As millennials enter their 20s and 30s, they begin to ponder the future and what it might look like for them. The goals and objectives of this generation, my generation, are as diverse as the population itself. They love to travel and explore. They seek meaningful work in careers they’re passionate about. They want to start families, businesses, and non-profits. They’re mobilizing politically and engaging socially to ensure that the world around them reflects their values and perspectives. For a generation as forward-thinking, debate-ready, and well educated as millennials, they have one major problem -- student debt.
Now I know, this is not our only problem. Far from it. But it is the primary roadblock standing in the way of this generation attaining financial security and independence. Since the financial crisis of the late 2000s, the median income in the US has decreased by almost 10%*. Meanwhile, in that same time frame, federal student debt outstanding has increased by over 400%. That’s to say nothing of the private loans which have even more potentially harmful provisions and can financially devastate a borrower overnight if he or she does not comprehend their loan stipulations. With the average income decreasing and debt increasing, it is more important than ever to implement a financial plan that can best allocate your resources.
Research has shown that 81% of Americans with student loans have made personal or financial sacrifices as a result of their debt*. These sacrifices range from not saving for the future, delaying an upgrade to a car, putting off buying their first house, postponing a marriage or children…the list goes on and on. So what do millennials do about our student debt? Where do we go from here? The answer is – you get help.
What I recommend you do is find an advisor who has both earned their CERTIFIED FINANCIAL PLANNERä designation and who has received additional training in student loan repayment strategies. A financial planner meeting these criteria will be able to assess your student loans and determine which repayment strategy is the most advantageous to you within the context of your overall plan. Although you should theoretically be able to rely on the loan servicer or income driven repayment plan application to put you in the most beneficial plan, it does not always work out that way.
Neither the online application system nor the employees of the loan servicer are necessarily equipped to fully evaluate your situation and ensure that you are going down a path that is in your best interest. Depending on your marital status, when you took out your loans, what percentage of the family debt (if you’re married) your portion represents, etc., there can be multiple ways to look at your repayment options. Ensuring you end up in the right plan is not an exact science. Circumstances can change (getting married, changing jobs, having children, going back to school...), legislation can change, and you are often put in a position to try and evaluate a future that is impossible to predict.
All that being said, having a financial planner who is trained to look at your situation from every angle and help you put a plan in place that is right for you can make a big difference. Not only could it mean thousands of dollars extra in your pocket over the life of the loans, it takes the guesswork out of the equation for borrowers. The average loan holder cannot and should not be expected to navigate this student debt landscape on their own.
If you’re wondering whether you’re in the right repayment plan, if consolidation is something you should consider, the tax implications of certain spousal repayment strategies, and more – check back next week for Part II of this blog series.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Fish and Associates is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.
* Source - American Institute of CPAs via their 360 Degrees of Financial Literacy program.