Attending graduate school can significantly enhance your career opportunities and income potential, but it often comes with a hefty price tag. According to a 2023 report from the National Center for Education Statistics, almost half of graduate students rely on loans to finance their education, with an average debt balance of $77,300.
Managing this debt can be challenging as it accumulates interest rapidly, even while you are still in school. Brittany Brinckerhoff, a certified financial planner and student loan professional based in Chapel Hill, North Carolina, points out that graduate school loans offer fewer repayment options compared to federal undergraduate loans, which can make the repayment process more complex.
If you find that your graduate school loans are hindering your financial progress, consider implementing expert-recommended strategies to address your debt effectively.
Gain a Comprehensive Understanding of Your Debt and Financial Situation
The initial step involves comprehending the specifics of your debt. Glenn Sanger-Hodgson, an accredited financial planner and student loan professional specializing in medical school debt in Tallahassee, Florida, emphasizes the importance of knowing your loan type to determine the available repayment plans.
For federal loan details, including balance, type, interest rate, and repayment options, log into your StudentAid.gov account. The Education Department’s loan simulator can aid in understanding federal repayment choices. For private loans, review your loan documents or reach out to your lender.
Once you grasp your debt and repayment alternatives, it is crucial to select a suitable path forward. While certain rules of thumb can provide a starting point, Sanger-Hodgson suggests evaluating all available repayment plans to align with your financial objectives and career aspirations.
Consider Loan Forgiveness If Your Debt Exceeds Your Income
Loan forgiveness is typically time-dependent. For instance, forgiveness may be attainable after a decade of payments in a public service role or after 20 to 25 years of payments on an Income-Driven Repayment (IDR) plan.
To maximize the forgiven amount, opt for the repayment plan with the lowest monthly payment if you are aiming for forgiveness. For many borrowers, enrolling in an IDR plan, such as Income-Based Repayment (IBR), is the most suitable option.
“Your objective should be to minimize the total amount paid over the loan’s lifespan,” emphasizes Sanger-Hodgson. Redirecting extra funds towards debt repayment on a forgiveness path may result in unnecessary payments that would have been forgiven otherwise.
Prioritize Aggressive Repayment If Your Debt Equals or Is Less Than Your Income
If your student debt aligns with or is below your income level, forgiveness programs may offer limited benefits. With an IDR plan, you could potentially clear your debt entirely before qualifying for forgiveness.
Instead, provided that you are on track with other financial objectives, focus on “aggressively allocating every available financial resource towards expeditiously settling your student loans,” advises Sanger-Hodgson.
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