First and foremost - you need to identify and refine your goals for your student loan debt... There are a few things to consider here:
1) How quickly do you want get out of student loan debt?
- Are you absolutely adamant that you want this gone as soon as possible?
- Are you looking for an efficient repayment strategy to both pay off the debt and give you the flexibility in your cash flow to prioritize other financial goals?
2) WHAT is your income trajectory?
- Is your income going to look pretty consistent and graduated over time?
- Are you going to be expecting some huge jumps throughout your career? This is important to know when we are considering an income-based repayment plan for your federal student loans so you have an idea of what to expect and what the implications are on your longer-term repayment plan.
Once you have those things identified, next, consider this rule of thumb:
If your balance is lower than your annual income, you should consider paying that down quickly to minimize the interest you're going to be charged over time.
On the flip-side, if you have a very HIGH debt to income ratio, meaning your student loan balance is more than your income - your safe haven is going to be relying on income-based federal forgiveness programs for your federal loans.
What this would look like: paying down your debt at a slow and steady pace to maximize your forgiveness, while also saving for the potential tax consequence you may have at the end of that term.
Now that you know your repayment objective based on your goals and rule-of-thumb on the total balance, you can move on to identifying the specific plan right for you.
Speak to a Certified Student Loan Professional™ to help navigate through what repayment plan is right for you.
Meagan Landress, CSLP®
Certified Student Loan Professional™
Financial Coach Meagan