How to Deal With Your Student Loan Debt While Managing Financial Goals for the Future

In this week’s episode of Money Confidential, host Stefanie O’Connell Rodriguez and financial expert Lynette Khalfani-Cox advise a woman struggling to pay off more than $100,000 in student loan debt.

Real Simple's Money Confidential podcast helps people bring their money issues out into the open, so they can start on the path toward solving them. On this week's episode, host Stefanie O'Connell Rodriguez helps Elaine (not her real name) deal with a financial issue so many people are struggling with right now—a huge student loan debt.

Elaine took out more than $100,000 in student loans to help finance her education nearly a decade ago. Even though she's made a significant dent in what she owes, she still feels like the loan is keeping her from moving forward into the future, including goals like buying a house, having kids, or putting money away for retirement.

Lynette Khalfani-Cox, The Money Coach

Part of the American Dream is 'I want to go to college' or 'I want to send my children to college.' But we have to be honest about the fact that on the other side of those goals is debt.

—Lynette Khalfani-Cox, The Money Coach

So how should Elaine balance paying down debt with achieving the goals she has for the future? For a little guidance, O'Connell Rodriguez turns to financial expert Lynette Khalfani-Cox, The Money Coach and author of Zero Debt: The Ultimate Guide to Financial Freedom.

Khalfani-Cox recommends taking a deep breath—and then checking in with your lenders to determine the total debt amount. "Some people have no idea how much they owe," she says. Then, see what kinds of repayment options you have that could fit with your current budget, whether it's starting small now and ramping up as you earn more income, or sticking with the typical 10-year repayment schedule.

And Khalfani-Cox recommends you don't wait to pursue your financial goals for the future, such as saving for a house, having a baby, or saving for retirement. Waiting for those things until you pay off student loans could keep you from reaching those milestones down the line.

Listen to this week's Money Confidential—How to Deal With Your Student Loan Debt—for Khalfani-Cox and O'Connell Rodriguez's tips for getting a handle on student debt. Money Confidential is available on Apple podcasts, Amazon, Spotify, Stitcher, Player FM, or wherever you listen to your favorite podcasts.



Kara: I graduated with a total of about $28,000 in federal loans. And because I chose to pay less and build up my savings account and pay down other higher interest debt, that balance hasn't really changed over the last 10 or so years. And now that I want to make a career change, I feel stuck.

Lily: I am 35 years old and I just started paying off my student loans of $60,000, which I took out over 10 years ago.

Jean: When I think about planning for the future, I feel trapped by my student loans.

Stefanie O'Connell Rodriguez: This is Money Confidential, a podcast from Real Simple about our money stories, struggles and secrets. I'm your host, Stefanie O'Connell Rodriguez O'Connell Rodriguez and today we're talking to a 29-year-old listener from Queens, New York we're calling Elaine, not her real name.

Elaine: I went to a private university. I got the maximum amount of government student loans, which when I went to school was about $28,000, maybe $30,000. And then I still had to cover the rest of it with private loans, but the total amount that I left school with was just over a hundred thousand in private loans. And in addition to the $30,000 in government student loans. So it's been, uh, it really sucks.

Stefanie O'Connell Rodriguez: Some 44.7 million Americans have student loan debt. Collectively, Americans owe over 1.71 trillion dollars in student loan debt alone. But despite that shared experience, facing down the entirety of your own student loan balance can feel totally isolating and overwhelming.

Elaine: I graduated college in 2013, so it's been a long time, but I remember that six month post-graduation date coming up and they're like, you've got to start paying them now. It was really, really terrifying, especially because I had family members, close family members who also took on a huge amount of student loan debt and ended up not paying them. I was lucky enough to have money that I could pay them a little bit at first, but it is really, really daunting. It kind of felt like I was never going to be able to do anything else, but pay these loans. It's just such a burden. Like I, that's the only thing I can describe it is a burden.

Stefanie O'Connell Rodriguez: The burden of student loan debt, as Elaine described it, has grown disproportionately over the last several decades.

Among the Class of 2019 college students, 69% took out student loans, graduating with an average debt of $29,900. 20 years earlier, in 1999, undergraduates left college with an average student loan debt of just $16,030. Even after adjusting for inflation, the average student loan debt at graduation has increased 326% since 1970 as college tuitions have risen.

But despite the fact that significantly more young people today hold a bachelor's degree, millennials are earning 20 percent less, adjusted for inflation, than baby boomers did at the same life stage.

Elaine: So now I pay for my private loans, I pay $1,300 a month for those. I think I refinanced them at the end of 2018, so two and a half years ago, because I had gotten a big raise and I could make a bigger payment to pay them off faster. But before that it was like $700 a month for the first, like, six years out I was out of school. And then now, it's been $1,300.

Stefanie O'Connell Rodriguez: Eight years of seven to $1,300 a month.

Elaine: Yeah. Plus the government, the government loans on top of that, which thankfully the pandemic has like put those on 0% interest or whatever. But I have my husband's, too, who has the same amount. That's another $30,000 on top of my $30,000. So it's a lot of money.

Stefanie O'Connell Rodriguez: Tell me a little bit about the first time you talked about your student loan debt with your husband.

Elaine: The biggest fight we ever got in was about his student loans, because I found out that he hadn't been paying them. For a year, he just didn't make the payments because he was making a lot less than I was, but I was really frustrated because at the time 'cause I had like my day-to-day job and then I was making a lot of money as a freelancer and I could have easily covered those payments for that year.

It was before we were married, but I was like, I am terrified of doing anything with you because your financial position is like, your credit score is super low now, like all that kind of stuff. Like, you know, it's like a big snowballing effect.

Stefanie O'Connell Rodriguez: Are there any things you wish you'd done differently or money mistakes you feel you've made?

Elaine: Well, I could say going to college, but I don't necessarily think that that's true. I mean, I knew how much money I was taking on. but I was also aware of the fact that if I didn't go to college, I wouldn't leave my hometown. And I wanted bigger things. So I wanted to move to New York. I wanted to live here and get this job doing whatever I wanted to do when I was 17 years old. Like I knew that it was going to be a lot of money to take on, but I also knew that I didn't really have a choice.

At least I felt like I didn't really have a choice. It sucks that that's kind of the system that we were in. I graduated high school in 2009, middle of the recession, all that kind of stuff. And it was kind of a gamble anyway to be like, well, am I good? Is there going to be anything on the other side of this anyway?

It ended up making sense and being okay. But at the time, is that a smart decision for a 17 year old to make, I mean, a hundred thousand dollars in debt—even if I was to take on that much now at 29, I'd be like, oh, I don't know about that.

Stefanie O'Connell Rodriguez: It's really painful to be spending that much money every single month that is going toward your past and not your future. I wonder what that feels like, and what concerns that brings up for you.

Elaine: I think now that we've gotten to a place where we can do both, we've started to save for our future. That's what makes me feel more optimistic now, is that there's a light at the end of the tunnel.

I mean, it's only been a few months that we've been doing this, but it's honestly exciting to put it towards something. Like having a net worth or something. I mean, I don't technically, it's still negative because of our debt, but like having accounts that have money in them is really nice as opposed to money that I owe.

But still I'm like, is it enough? I'm always afraid that I'm not going to have enough basically for the future. And this is a big problem for me like in general.

It's like, am I going to have enough for this house that I really want? Am I going to, after that, have enough to have kids? Am I going to have enough to live after I retire? Like all that stuff, it's a constant, that's just like, my personality is like, always worried about five to 10 years from now. And especially with money. I don't know.

Stefanie O'Connell Rodriguez: Elaine's anxiety around her student loans, and finances in general, is also not unique. A 2018 study found that 74% of millennials feel daily stress related to their student loan debt, with many reporting that their student loans have a significant impact on their ability to meet their other financial goals. From saving for retirement to buying a home to having children, many millennials report putting off major milestones because of their student loan debt.

Stefanie O'Connell Rodriguez: If you were to have a setback that meant that you couldn't pay off your loans by your target date, what would that mean to you?

Elaine: It would be really heartbreaking because it kind of like feels like a domino effect because I can't do everything at once. I can't save for this house and have a kid.

Stefanie O'Connell Rodriguez: I do wonder though, if there is something about challenging the notion that it's a dominoes—these milestones—paying off the debt, the house, the kids—versus is there a way in which these things exist in tandem?

Elaine: I think I get that I just want it to be done with, I want the debt, especially to be done with—I'm sick of it. And I think that when that giant debt, my student loan debt is paid off. I don't know what I'm going to do. I'm like, okay, throw a party of epic proportions.

Stefanie O'Connell Rodriguez: I think you should. I know you talked about like having a party if your student loans were paid off, but how would you feel?

Elaine: Like I had accomplished a really hard thing. Um, really proud. Yeah. I was just thinking about like sitting in my mom's office in her house. I just remember her sitting there with me and like trying to make this thing happen. 'Cause that's all I wanted was to go to school and go to New York and um, you know, get a job in film. I wanted to be a screenwriter.

She had been told by one of my teachers at school who did not like me very much. She told my mother that it was a waste of money to send me to college because it was, I was, you know, wouldn't be successful basically. Um, and my mom basically told her off and was like, you're just ignorant and stupid yourself, and you have no idea what you're talking about. You don't know my kid and all that stuff. And my mom was determined parents both my parents were determined to, you know, let me do what I wanted to do.

Stefanie O'Connell Rodriguez: And so paying off that debt is a vindication of that.

Elaine: Yeah.

Stefanie O'Connell Rodriguez: You think your mom's going to be really excited?

Elaine: Yes she is. I think it'd be really cool. I guess. I don't know, just like very, basically just very relieving, it's a very cool feeling, very lucky that I was able to do it. And, um, you know, at all, let alone in such a short amount of time, 10 years after the fact, I just, I really looking forward to that day.

Stefanie O'Connell Rodriguez: You can have one of those headlines, like I paid off a hundred, whatever thousand dollars in six years or whatever it is.

Elaine: Yeah. And my parents didn't do it for me. I pay my own rent and all that stuff. I think that's the other thing too. Like a big thing I struggled with when I first started working in New York was not understanding where the money comes from for other people.

My first job was at the New York Times in the newsroom, and I just remember going, meeting all these people who A) I didn't realize were in their mid thirties. I was 21 when I started working there. And I thought everyone was like 25. They all looked so beautiful and young and talented. And then you start to like, know them better, and they come from family money or they, you know, have been just older and have been working for a long time and all that kind of stuff. So that was one of the biggest, most important things I learned that like, my story isn't the same. I'm from a really small town in a really small family that doesn't have a lot of, you know, family money or anything like that.

So it is a big deal to do what I've done—to go to college, to pay it off, to live here. That too is a big deal for me, not just like the one singular thing of paying off my loans, but the life that I've created over the last 10 years I think will be something to celebrate too. Not just making that final payment.

Stefanie O'Connell Rodriguez: After the break, we talk to a personal finance expert who paid off over six figures of her own debt, her recommended strategies for Elaine—and anyone else doing the same.

Lynnette Khalfani-Cox: Back in 2001, I had a hundred thousand dollars in credit card debt alone. I paid it all off in three years. When I got out of grad school at USC in Los Angeles, I had $40,000 in student loans, it took me over a decade to pay off my college loans. And believe me, I was not born with a silver spoon in my mouth at all. My mom was a secretary. My dad was a shoe shine man. So in my family, very little means, and loans is how I financed my college education, especially my graduate school education.

Stefanie O'Connell Rodriguez: Lynette Khalfani-Cox is a personal finance expert and author of 15 books, including the New York Times bestseller Zero Debt: The Ultimate Guide to Financial Freedom.

Stefanie O'Connell Rodriguez: So I wanted to take this back a little bit, because student loans don't start at graduation. They start before college. And I want to talk a little bit about what are the things we should be thinking about when we're making decisions about our education and how much to invest in it.

Lynnette Khalfani-Cox: Well, there's a lot to take into account before you sign on the dotted line and agree to use a loan of any kind to finance higher education. But unfortunately, a lot of us, we make these choices when we're essentially like 18 years old.

So among the things that people should take into consideration before they finance a college education is what the expected returns are going to be in terms of their own career path. So I do think it makes sense to have loans, if you absolutely need them, that are commensurate with what your salary expectations will be. The tricky part is that we know that most folks, especially in their early twenties, once they graduate from college, tend to vastly overestimate what their starting salaries will be. And they also underestimate what their beginning household bills will be.

Stefanie O'Connell Rodriguez: I think the framework of thinking about our education as an investment that needs to have a commensurate return is not something I ever heard before going to college. It was like go to the best school you get into and somehow it's going to magically work itself out.

Another thing that I see a lot of professionals dealing with right now, especially in the pandemic, is thinking about going to get their master's degree or go back to graduate school and considering whether it's worth the cost. And I do fear that some of it comes from this idea of, I don't know what else to do.

Lynnette Khalfani-Cox: Yeah, I think I agree with you some people who are, you know, in their twenties or thirties really might be kind of stuck or feeling like, oh, is there something better than what I have been doing?

Or, you know, I've tried this out and I didn't really like it as much. And I don't really have the knowledge or the background that I need. I want to try something new, so maybe I should go to graduate school. but oh, by the way, it's going to cost me a small fortune to go ahead and get that advanced degree.

So I do see that a lot as well. And I do think it's in part due to people wanting something different in terms of, challenge, a shift or some level of satisfaction. Because they might feel like, eh, I kind of tried this and this is what I thought I wanted when I was like 18, 20 years old. You know, now I'm 30 and I'm like, this, this is not quite it.

So I want people to be mindful that you don't automatically have to have an advanced degree for every line of work in every profession.

Stefanie O'Connell Rodriguez: Inthis episode, we were talking to a listener that we're calling Elaine, and Elaine is done with school. But one thing that came up in my conversation with her is just how vivid that feeling was for her six months after graduation date, when that first student loan payment came due and just the fear and overwhelm at that moment. So what are your strategies for managing just the total enormity of those kinds of numbers and feelings?

Lynnette Khalfani-Cox: Well, the emotional side is one thing. And then the financial side is another...let's deal with the emotional first.

From an emotional standpoint, I want people to not feel overwhelmed and to realize that they're not alone.

I do feel that in general, it's worth it to get a college degree. But I do feel like part of it is a little bit of a reckoning to think about the ways in which we've sold the American dream, right? And part of the American dream is I want a house or I want to go to college or I want to send my kid to college. And those are great, lofty, aspirational goals. But we really do have to be honest about the fact that on the other side of those goals is debt, because most people cannot afford to buy a house in cash outright. Most people cannot afford to write a check for tuition outright in cash.

And if you're trying to tackle this now, in your 20s to 40s, know that it is surmountable. The second thing I would say is from an emotional standpoint is you have to focus on the stuff that you can control. So sometimes debt itself, the overwhelm that people feel is often tied to the powerless feelings, or the feeling like, geez, this there's just so much up in the air so much I can't do.

So, you know, again, take a deep breath, kind of emotionally do a reset and understand that you're going to approach the problem in a methodical, step-by-step manner, thinking about what you can do, what you can control and the stuff that is within your purview.

That's, you know, not like based on the economy or on the stock market or, you know, what others might do, et cetera. Take a deep breath, pause and say, okay, I'm going to conquer this. What do I need to do? And then that leads us to the practical and the tactical, some of the strategies around financially getting your arms around your debts.

So step one for a lot of people is to actually tally up what they owe. Some people have no idea how much they owe. They just know, I signed because I wanted to be in school. And so you need to understand, you need to first go to the Department of Education, check out their website. It basically lets you log into their system and they'll show you at the federal level, every student loan that you borrowed and they'll show you the status of it. Is it in deferment or forbearance, anything past due, you know?

For any private student loans you want to reach out to your loan servicing agent. Again, find out what the tally is and what the total is. You're going to write it all down. You're going to type it, put it on your spreadsheet. Use your software program, budgeting software tool, et cetera of your choice.

But you're going to just know what the numbers are in black and white. No guesstimating, right? Then after that, you're going to see what your payment plan options are.

What are your repayment plan options? At the federal level, there's a variety, but they kind of all fit into one of kind of four buckets.There's the standard loan repayment program, which is the one that they really steer most people or everybody into, unless you change it. And that's to let you pay off your student loans in 10 years. In addition to that, there's the graduated loan repayment program. There's an extended loan repayment program. Again, those stretch them out over time—20 years, 25 years, some could potentially be 30 years. And I know people hate to hear that because they're like, I don't want to be paying anything for, you know, 20 or 30 years.

But if you want to have smaller loan payments in the short run, get a little relief for yourself financially, maybe because your income is lower right now, et cetera, you can choose to have one of those payment plans where you extend your payments over time.

Tradeoff there is to know that, yes, you're going to be paying more in interest over time, but your monthly payments in the short run will be smaller. And so that might feel a little better for people in terms of cash flow. The fourth sort of rough category is around income based or income contingent loan repayment options.Again, these are all based on your federal student loan options. You want to reach out to your lender again on the private student loan side.

Those tend to be a little more rigorous, which is why you want to know what you're signing up for in the beginning.So from a strategic and kind of a tactical standpoint, you're going to figure out what you owe.

You're going to see your loan options. And then you're going to assess, like, what plan makes sense for you. Right. And if you really know, like, okay, well, it's just that I'm new in my career and I do have a job, but, um, you know, I don't get paid a ton of money and I have a lot of other bills because I'm in some new city or I'm just starting out.

Then one of those loan repayment programs that's tied to your income actually might make sense because you get to kind of scale it over time as your income rises so do your monthly payments.And so that's good for a lot of people, but again, you're going to assess and see what kind of makes the most amount of sense for you.

I think you want to really start looking at your budget and your overall kind of spending plan of action in a holistic way, right? You want to think about like, what am I just on the regular, spending my money on. I tell people think about windfalls again as another strategy. What's a windfall? It's any sort of unexpected or lump sum of money outside of your normal paycheck.

So if you get a government stimulus check, if you get a tax refund check, if you get a bonus on the job, um, even if you get a raise and you want to direct that towards your student loans, all of those things using that extra quote unquote, you know, extra money to pay down college debt is a good thing, and you'll be really super glad that you did.

Stefanie O'Connell Rodriguez: Now I know when we're talking about maybe a more aggressive repayment strategy or even just trying to keep up with student loan payments in general. There's also trying to balance it against saving for the future, both saving for retirement, and saving for life—the life we want to live and the milestones we want to achieve. And I'm wondering how you suggest people balance those two things.

Lynnette Khalfani-Cox: Well, I am often asked which one should I do first? Like, should I pay off my debt? Whether that's student loan debt or credit card debt, or should I save first? the answer is you really have to do both and the two are not mutually exclusive.

So it behooves you to go ahead and pay down debt incrementally if that's the most feasible way for you to do that. But at the same time, those who don't save at all, they miss out on two things. One is that they don't develop the muscles or the skill sets that you develop just by getting into the habits of saving. And so I like to see people sort of use that savings muscle and get used to saving.

Increase it over time when it's possible and know that you're making progress in a really great way, just by getting into the act of saving, into the habit of it.

So the savings component is crucial because you do want to be able to have resources or assets to be able to deal with emergencies and unexpected events. You want that savings to be able to grow for you over time, and you want to chip away at the debt, even that student loan debt, so that it doesn't compound over time in terms of, in terms of interest and accruing, the balance is getting larger and larger.

And I'll tell you what else, Stefanie, certainly for people of color like myself, I'm African-American. It's really crucial that we manage our student loan obligations in a really smart and strategic way, because we know that from an economic standpoint African-Americans in general have lower incomes compared to our white counterparts.

Twenty years after the average African-American graduates from college, they still owe 95% of their college debt, versus white Americans who went to college, they typically owe about 6% of their student loans, 20 years later.

So I just point out that disparity because frankly, most people do not think that they will have the student loan debt or carry it for as long as they actually do.

Stefanie O'Connell Rodriguez: And one of the things that came up in my conversation with Elaine is she does want to buy land and build a house, which is a wealth building asset, but there's this feeling that she can't really make progress toward that goal until the loans are paid off.

And it feels in her words that her life is kind of on hold until she becomes debt-free. And to your point about the extended timeline that people have student loans for, especially people of color, women that's just not realistic. So how do we balance living our lives with this student loan debt burden?

Lynnette Khalfani-Cox: I really would encourage people like her and your other listeners to understand that for the vast, vast, vast majority of the population, it's not going to be possible to do it like sequentially, right. If you only wait until you do one goal and a hundred percent conquer that goal, then you go to the next thing and then the next, you'll push your timeline out so far for reaching so many other goals that it probably won't be as much satisfaction utility or, just sort of happiness in terms of having achieved the goals.

So again, I encourage people to kind of reframe and to think about how they can do things in a way, the way that is positive, possible, and practical for them simultaneously. So, what can they leverage in terms of what they're doing right now? How can they make their dollars count for them right now?

If you have not yet signed up for your employer's retirement savings program on the job, 401k, 403B, 457, you know, depending on the type of work that you do and your employer is offering a match of some kind, you're not leveraging your savings dollars to their maximum potential. And that's just one little shift that you can do.

Stefanie O'Connell Rodriguez: Yeah, well, it's also kind of illustrating the point about if we're only focusing on our debt, all of our financial efforts are backward focusing instead of with savings. Part of it is just like an emotional cue to move toward the future, to move toward our excitement, to move toward our values and our goals. This thing that came up for Elaine is that she's actually made a lot of progress on paying down her debt. And it's been really incredible. She had a hundred thousand dollars in loans and she can see the light at the end of the tunnel a few years out.

But what she describes now is this constant anxiety around having enough for the future. So how do we start to move forward and let those feelings of anxiety go?

Lynnette Khalfani-Cox: Well, I think Elaine has done amazing To pay off $60,000 worth of student loan debt, that is awesome. Um, is she at zero yet? No, but she's made tremendous progress and I really would applaud her. And maybe sometimes it's just hearing and knowing and understanding either from a financial expert or from others that what she's accomplished thus far at the age of 29 is really quite impressive. I mean I took forever to pay off my student loans and I had considerably less—I had $40,000 versus her $100,000.

I share about my own past that I went through a divorce, and that I had to pay my ex alimony and child support. And so, because I happen to be a positive, optimistic, glass half full kind of person I frame it in the context of overcoming and going past obstacles and things of that nature.

And so I do tell people the point of awareness is really crucial upfront to recognize. Like Elaine, girl, you're kicking butt.

Stefanie O'Connell Rodriguez: Whether you're at the start of your debt repayment journey and just trying to figure out how to get started, or like Elaine, managing the anxiety of the precarious balance between saving for the future while working to pay down your past debt, it's critical to remember these truths—You are not your debt. Your net worth does not dictate your self worth. Where you stand today is not permanent and it does not control where you can go in the future. And you are most certainly not alone.

While debt does not have to be forever, it's hard to make a plan to pay off your debt until you know exactly how much of it you owe. So if you haven't already, take stock of exactly what you owe, to whom, your minimum monthly payments and your interest rate for each of your debts. Once you have all of that information, you can better consider all of your repayment plan options.

Putting together a concrete, step-by-step plan for your debt repayment based on things you can control and what plan works best for you, can help you live your life empowered and excited about your future, instead of feeling trapped by your past debt.

Remember, that the process of debt repayment and saving for the future, or the things you want to do in the present, or even just your own happiness and peace of mind, do not need to be mutually exclusive. While debt can undoubtedly be an emotional and a financial burden, we can acknowledge and celebrate every step of progress we make, and learn to take full satisfaction in the lives we're building alongside our debt repayment journey, knowing that our lives today are just as valuable and worthy as life after debt freedom.

This has been Money Confidential from Real Simple. If, like Elaine, you have a money secret you've been struggling to share, you can send me an email at money dot confidential at real simple dot com. You can also leave us a voicemail at (929) 352-4106.

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