Brent Lindell and Ellie Kay are financial advisers who offer their advice and guidance on tackling student debt. The secret to managing student debt successfully boils down to doing the math before and after it is acquired. It’s becoming more and more common for college grads to stay at home longer and put off marriage and children because of student debt. It makes sense when average student debt is about to exceed $35,000 per student and that’s only for undergrads at public universities. The average is higher for students at private universities or those who pursue graduate school.
Brent Lindell identifies some helpful rules of thumb students should adhere to before they take on student debt. Doing the math is extremely important. This applies to any math that will reduce the amount of time spent in school. For instance, if an individual can graduate in 3 years instead of 4 this will reduce the amount of debt they will take on. Another example is if a student attends a community college for 2 years before transferring to a university, this will also save them a lot of money. Lindell also emphasizes the importance of career plans. His general guideline is to make sure an individual makes more in their first year on the job than the entire loan bill they are going to have when they graduate. Lastly, another way to reduce student debt is to take advantage of scholarships and grants.
There are also important strategies for taking on debt after graduation. Budgeting is an essential component if a student wants to pay off their loan. It is even advisable to attempt to pay loans off early. It has a long term financial benefit because borrowers won’t be responsible for the interest that accrues as time goes on. In order to accomplish this, individuals should be saving 15% of their income at any time. Lindell makes it a point that what borrowers do with that 15% savings isn’t necessarily the same for everyone. Those with a 401(k) would be advised to take advantage of it and use the rest of the savings to pay down their student loans. Kay recommends that individuals make extra payments every year or quarter to pay down the debt earlier. If the extra payment is broken up among the other payments, it might seem like an insignificant amount, but could end up saving borrowers tons in interest. The last rule is to pay off debts in order of their interest rate.
Doing the math on Student Loans
According to the wisdom of Lindell and Kay, careful planning and rigid budgeting are the keys to financial success when it comes to managing student loan debt. In this way, steps students can take before and after they acquire debt can drastically reduce the amount they will end up paying. Let’s face it, interest is the majority of the battle. Lastly, Ellie Kay notes that in addition to planning and budgeting, students can also take advantage of federal loan forgiveness programs, but it is important to know which program to enroll it and what the requirements are. Student debt doesn’t have to be eternal. With some simple math, students can get out of debt and enter into financial freedom.