As the cartoon illustrates, many Millennials are being held back from achieving their goals because of debt. And don’t think our goals are just buying avocado toast or tickets to Coachella. We have real goals. Big goals like starting our own businesses, buying a home and saving for retirement. But we also have debt. This debt problem is hitting older Millennials hard. Our debt from student loans is large and that can grow even more as we enter our 30s and add on a mortgage and credit card debt.
I understand that debt can set you back in the grand scheme of things, but it should be a priority you tackle now. There are many options out there and you can take some simple steps to get started. Here are just 4 that you should review if you have student loan debt and want to take control of it to achieve your goals.
- Know what you owe and your options. There is no way you will be able to reach your goals without having any idea how much you owe in terms of loans. Gather your statements and make a spreadsheet. Know who you have to pay money to, when it needs to be paid, what the interest rate is and how much is outstanding. By understanding your obligations, you can take ownership of your debt.
With federal student loans, you may have repayment options. Research the standard, graduated and extended options for your loans. There are also income-driven repayment plans that can be used to reduce your monthly payments. There are some options in this area as well but all calculate the monthly payment based on your income. These plans may free up cash flow but may take longer to pay off debt and you may end up paying more interest in the long run.
You may also be able to refinance or consolidate your loans in order to get a lower interest rate. By paying less interest, you may be able to start funding other goals sooner. Additionally, as interest rates continue to increase, borrowers with variable interest rate loans will see their rates increase as well. If you do look to refinance or consolidate be sure to shop around for the best rates and terms.
- Pay off the most expensive debt first. This strategy may not be for everyone, but it means that you would pay off the loan with the highest interest rate first. Also, it may be a good idea to set up auto-pay for your loans so you don’t fall behind. Missing payments can affect your overall credit and may even disqualify you from some of the repayment programs. Don’t let something so simple cause a problem.
- Negotiate higher pay. Any extra income can be put towards paying down debt. Don’t be the Millennial that doesn’t negotiate their salary. It can be an uncomfortable conversation, but if you really want to achieve your goals, having extra income matters. Even and extra $5,000 a year can go a long way towards paying down debt and saving for other goals.
- Develop a financial plan. Surprise! Only kidding- this shouldn’t come as a surprise to any regular readers of this blog. You should create a financial plan for yourself in the context of both what you need to pay on your loans and what other goals you have. Student loan debt or any other type of debt shouldn’t stop you from achieving other goals; you just need to have the right plan.
If this blog post has you fired up, then get excited for our book, The Millennial Money Fix, which comes out this August. You can pre-order yourself a copy today.