Smart Ways to Pay Back Your Student Loan

What comes after graduation day? The job of repaying the cost of college. That often involves hard choices, but with a solid strategy you can tackle your debts without jeopardizing your future.



TWENTY MILLION COLLEGE STUDENTS started their freshman year last fall—and seven in 10 are likely to graduate with debt. They’ll have lots of company. As of December 2018, Americans collectively owed $1.5 trillion in student loan debt, making it the second-largest source of consumer debt after mortgage loans, according to the Bank of America Chief Investment Office.

How much individual graduates owe is partially dependent upon where they go to school. The Institute for College Access and Success surveyed more than 1,000 public and nonprofit four-year colleges and found that in states like Utah, for instance, the average student loan debt for the class of 2017 was only $18,850, while in Connecticut it was $38,500.

Finding the Right Repayment Plan for You

There are a number of repayment options available to graduates with federal student loan debt. They include a 10-year repayment plan, a graduated repayment plan with payments that start low and steadily increase, and various income-based plans. Those who work for the government or in the nonprofit sector may also be eligible for the Public Service Loan Forgiveness Program. If you owe private loans, the issuing bank sets the repayment terms.

“Lower monthly payments and more time to pay off your loan may sound tempting, but you’ll end up paying more in interest over the life of the loan.” —Jean Kim-Wall, managing director and wealth strategist at Merrill’s Strategic Wealth Advisory Group

“Deciding which repayment plan is right for you requires hard choices and a solid strategy,” says Jean Kim-Wall, managing director and wealth strategist at Merrill's Strategic Wealth Advisory Group. “For instance, having lower monthly payments and more time to pay off your loan may sound tempting, but you’ll end up paying more in interest over the life of the loan.” For that reason, she says, “even if you’re eligible for an income-driven plan with a lower monthly payment, it may not be your best choice. If you can afford to pay more, you should.”

Here are three more tips from Kim-Wall.

  • First, "try to pay the interest on your loans while you’re in school. Otherwise, it will be added to your principal and accrue even more interest, which means a larger loan balance when you graduate."
  • Also, “pay back the loan that has the highest interest rate first.”
  • Finally, consistency is key. “Regular payments show future lenders that you have discipline.”

A private wealth advisor can help you get started.

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