In becoming an educator, you chose to use your talents to make a positive difference in the lives of your students. But as you focused on fulfilling your purpose, you may not have been aware of a looming problem: your student loan debt.
Now, confronted with your financial situation, where do you start? And how do you combat the stress and anxiety that comes with education debt?
There’s no question it’s overwhelming, but think about the advice you give to your students on the eve of a big test or sports match. You tell them there are no shortcuts to realizing their goals. The same applies to student loans. You can’t wish away your debt. It’s a challenge you have to meet head-on.
At Thrivent, we help people achieve financial clarity so they can lead lives full of meaning and gratitude. As part of that, we believe everyone deserves a plan. With the right strategy, you can chart a path forward toward financial freedom and make the most of all God has given you.
To get you started, Thrivent suggests the following practical steps to help you chip away at your loans and break free from debt.
1. Know your loans
Student loans can be challenging to understand. Before taking any action, you have to know what you’re dealing with. If you’ve just graduated, you likely have a six-month grace period before your loan kicks in, so you can use this time to get educated and organized. Even if you’ve passed this period, this step is still important. Learning everything about your loan may help you discover ways to pay it back faster.
Start by thoroughly researching how a loan works and understanding the terminology used in your contract. You’ll find there are plenty of resources available to get you up to speed.
Once you have a baseline, read your contract so you understand your responsibilities. Be sure to understand:
- The type and number of loans you have
- Terms and requirements
- Repayment plans
- Options if your financial circumstances change
- Eligibility for loan forgiveness programs
As you do this, you may realize you have more questions than answers, and that’s okay. Write them down and call your loan servicer to get clarity on every single point. Their job is to help you keep your loan in good standing, so seek them out whenever you need additional resources and support.
2. Budget for success
When it comes to your finances, you have to be prepared for the unexpected. Maybe you’re dealing with several financial obligations and don’t know where to find additional money for your payments. Or perhaps your payments used to be manageable but are starting to increase. Budgeting is the best way to help you understand where you’re at financially and find opportunities to reduce expenses.
Make it a regular practice to track your income, savings, and expenses. Whenever you review your budget, look at your spending habits and where you can scale back on miscellaneous expenses, like going out for coffee or an unnecessary subscription. If you’re supporting a family and have more expenses, take some initial steps that make sense to you and reach out to a financial professional for additional ideas on how to save.
If you’re disciplined with saving, you may be able to pay back more every month. As part of your budgeting exercise, use a loan simulator to calculate how much faster you can pay off your loan if you add $50, $100, or $200 to your payment. Find one online or visit with a financial professional who can walk you through possible scenarios and provide advice.
3. Explore other solutions
While budgeting is a good first step, it’s not enough. Depending on your situation, we recommend exploring a range of tactics to creatively chip away at your debt, including:
Direct debit If you have a federal loan, the Federal Student Aid Office (FSAO) of the United States Department of Education provides Direct Debit as an optional billing method. If you choose this option, your payment will automatically be debited from your bank account every month. By doing this, you may qualify for a 0.25% interest rate reduction on your loan, allowing you to pay more on the principle of the loan rather than on interest.
Tax benefits For federal loans, depending on your income, the IRS may allow a special deduction for paying interest on a student loan—potentially up to $2,500 a year. Don’t let this money go untapped! In addition, if you’re pursuing continuing education courses, work with a tax advisor to understand if you qualify for the Lifetime Learning Credit or the American Opportunity Credit, which can help people pay for qualified education expenses.
Increased payments You can apply the money you earn from a raise, bonus, or promotion towards your loan payments. Do the same with your annual tax return to make a more significant dent.
Additional income opportunities You can use your time and talents to make a difference outside the classroom and earn extra money while you’re at it. Consider tutoring or coaching a team over the summer. There are even some non-profit organizations that exist to connect people with freelance opportunities and then provide loan reimbursement once a project is successfully completed.
Loan consolidation If you have multiple federal loans, work with your loan servicer to understand how you can consolidate. Or, if you have a mix of federal and private loans, check to see if refinancing is an option through a private lender.
Consolidating and refinancing may help reduce the number of payments, lower your overall payment amount, and allow you to extend your repayment term. However, this approach has some pitfalls, including the possibility of paying more in interest or becoming ineligible for loan forgiveness.
Income-driven repayment plans for federal loans For immediate financial relief from payments, the FSAO offers an income-driven repayment plan. This would adjust your payment to reflect a specific portion of your income. Your loan servicer can help you determine which plan is best suited for you.
Federal loan forgiveness Finally, if you’re a teacher in a low-income school or educational service agency and meet specific qualifications, you may be eligible for loan forgiveness of up to $17,500 under the FSAO’s Teacher Loan Forgiveness Program. For private loans, you may be eligible for borrower benefits—like rate or principal reductions—if you hit certain milestones with your payments.
4. Ask for help
While we’ve prefaced this point earlier, we can’t underscore it enough: seek help. Student loans are one piece of your financial puzzle. As you progress in your career—and in life—you’ll be faced with other financial challenges, so it’s important to work with a financial professional who can guide you through the ups and downs.
We hope you’ll find a financial professional who takes the time to understand you, your family, your goals, and your aspirations—someone who is committed to helping you develop a financial strategy that truly reflects your values.
Greg Carlo is a financial planning consultant at Thrivent where he supports financial professionals in developing college and advice-based strategies to help them serve clients. He brings more than two decades of experience to his role, having worked in college admissions and financial aid, as well as with federal and private lending institutions.
About Thrivent: Thrivent is a diversified financial services organization providing financial advice, investments, insurance, banking, and generosity programs to help people make the most of all they’ve been given. For more information, visit thrivent.com. You can also find Thrivent on Facebook and Twitter. If you are a Thrivent client with membership who’s eligible to direct Choice Dollars®, please consider supporting CEAI. It can make a world of difference to our organization. To learn more about Thrivent’s membership benefits and generosity programs, visit thrivent.com/generosity.
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