How to Manage Student Loan Debt While Planning for the Future

For many Americans, student loan debt is a heavy financial burden that follows them well into adulthood.

As of mid-2024, student loan debt in the U.S. stood at an eye-popping $1.74 trillion. This reality can feel daunting, especially for recent graduates eager to build their financial futures.

The good news? Managing student loan debt doesn’t have to come at the expense of your long-term goals.

“Whether you’re still in school or have already graduated, finding the balance between repaying student loans, saving for the future, and even investing is possible,” advises Martin Walcoe, President & CEO, David Lerner Associates, Inc. “With a proactive approach and the right strategies, you can tackle your loans while laying a strong foundation for financial growth.”

Step-by-Step Guide on How to Manage Your Student Loan Debt

1. Understand the Full Scope of Your Loans
   Before effectively managing your student loans, you need to understand what you owe fully.
   Start by gathering key info about all your loans, including:
   • Total balance owed
   • Interest rates for each loan
   • Monthly payment amounts
   • Loan servicers

   Knowing the interest rates is particularly important, as they determine how much your debt grows over time. Federal loans often have fixed rates, while private loans can vary widely. Once you have a clear picture, prioritize loans with the highest interest rates for repayment, as they cost you the most in the long run.

   For federal loans, it’s also worth exploring repayment options. Income-driven repayment plans, for instance, adjust your monthly payment based on your earnings and family size. This can make payments more manageable, especially in the early stages of your career.

2. Create a Realistic Budget
   A budget is essential for anyone managing student loan debt. It ensures that you’re making timely payments and setting aside money for other goals. Start by calculating your monthly income and subtracting all necessary expenses, such as rent, utilities, groceries, and your minimum loan payments.Next, allocate funds for savings. Even if it’s a small amount at first, contributing to an emergency fund can protect you from unexpected expenses and prevent you from falling behind on loans. After that, determine how much extra money you can spend on your monthly loans.If you’re struggling to find room in your budget, consider cutting discretionary expenses like dining out or streaming services. While sacrifices may feel challenging, they’re worth it when you’re working toward financial freedom.
3. Take Advantage of Loan Forgiveness and Assistance Programs
   You may qualify for student loan forgiveness or repayment assistance programs depending on your career path. Public Service Loan Forgiveness (PSLF), for instance, forgives the remaining balance on federal loans for borrowers who work full-time for qualifying public service employers after making 120 payments.Similarly, some employers now offer student loan repayment assistance as part of their benefits packages. If you’re job hunting, look for companies that provide this perk. It’s a great way to reduce debt while focusing on other financial goals.For current students, scholarships and grants are an excellent way to minimize borrowing in the first place. Spend time researching and applying for funding opportunities to reduce your reliance on loans.
4. Save for the Future—Even While Repaying Loans
   One of the biggest challenges for young adults is balancing loan repayment with long-term savings goals. While it might be tempting to put off saving until your loans are paid off, this approach could hurt you in the long run.Start small but start early. Contributing $100 a month to a retirement account can make a big difference over time, thanks to compound interest. Consider opening a Roth IRA or contributing to your employer’s 401(k) plan, especially if they offer matching contributions. Get advice from your investment counselor on how to plan your financial future.If you’re also saving for a home, a Health Savings Account (HSA), or other financial goals, prioritize based on your needs and timeline. For example, focus on building an emergency fund before tackling longer-term goals.
5. Don’t Overlook Investing Opportunities
   Although student loan repayment might feel like your top priority, investing shouldn’t be ignored. Investing is one of the best ways to grow your wealth over time, and starting early gives you a significant advantage.Begin with small, consistent contributions to investment accounts, such as index funds or exchange-traded funds (ETFs), which offer diversification and lower risk compared to individual stocks. Consider using robo-advisors, which provide automated investment management based on your risk tolerance and goals.While paying off high-interest loans should take precedence, investing even a little can help you build a financial cushion for the future. Striking the right balance between repayment and investing is key to long-term financial success.

Managing student loan debt while planning for the future can feel like a juggling act, but it’s absolutely achievable with the right approach. The earlier you start taking control of your finances, the easier it becomes to achieve your goals. Remember, every small step you take today brings you closer to a secure and prosperous tomorrow.

At David Lerner Associates, we’re dedicated to helping individuals and families build strong financial foundations. Whether you’re looking to create a repayment strategy, start investing, or plan for the future, our team is here to guide you every step of the way. Contact us today to schedule a consultation and take charge of your financial journey.

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.