Strategies to ease the burden of student loan debt

Student loan debt in the United States is growing. According to EducationData.org, federal student loan debt has increased at an annual average rate of just under 28 percent since the start of the 21st century. Private student loan debt also is a significant burden, totaling $132 billion by the end of 2020.

As student loan debt has risen, managing that debt has become an essential component of financial planning. Individuals with student loan debt can look into various strategies to help ease their debt burdens.

• Reconsider your employment. As student loan debts have risen, employee repayment assistance programs once associated strictly with government jobs have grown in popularity at private companies. In addition, the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed around the onset of the pandemic in 2020 included a tax-free provision for employer-sponsored loan assistance programs. The tax benefits helped both employees, who did not have to pay income taxes on loan assistance money provided by their employers, and businesses, who received payroll tax exclusions on funds paid to employers via the program.

The CARES Act provision was temporary, but experts at Goldman Sachs have noted that many private companies have gotten creative regarding helping employees pay down student loan debt. For example, some have allowed employees to redirect PTO and vacation pay toward their student loans. Individuals with sizable student loan debts whose companies do not currently offer such benefits can look for new employment opportunities with firms that will help them pay down their debts.

• Consolidate loans. Consolidation is often viewed through the lens of simplifying loan repayment by combining all loans into one, so borrowers with multiple loans only need to make a single payment each month. That impression is correct, but there is more to consolidation than simplifying repayment. The experts at Credit.com note that consolidation typically allows borrowers to change their repayment terms. Longer repayment terms will increase the total interest borrowers pay over the life of the loans. But longer repayment terms also allow borrowers to pay less each month, freeing up money to pay bills and build savings for large purchases, including a home.

• Know your loans. Many borrowers signed their student loan documents when they were 18, while others might have signed when they were 22 or 23 and about to enter graduate school. It is easy for young borrowers to overlook important details like interest rates. Still, individuals who have multiple loans must recognize that the interest rates on loans that have not been consolidated almost certainly vary. Learn the interest rates on your loans and make a concerted effort to pay extra principal each month with higher interest rates. Doing so can save borrowers a lot of money over time and get them closer to eradicating their student loan debt.

Student loan debt is a significant burden for millions of individuals. Finding ways to ease that burden can help borrowers secure their financial futures.