Student debt is a big deal for many millennials.
That “educational investment” yield a lower ROI than expected?
The average student debt load for today’s millennials recently registered at over $35,000 – a financial obligation that can put the “no-go” on many costly life events, such as getting married, having kids, and buying a home. A 2015 survey by Bankrate indicated that 56 percent of people ages18 to 29 have put off major life events – even purchasing a car and saving for retirement – because of student debt.
Many of you may be thinking, “Yep – that’s me!”
If you’re like many millennials, you hit the job market at a time of historically high unemployment and have been forced to delay your professional dreams in lieu of landing underemployment options just to make minimal student loan payments.
As a millennial with student debt, I feel your pain.
There are times where my student debt has felt like an overwhelming dead weight or even indentured servitude. I hate it. I really, really hate it.
While we could embark on a book of the macroeconomic why’s and wherefores’ (including the conspiracy theory regarding federal student loans being utilized to fund the longest war in American history) regarding student debt, today’s post will focus on answering a question I frequently get from entrepreneurially-minded millennials: How do I manage my student loans while doing what I love?
For some of us, “doing what I love” translates to starting a business, founding a nonprofit, embarking on overseas philanthropy, or starting a family.
Regardless of what your “love” is, here’s a few student loan strategies that may help you manage the debt load without sacrificing quality of life:
Income-based loan repayment (IBR) options are available for federal student loans. The IBR program allows borrowers to make capped payments (10 to 15 percent of income) for 25 years, with the remaining balance being forgiven. If you’re an entrepreneur working around inconsistent cash flow, IBR program can be a good way for you to get your business through its start-up phase, while paying down your student debt.
There are a couple IBR programs available, and talk of modifying the existing programs to be an even sweeter deal (click here to view proposal), but I guess we’ll just have to see how the 2016 Presidential election tailspins this system.
With this option, you defer paying your loans for a few months or possibly years in addition to the normally allotted six-month post-grad grace period.
Good news is that you’ll get a break from paying your loans with no hit to your credit score and could use the extra cash to start a business, nonprofit, or whatever your passion(s) is. The bad news is that the debt doesn’t just go away – once the deferment period is up, you’ll still have to tackle the even bigger debt.
As the primary caregiver during a life-threatening injury that resulted in the long-term hospitalization of a family member, I had to defer my student loan debt for an extended period of time. Thankfully, the military hospital social workers assisted me with the process (it’s quite paperwork intensive and can be really confusing). Unfortunately, my entire caregiver support group was full of highly educated millennials with student debt loads who found themselves unexpectantly providing round the clock care for disabled veterans following IED blasts and firefights in Afghanistan and Iraq. It’s frustrating and quite concerning, that family caregivers do not currently have a better student debt management option than interest compounding deferment.
If you find your life derailed by unanticipated medical events, don’t (totally) despair. Know that you’re not alone (over 10 million caregivers in the United States are millennials), utilize debt management programs that work with your family’s post-injury finances, and consider advocating for much-needed policy change in this arena. Join a Change.org petition or contact your elected officials.
Federal Loan Forgiveness
There are a couple options here for federal loan forgiveness – government employment, nonprofit service, and public service or healthcare work in designated underprivileged areas (also known as Rural Opportunity Zones). If you’re interested in entering the public service or nonprofit sector, check to see if your profession qualifies for any of the ten-year federally sponsored forgiveness programs.
Some states offer additional student loan repayment packages and forgiveness programs for a variety of professionals – teachers, physicians, law enforcement, etc. When evaluating job opportunities, it might be worth your while to research location-dependent debt programs available.
There is also an option for student loan forgiveness for qualifying disabling conditions. If you’re facing a long-term medical situation, be sure to check out the options and eligibility requirements. You can hire a lawyer to help you with this process if the Department of Education fails to properly consider your medical professional’s submitted documentation.
Refinance Your Student Debt
Refinance, but not through traditional lenders.
SoFi, CommonBond, and LendKey are nontraditional student debt refinance companies that help the borrower through low rates, no fees, great customer support and unique borrower protections. I’ve not utilized any of these third-party programs (some may render you ineligible for federal loan forgiveness programs), however, a few of my business school classmates have and reported positive experiences.
Yes, you read that right. “Gamified crowdfunding” has emerged as an option for student loan assistance. So this is by far the weirdest student debt repayment strategy, but hey, if it works…
Givling is pay per play online gaming option that works towards paying off users’ debt. Currently, the platform has paid off over $400,000 in user student debt [insert: major “WOW!”] – I did not see that one coming. Maybe instead of cramming BioChem during undergrad, I should have brushed up on my gaming skills.
While it’s an unusual strategy for student debt, it might be worth a look if gaming is your thing. If you’re already active in the gaming arena, joining a platform like Givling could be a good way to pursue your hobby while managing your debt.