Student loans are a double-edged sword. On one hand, student loans help many people afford a higher education. On the other hand, they often leave the young saddled with debt they can’t afford after college.
Principal Financial Group’s recent study of the financial well-being of American workers found that nearly a third (32 percent) of American workers regret taking out student loans to pay for college. A similar percentage (34 percent) of workers blame student loans for preventing them from achieving their financial goals.
Student debt now totals $1.2 trillion in the United States. In 2013, about 69 percent of college graduates had student loan debt, with an average of $28,400 per borrower.
It’s easy to feel overwhelmed by student loan debt, says Jenny Smith, a financial service representative at Principal. These are some of her tips on how to effectively manage debt, including student loans, after graduation:
- Your budget shouldn’t be like a bad diet. Don’t be too restrictive with your budget, Smith warns. It would leave you exhausted and discouraged — and possibly hungry! “Look at three months of your spending history, then work with an honest picture of yourself,” Smith said. “Look at what you do, and what small changes you can handle. You don’t have to be perfect yet, just be a little bit better than you are now.”
- Refinancing is always an option. If you have loans with astronomical interest rates, refinancing is worth looking into. You could potentially lock in a lower interest rate, which would save you big bucks over the lifetime of your loan.
- Be smart with your money. “Don’t empty one silo but fill another,” Smith said. “If you’re paying off your student loans, but racking up credit card debt, are you really accomplishing anything? It’s important to really look at your spending and decide how much of your income you can really put toward paying off debt.”
Check out “10 Debt Management Tips for New College Grads.”
Student loans helped me pay for college. I graduated with about $17,000 in loans in 2001. I don’t regret taking out the loans, because I would not have been able to afford college otherwise. But looking back, I wish I had only taken out the amount necessary for tuition and nothing more.
Do you regret taking out student loans? Do you have tried-and-true advice for managing debt? Share your experiences below.