Millennials are finding that their student loan debt is hurting their credit scores
Many college graduates have settled into good jobs, and after a few years are anxious to begin acquiring things, such as an automobile or home. They also want to save money for other priorities, such as starting a family, business, going on vacation or retirement. But, when the time comes to buy a car or home, they discover that their student loan debt is standing in the way of their dreams. This has increased the focus and drive on the part of millennials to move their student loans off the books as quickly as possible. It is also opening a new specialty for financial advisors.
National student loan debt passes the trillion dollar mark
According to the Federal Reserve Bank of New York’s May quarterly report, outstanding student loans hit the 1.3 trillion dollar mark. It tops credit card debt which stands at $712 billion and car loans which amount to $1.1 trillion. Higher education experts say that the average college graduate leaves school with a little more than $37,000 in student loan debt. It has become the most pressing financial concern among millennials. For students who do not finish college, but have already taken out loans, the problem is even worse because they have less financial means with which to repay the loan.
The ramifications of student loan debt are long-term. When a young person graduates already laden with debt, it means that he or she must delay savings for retirement, healthcare, emergencies, and making those first purchases, such as a car.
Here are 5 easy strategies for eliminating your student loan debt
- Sort out your student loans. Many graduates have no idea of the sources of their student loans or how much is owed. First step is to pull together all of your loan documents, identify which loans are from the government, which are from private lenders and what are the interest rates and fees.
- Seek out student loan relief programs. The government offers several programs that give you an opportunity to revise your loan terms. For instance, if you are a low-income earner, the government offers an income-driven repayment plan that considerably lowers your monthly payment so that you do not default on the loan. Defaulting is the one thing you want to avoid at all costs. It seriously damages your credit and results in very high fees, significantly increasing the total amount you will ultimately repay on your student loans.
- Refinance your loan through an online lender, such as peer to peer. A P2P loan can decrease your interest rate and fees, make your monthly payments more manageable so that you get rid of your student loan debt more quickly, and protects your credit rating.
- Take advantage of employee tuition-reimbursement programs. The Society for Human Resource Management reports that roughly 3% of employers offer programs that help employees reduce their student loan debt. This is especially true of trendy and tech-savvy companies that most millennials are drawn to. Look into what your company offers and take advantage of everything.
- Choose credit card companies that offer rewards for student loan debt. Companies such as Sallie Mae Upromise MasterCard and Citi Thank You card allow you to use reward points to pay down your student loans. Some retailers are also in on this, including Amazon.com which gives you cash points that can be used toward student loan debt or to finance your tuition.
Bottom line: treat your student loan debt like a pariah. Before spending money on anything else, use the money to pay off your student loans. If you can, pay more than the minimum. Take advantage of every opportunity to get out from under this debt. Then you can move forward with your dreams.