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Student loan debt is a very real concern for most of us. In fact, the figure now states that student loan debt is hovering around $1.35 trillion dollars (and growing), with 43.3% of Americans saddled with some student loan debt. There are loads of payment options for student loans that most people aren’t aware of to help ease the burden of your student loan payment if you happen to be one of those 43.3%.The problem is that student loan debt isn't merely about the principal and interest payments: they also affect you in many different ways that have a lasting impact on your overall financial health.High student loan balances can lead to delaying life goals, a ton of stress that can be downright debilitating and higher credit card balances, to name a few of the common symptoms.Let's dive in further and take a look at the real cost of student loans in three key areas.
The emotional component to student loans can be a key factor as to why you feel in a constant state of doom and gloom. Student loan payments can be very expensive - which we all know. Payments are a drag mentally when, year after year, you swear you see the same balance due as the year prior. It's easy not to feel like you aren't making any headway when it comes to paying your student loans off. This stress then trickles into all the areas of your finances.
You don’t have a budgeting system you can keep up with.
You have no money saved for emergencies.
You are always making silly mistakes with your finances because you are stressed out.
The most important thing you can do is come up with a solid payoff plan to tackle your student loan debt. You certainly wouldn’t get in the car to travel cross country without a roadmap, so don’t try to do the same thing with your student loans.
Two opposing strategies for debt payoff are as follows:
Choose the student loan with the highest interest rate and attack that first. Pay the minimums on all your other loans until that is paid off - then move to the second highest interest rate.
Choose the student loan with the lowest balance and attack that first. Pay the minimums on all your other loans until that is paid off - then move to the second lowest balance.
You might also be able to refinance your loans and save a ton of money, which would ease your feeling of not making any progress. There are loads of alternative lenders like, Earnest, who have great financing rates and lots of special perks. You could move onto a different student loan payment option with your current lender that might lower your payment or be a better fit for your finances.Remember, the longer the payment period, the higher the interest amount you will pay over the life of the loan.
On top of the mounting emotional stress of student loans is a very real monetary loss which can delay all the fun life goals that you want to achieve like buying a house, having a baby and moving to Europe on a whim. A recent study found that the average student loan debt costs borrowers:
An extra five-year wait to buy a home.
Approximately $500,000 in lost retirement savings (and college graduates who extend their payoff to 20+ years will lose even more).
A luxury vehicle, dozens of vacations and half of a child’s college savings account.
It's easy to understand why you would experience this delay. If your student loans are taking up all of your disposable income, then there isn't any money left to put towards your 20% down payment for your home purchase, or in a travel fund to afford that trip to Africa.High student loan debt also has a real impact on your retirement fund for the same reasons. Studies have shown that saving even a little bit early on in life has a tremendous impact on your entire retirement nest egg. Whether you have a 401(k), a traditional IRA, or a Roth, the best strategy you can take is a balanced approach. Paying off your students while also saving money will get you ahead of the game financially.
There’s an interesting link between student loan debt and credit card debt. According to a recent study, 76% of people that have student loan debt also have credit card debt. While credit card debt pales in comparison to student loan debt (the current average is $733 million), there is still an unyielding link between the two.As with student loan debt, you need a solid strategy to pay off credit card debt. There are loads of options like balance transfers or even negotiating for a lower interest rate - which can be done fairly easily with a good credit score.When student loan payments cause your budget to blow up, it's relatively easy to turn to your credit cards for some relief. You are in essence creating higher interest on your credit cards while you are trying to lower the interest amount on your student loans. Again, find a payoff strategy that works for you where you can balance your student loan payment and your credit card payment, so you are poised to be debt free ASAP.Getting rid of student loan debt won’t happen overnight. It takes a good strategy and years of commitment to make choices that will lead to a debt-free life. It’s important to understand the real cost of student loans and how they affect your finances.
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