the golden ticket to stellar salaries, no matter the degree.
Now for repaying the debt:
- Make all of your payments on time. Use any additional money you receive - gifts, tax refunds, credit card rebates or a side hustle to pound away at the balance as fast as possible. The goal is to get rid of this burden as fast as possible. I’ve met people that have paid off over $50,000 in less than 4 years buy staying focused on the objective of ridding themselves of this debt.
- NEVER consolidate your loans! If you come out of school with say 8 loans, they will all have different interest rates and minimum payments due. The beauty of this is that you can choose to pay off a loan and reduce your obligation for that loan going forward. [Say you have total payments on the 8 loans of $300/mo, but loan A has a minimum payment of $25. You target loan A and pay it off early, your minimum due has just dropped to $275/mo.] If you consolidate, your minimum payment cannot be changed, short of extending your payment period beyond 10 years with various income based repayment plans that lock you in even longer.
- You should never have to use an IBR (Income Based Repayment) plan if you have done your research and followed the predebt planning above.
Hope this helps.
