A financial planner asks every new client the same question about their student loans


  • There are two major strategies for student loan repayment, says a financial planner: all-in and long-game.
  • The “all-in” approach is for anyone who wants to (and can) pay off their debt in five years or less, and the “long-game” approach is for those who need a little more time.
  • There are benefits to each, and choosing your repayment strategy depends on your financial goals and lifestyle.
  • If you’re “all in,” expect to shrink your spending, move back home, and cut out travel and luxuries for a few years. If you’re in it for the long haul, look for income-driven repayment options and possible loan forgiveness down the road.
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Most people who graduate with student loan debt know they need to have a plan to pay it off. Yet one in five young people with student loans expect to die before their debt is paid.

This sounds drastic – and it is. For a young person with five-figure student loan debt, looking at the numbers can be scary and overwhelming. But does it have to be?

According to Tim Baker, certified financial planner with Your Financial Pharmacist, the sooner you devise a payoff strategy for your loans, the better. Doing so helps you take control of your net worth and establish a sense of long-term financial peace, even if your plan includes staying in debt for a couple of decades. In fact, staying in debt sometimes makes financial sense – but you’ll never know until you look at the numbers.

Whenever Baker gets a new client, his first question is, are you taking an “all-in” approach or a “long-game” approach to your student loans?

As Baker says, many of his clients are willing to “eat ramen and live at mum and dad’s house” to pay off their loans in five years or less. But others are not – and that’s ok.

An ideal “all-in” client is someone who has a low tolerance for debt, a low-cost lifestyle, and a high salary shortly after graduation. In this case, there is a strong incentive – and ability – to pay off loans faster. An “all-in” client is willing to do whatever it takes to be frugal and apply all of their discretionary income to paying off debt as fast as possible.

This approach suits people with a particular personality, and the financial incentives are obvious – no one wants to carry a heavy debt load and pay years of interest. Once the debt is paid off, money is freed up for saving and investing. Baker advises a person to do this if they can reasonably pay off their student loan debt in about five years or less.

Want to speak with a financial advisor about your student loan repayment options? SmartAsset’s free tool can connect you with a licensed professional. »

On the other hand, a “long-game” personality is someone who has a higher debt tolerance, meaning that carrying a student loan would not keep them up at night. In this case, there are some options. A person like this would benefit from making low monthly payments for anywhere from 10 to 25 years as part of a student-loan forgiveness strategy with an income-driven repayment plan (IDR).

IDRs are a great option for people who live in high-cost-of-living areas and cannot simply “knock out” their debt, or for people who will qualify for loan forgiveness due to a government or nonprofit job. In this case, it is best to think long-term. Choosing an IDR with a 10-year forgiveness plan allows a person to make low monthly payments, have a good chunk of their debt forgiven, and have discretionary income leftover every month for saving and investing.

Factors to consider when choosing your loan payoff plan

The two strategies sound self-explanatory, but there are a few ways to identify which one is right for you. Here are some important questions to ask yourself when figuring out your game plan:

What is my debt tolerance? If carrying debt keeps you up at night, consider knocking it out as quickly as possible.

What type of loan do I have? Federal student loans usually have lower interest rates and a variety of income-driven repayment options. Private loans tend to be more expensive but easily refinanced with lower rates through lenders like SoFi, Earnest, and LendKey.

What are my long-term plans? The 10-year Public Service Loan Forgiveness (PSLF) Program is great if you know you’re comfortable working for a federal or nonprofit employer for 10 years. But if you need more flexibility, an all-in approach might be for you if you can afford it.

It’s also worth noting that President Trump has said he plans to cancel this program, and it has been difficult for borrowers to take advantage of PSLF since its inception because of complex rules and requirements.

What are my loan forgiveness options?Many federal loans are forgiven after 10 to 25 years with a combination of IDR and PSLF. Loan forgiveness is great, but don’t forget your forgiven balance is taxable!

Is this plan realistic for my life? Whether you are an “all-in” or “long-game” person might come down to factors outside your control. Factors such as familial relationships, cost of living, dietary restrictions, health, and number of dependents can all determine a person’s budget and impact whether an “all-in” approach is even realistic. Not everyone can count on moving back home, and some people have high health-related costs. Every person is unique, and circumstances always change.

The importance of big-picture thinking

Many millennials feel frozen when it comes to making big life decisions, like buying a home, because they’re overwhelmed by student loan debt. That’s why it’s important to devise a plan for paying off loans, because once you do, you’ll know exactly what you need to do to meet your goals.

For example, some people default to the automatic 10-year repayment plan without a second thought, then learn years later that if they had chosen an IDR they could have saved for a home more quickly and qualified for forgiveness later. Others regret not paying off their loans as aggressively as possible to avoid paying interest.

It all comes down to what is most important to you. Bottom line: Be honest about your numbers, your values, and what aspects of your lifestyle are most important, and consider student loan payoff just like any other part of your long-term financial plan.

Want to speak with a financial advisor about your student loan repayment options? SmartAsset’s free tool can connect you with a licensed professional. »