College Corner | Managing Student Debt

Managing Student Debt

Student loans can be a heavy burden for those paying them. Often, student debt ends up delaying important financial milestones like buying a home or saving for retirement. The numbers can be intimidating, too; the average balance for federal loans is $38,375. This doesn’t include interest. You calculate the interest amount by taking the outstanding principal balance times the interest rate factor, then multiplying that by the number of days since your last payment. For a $10,000 loan, with a 6.8 percent interest rate, the interest accrued daily would be $1.86. That can add up to hundreds of dollars during periods of deferment, which will ultimately increase your principal balance. Whether you're supporting a student or just wanting a refresher, here is some practical information for staying on top of student debt.^1,2,3

Understand the Full Cost of Borrowing

When taking out a student loan, it’s vital to grasp the full cost over time for different types of loans. For example, unsubsidized and private loans typically do, whereas subsidized federal loans don’t accrue interest while a student is in school. Knowing how interest affects the repayment total can help avoid unexpected costs, so do your research.

Borrow Only What You Need

Sometimes, it's necessary to borrow more funds to cover living expenses. Consider how much of your loan is needed to cover tuition and essential fees, and how much could be used for other costs. If living expenses can be covered in other ways (such as a part-time job), it may make sense not to use loans to cover those. Since payments might kick in after graduation, it’s wise to estimate the monthly payment. Online loan calculators can help you project your debt-to-income ratio and may inform smarter borrowing choices.

Special Considerations for Parents

For parents and guardians helping to finance a child’s education, weighing the risks and benefits of various borrowing options is essential. Federal PLUS Loans, for example, offer access to larger amounts but often come with higher interest rates and limited repayment flexibility. Alternatives like home equity loans or borrowing from retirement savings may seem attractive, but can pose long-term financial consequences. In short, sacrificing your finances for a child’s education may have negative tradeoffs. A financial professional can help you assess whether it's possible to help your student while keeping your other financial priorities in sight.

School is in Session: 5 Essential Student Loan Tips 

1. Understand the loan’s terms.
   Each loan may carry different interest rates and repayment conditions. Review these carefully to prioritize which loans should be paid off first and to help you manage penalties and fees.
   
   
2. Think carefully about consolidation.
   Combining multiple loans into one can simplify payments and help you manage your monthly bills. However, it may extend your repayment timeline and eliminate some borrower benefits, especially with certain federal loans like PLUS.
   
   
3. Use the avalanche approach.
   This approach prioritizes paying off the highest-interest loans first, which might save you money. Consider allocating extra payments toward these loans while making minimum payments on the others.
   
   
4. Reduce principal whenever possible.
   Making additional payments toward your loan principal—even small ones—can reduce interest costs and potentially speed up your payoff timeline.
   
   
5. Set up automatic payments.
   Some lenders offer interest rate discounts for setting up automatic payments. Autopay also helps the borrower stay on track with on-time payments, which avoids late fees.
   
   
6. Don’t spend it all right away.
   Commit to living a frugal lifestyle even after you get your first job out of college. Having income and starting to live more extravagantly can be tempting, but doing so may delay financial freedom. 

The Bottom Line

Managing student loan debt requires diligence, attention, and a clear understanding of your options. From choosing a repayment approach to making smart borrowing decisions, staying informed and involved can help you keep your financial goals in sight. If you’d like to discuss the loan management strategies that might work for your situation, please reach out anytime. 

🗓️ SAT Registration Deadlines ⁴

• November 21, 2025 (for the December 6, 2025 test)
• February 27, 2026 (for the March 14, 2026 test)
• April 17, 2026 (for the May 2, May 2, 2026 test)

🗓️ ACT Registration Deadlines⁵

• November 7, 2025 (for the December 13, 2025 test)
• January 7, 2026 (for the February 14, 2026 test)                            
• March 6, 2026 (for the April 11, 2026 test) 

🗓️ The 2025–26 Free Application for Federal Student Aid (FAFSA®) form is available for submission from July 1, 2025, to June 30, 2026. However, individual states and schools can have their own FAFSA deadlines. Check those deadlines by contacting your chosen institution's Office of Financial Aid.

🗓️ College fairs and visits can be a wonderful resource when deciding on a school. Many institutions offer guided tours or informational fairs for future students. For the most up-to-date information, bookmark www.nacacattend.org and check it regularly.

🗓️ Early decision deadlines vary slightly from school to school, but most fall on November 1 or November 15. Always check the deadlines of your top schools before applying.

🗓️ Other deadlines differ depending on the institution of your choice. Bookmark the most recent deadline page offered on their website, and make sure to check it often.

^{1. EducationData.org, March 16, 2025.}

^{2. StudentAid.gov, June 17, 2025.}

^{3. StudentAid.gov, June 17, 2025.}

^{4. PrincetonReview.com, June 2, 2025.}

^{5. Act.org, June 2, 2025.}