U.S. News and World Report published an article at the end of last year saying that the average student loan debt is now approaching $30,000. Because of this, it’s likely that many people feel the burden of their student loans every single day.
I know I do, and I started with $39,000 worth of debt. I have now brought it down to $32,000 in just a few years using a combination of side hustling and reducing my expenses.
Despite this, I’ve never made paying down my student loans my top financial goal. Although it’s certainly important and something I make a concerted effort to improve every month when I pay above the minimum on my bill, there are some other financial goals that take precedence and probably should for you, too.
Here are some examples of financial goals that may be more important than paying off student loans:
1. Check Your Credit Report
It’s crucial that you view your credit report every year to make sure your identity is protected and there are no errors.Checking your credit report ensures that your credit score is accurate and up to date.
In order to access your credit report, go to AnnualCreditReport.com. There, you will be able to obtain your credit report from each of the three major credit bureaus for free.
You should check your credit report before paying off your student loans to make sure that your actual student loan debt numbers match the numbers on your credit report.
When you have access to your report, look at it very carefully. Do all of the credit cards listed match the ones you’ve had in the past? Does your student loan debt look accurate? Are there any negative accounts that need to be repaired? Is there something on your report that shouldn’t be there?
If there is an adverse account on there, frustrating as it may be, it’s best to fix it right away.
I once found a collections fee on my credit report for failing to return an audio book to the public library. I didn’t even know this was possible, but the fee was for $150.00.
Because I hadn’t paid this fee, my credit report showed an adverse account. I was able to find the audio book, send it back, and work with collections to get the fee reduced, paid, and eliminated from my credit report.
2. Save for Retirement
There is always considerable debate over whether you should pay off debt or save for retirement first. However, there’s no reason why you can’t do both.
Remember, the earlier you start saving for retirement, the better. Just a few years of lost compound interest can make a huge difference in the amount of money you have saved at the end of your career.
For example, if you invest $500 a month from ages 25-65 at a conservative 7% return, your net worth will be well over $1 million dollars when you retire. However, if you wait to start investing at age 35, and invest $500 a month from age 35-65 at a 7% return, your net worth would only be just over $600,000.
As evidence, the ten years’ variance in investing makes all the difference, so don’t forget to save for retirement in addition to paying off your student loans.
I personally have made saving for retirement a priority because of the numbers mentioned above. Even though it might not be the right choice for everyone, I feel good knowing that I have a large sum of money in my IRA even though I still have a student loan balance.
3. Pay off High-Interest Debt
Most student loans have relatively low interest rates when compared to credit card interest rates. My husband’s highest interest on a private student loan is 9%, which seems quite high; however, credit card interest rates are typically much higher.
Before you pay off your student loans, focus on your high-interest debt first. If you have $5,000 of credit card debt at 24% interest, it’s much more important to focus on that balance before you worry about even $5,000 of 5% student loan debt.
In order to tackle this credit card debt, consider applying for a personal loan at a lower interest rate so you can consolidate the high-interest credit card debt. You can do this through your local bank or even try a peer-to-peer lending site like Prosper or Lending Club.
The math is in the favor of paying off the high-interest debt, and it will be far better for you in the long run if you make paying off your high-interest debt a priority before significantly reducing your student loan balance.
4. Create an Emergency Fund
It’s great to be able to make large payments towards your student loans, but this means nothing if you get into a car accident and have to go to the hospital and don’t have the money to pay for it. Unfortunately, the unexpected does happen.
Last year, I was pregnant with twins who were born early and spent two weeks in critical care. Their hospital bills were astronomical. Luckily my husband and I had a solid emergency fund that we used to pay for all of their medical care.
If you don’t have an emergency fund, you could be forced to miss student loan payments altogether, which can cause damage to your credit report and your future.
Instead, create an emergency fund before you start making extra payments on your student loans. That way, if something bad happens, you have the money to handle it and can keep paying your loans uninterrupted.
5. Establish a Budget
When you make a payment towards your student loans, you can’t get it back. Even if you are excited that you made a $1,000 dent in your loans, it won’t end up being worth it if you need the money just a few days later. This is where establishing a budget comes in.
Paying down your student loan requires discipline, not only to make your payments on time, but to incorporate your payments into your overall financial plan for your day-to-day life.
A monthly budget, where you list out all of your bills and expenses and compare them to your monthly income, will allow you to see just how much you can put towards your loans. It might also show you areas where you can cut back so you can add even more to your student loan monthly payment.
However, none of this is possible without setting up your budget before you aggressively pay down your student loan debt. Get to know your financial tendencies and personality, and you’ll be far better off in your debt repayment journey.
6. Save For Your Children’s Education
This will probably be a controversial topic, but I’m so tired of having student loan debt that I’m more motivated than ever to ensure that my two children never have to have student loan debt.
Even though my husband and I still carry large student loan balances, we are still actively investing money in our children’s names so that they never have to worry about paying for college.
The choice is definitely up to you, but even if you don’t want to prioritize saving for your children’s college over paying off your student loans, at least give it some consideration for the future.
Do you have any financial goals that you are focusing on before paying off student loan debt?
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.50% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.49% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 17, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/17/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.48% effective April 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.49% – 7.27%1||Undergrad & Graduate|
|2.49% – 6.65%3||Undergrad & Graduate|
|2.49% – 7.41%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.49% – 7.11%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|