$1,500,000,000,000

Americans now owe an estimated $1.6 trillion in total student loan debt

Mind Blowing, Right?!

Remember when a billion dollars used to be a lot? Now, we’re talking trillions … a thousand times more! Let’s put this into perspective. How many days it takes for a trillion seconds to pass? Let’s do the math (hint: each 24-hour day is 86,400 seconds).

That means….
A million seconds is about 11 and a half days
A billion seconds is just over 31 years
And, a trillion seconds is over 31 thousand years. Believe it or not, a trillion seconds ago, the Neanderthal stalked the plains of Europe!

We pay attention to milestones. Student debt surpassed $1.5 trillion in 2018, and we’re feeling it! It’s a depressing milestone that’s changing our culture. Good investment or not, we can’t ignore the long-term effects it’s having on our ability to build wealth. Retirement? Keep dreaming! Even Baby Boomers are still paying off their student loans. I can’t be alone in feeling something is very wrong with this picture.

Is It Worth It?

College grads leave school with about $37,000 in debt, on average. Let’s put that into perspective. Student graduating today who owe $37,000 could have instead financed a new Audi A4 or Tesla Model 3, a down paying on their home, or even bootstrapped their own small business.

I am sympathetic to today’s student loan borrowers who take on a great deal of risk when they sign a promissory note for their student loan. It is an outrage that the federal government extends credit to students and parents allowing so many to accumulate eye-popping, unpayable amounts. How many students are straddled with loans that seem to have no labor market value? When it comes to making good on these debt payments, the struggle is real!

And, you know what? Education debt can haunt us for our life. Student debt has a slower repayment trajectory than credit cards or auto loan debt. It’s repaid over decades instead of months or years! This happens with income-based repayment plans and other circumstances when unpaid interest is added to principal. We’re paying interest on interest!

In Case Your Haven’t Noticed…

We continue to live in an ultra low investment environment. Money market funds have a yield of just .21%, 2-year CDs are returning .94%, and interest-bearing checking accounts are under .1%. Meanwhile, graduate loans generally carry interest rates of about 8%. So much for cheap money!

It’s Time to Pay Off Our Student Loans!

It’s only fair that I warn you — I am seriously opinionated on this matter … I don’t take a soft approach. I have lived far too many years in financial bondage to see this condition as tolerable. I’ve been there! Debt requires us to transfer our future wealth to our lender. I ask you: If given the choice between sending monthly checks to your (wealthy) lender or sending these same checks to build your own future, would you really choose the latter? Debt limits our options. It keeps us tied to jobs and careers we hate. It steals our freedom and makes us a slave. It’s a “ball and chain” on our lives. We have no way out but to work off our sentence.

Student, Heal Thy Personal Balance Sheet!

First things first. Know what you owe. If you’re not sure how much you owe in student loans, you’re not alone – far from it. Between subsidized and unsubsidized loans, private and federal loans, loan disbursements the bottom line can add up fast! The National Student Loan Data System (NSLDS) is a central database that keeps track of all our federal loan information. You can access it here.

Now, you’re on your way! Here are some thoughts on how we as student borrowers should approach this difficult issue.

First, pay off credit card debt. This is a no-brainer for anyone. Many credit cards charge annual rates as high as 24% to 29.9%. No investment portfolio is likely to generate returns of that size over any significant period. Before we focus on getting aggressive about paying off our student loans, let’s get rid of our credit card debt!

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Next, establish an emergency fund. Again, the advice her applies to everyone. It makes sense to have 3-6 months of living expenses set aside for any potential disruption in employment or large unexpected costs. But, that’s only where it starts!

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Contribute to your 401(k), if there’s an employer match. We aren’t overly enthusiastic about maxing out your 401(k) contributions as some advisors, but it certainly makes sense to take full advantage of any employer matching program if one happens to be available.

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That Brings Me to the Heart of the Matter. Are we better off aggressively paying down student loans? YES! YES! YES! In the current financial environment the right answer for most of us is to pay down our student loans as soon as possible.

Here’s why: Interest avoided by aggressively paying down student debt is money in hand! Can you think of any place in the financial markets where you can find a riskless return above 8%? Nope, you can’t.

We’re Here When You’re Ready

Education is important! It’s also expensive! Millions of us have student loan debt and it’s choking our progress towards financial independence. But, take heart. We can conquer it! Put on your game face, face the monster, and let’s escape from student debt prison. We offer student borrowers an ideal way to build wealth while paying off student loans sooner. If you have loans with rates north of 4%, we’d advocate paying them down first – it’s a wise step on the road to financial health.

If getting rid of your loans is a major personal goal as well as having a hefty investment account beyond your retirement savings, go for it! Don’t worry about doing everything perfectly. Just get started. Let’s get to work on your rapid debt repayment plan that works for you, and let’s start putting more money back into your pocket. That’s where it belongs! After all, that’s why you paid for a higher education, right?

Our service is FREE to you — no charges, ever! We focus on you, not the bottom line. Our mission is to help you, the student loan borrower, achieve financial balance and move closer to your dreams. Your success is our #1 priority!

HELP ME WITH MY STUDENT LOAN DEBT