Eliza Haverstock, Nald Wallet
Graduate school can boost your career outlook and revenue, but it can come at a sudden price. According to a 2023 report from the National Center for Education Statistics, almost half of graduates receive loans, with an average balance of $77,300.
That debt can be difficult to manage – it sums up quickly. Chapel Hill, North Carolina, certified financial planner and certified student loan expert Brittany Blinkerhoff says that while you’re at school, all private graduate loans, whether federal or private.
And there are fewer repayment options than federal department loans, said Brinckerhoff, who works with lawyers and health professionals who pay off hundreds of thousands of dollars of graduate debt.
If graduate loans are preventing you from achieving your financial goals, consider strategies approved by these experts.
Understand your debts and understand your full financial situation
The first step is to understand your debt. Your loan type can determine your repayment plan, according to Glen Sanger Hodgson of Tallahassee, a certified Florida-based financial planner and certified student loan expert who specializes in medical school debt.
For more information about federal loans, including balance, loan type, interest rates, and repayment plans, log in to your sustentaid.gov account. A loan simulator in the education sector can help you understand federal government repayment options. For private loans, please check the loan document or contact your lender.
Once you understand your debt and repayment options, it’s time to choose a path forward. Use the Sam rules below as your starting point. You can also run numbers on all available repayment plans to find the best one for your financial goals and career plans, says Sanger Hodgson.
If your debt is twice as much, consider forgiveness
If your student’s debt is about twice your income, Sanger Hodgson says you are a good candidate for public service loan forgiveness (PSLF) or income-driven repayment (IDR). Consider the complete list of student loan exemption programs.
Forgiveness is usually time-based. For example, you can get forgiveness while working in public services, or after 20-25 years of payment on an IDR plan, and after 10 years of payment.
So, if you are aiming for forgiveness, choose a repayment plan with the smallest monthly payment. This will maximize the amount of debt allowed when you reach the finish line.
For most borrowers, that means signing up for an IDR plan. The IDR plan, known as Income-Based Repayments (IBR), is the only IDR plan that has not disappeared in 2028 as a result of the recent budget adjustment bill.
“Your goal is to make as little payments as possible over the lifespan of your loan,” says Sanger Hodgson. If you spend extra money on debt while on your path of forgiveness, you “we’re just throwing away money that would have been forgivable otherwise.”
If your debt is below your income, we will actively repay it
If a student’s debt is roughly comparable to below income, they are less likely to benefit from the forgiveness program. Using an IDR plan means you will be repaid in full debt before you can achieve your forgiveness.
Instead, assuming that you are on track with other financial goals, Sanger Hodgson says, “we are actively throwing all your financial resources (you) to be rewarded as quickly as possible.”
Consider some key strategies to quickly repay graduate debt.
Stick to the standard 10-year repayment plan for federal student loans. Pay for additional lumps. If you have a federal student loan, call the servicer and ask if the principal can apply additional payments rather than interest. Also, if you have multiple student loans, first try a high-interest loan. If you qualify for a lower interest rate, refinance.
If you have a federal student loan, consider carefully your refinance decision. They will be replaced by private loans and you will permanently terminate the federal student loan system. It means confiscating access to income-driven repayment plans, forgiveness and other relief.
When refinancing, “we have to make sure you’re fully repaying the loan and that you don’t need to be forgiven at any time,” Sanger Hodgson said.
Please provide information about student loans
Government policies, including the recent budget adjustment bill, are poised to restructure student loan repayment and forgiveness options. Keep an eye out for news and official education division announcements.
“There’s been a huge change in the student loan horizon,” says Sanger Hodgson.
Eliza Haverstock writes for Nald Wallet. Email: ehaversstock@nerdwallet.com. Twitter: @elizahaversstock.
ArticleDoes graduate debt hinder you? A way to control it originally appeared in Nerdwallet.
