Repaying student loans after 30: A guide for not-so-recent graduates

Posted by Shelly Eweka.
I was surprised to learn that over 60% of the country's student debt is held by people over 30.1 But when I thought about it, it kind of made sense: People are staying in school for longer, and the costs of higher education has risen faster than inflation for decades now.
If you find yourself saddled with student debt beyond your 20s, here are some basic Dos and Don'ts to consider:

Dos

  • Pay regularly, and as much as you can.
  • Consider consolidating your debt. If you do decide to go this route, make sure your new loan is still classified as a student loan. You can often deduct the interest on them, which you can’t do with personal loans (for example). If it looks like you will actually be better off with a consolidation loan that isn’t a student loan, do the math to make absolutely sure it's in your best interests. You may also wish to discuss this strategy with your tax advisor.

Don'ts

  • Don’t transfer your debt to a credit card. Once again, the debt will no longer be deductible, and a credit card that entices with a 0% interest rate could easily go up to a 19% interest rate after a year. Many of these transfers can be subject to fees, which can be substantial.
  • Don’t ignore the debt until it becomes hopelessly overwhelming. Stay engaged with the loan institutions.
  • Don’t put your retirement plans in jeopardy. Save at least enough to get the employer match, and more if you can, while paying off the debt.
     
You may be eligible for a portion of your student loan debt to be forgiven through the Public Service Loan Forgiveness (PSLF) Program. In order to qualify, you must be employed fulltime by a qualifying employer—a tax-exempt non-profit or government organization, for example. There are also various loan forgiveness programs especially for K-12 teachers who work in low-income districts.
Understand the difference between federal and private loans. Many of the features of federal loans, such as tax deductibility and being able to consolidate into direct consolidation loans, are not available for private loans. Private loans also may not offer forbearance or deferment options. It’s important to know what kind of loan you have and what the terms are, so you can be clear about your options.
I often get questions from people who want to know how they can reach other financial goals, such as providing financial help to relatives. The one-word answer? Prioritize. Some things simply cannot be put off, like saving for retirement; remember, you may plan to work until age 70, but may not ultimately have control over when you retire. Weigh these necessities against your other goals, and be ready to make some hard choices.
A college education or an advanced degree is one of the biggest investments you will ever make. Educating yourself on student loan debt, meanwhile, requires just a small investment of your time. In both cases, the payoff can be great.
1 Source: New York Fed Consumer Credit Panel/Equifax, Q3:2018,  https://www.newyorkfed.org/microeconomics/databank.html
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June 13, 2016
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