Three Tips To Tackling Your Student Loan Debt Now
September 2020 ISSUE By Wesley W. Lyon, II September 1, 2020Personal Finances Debt Management
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With student loan debt levels reaching record highs and interest rates reaching record lows, now’s the best time to pay off your debt faster. Below we discuss three tips on how to handle a refinance and balance federal student loan forbearance, low interest rates, and potential student loan forgiveness.
- Take advantage of federal student loan relief! As discussed earlier, President Trump extended student loan relief through December 31, 2020. This means no payments are due nor does any interest accrue until 2021. The combination of no interest, no payments, and an upcoming election mean you should wait to refinance to ensure you don’t miss out on any further relief.
For private student loan holders, many loan providers are offering a penalty free temporary forbearance. If you are struggling to make payments, reach out to your loan servicing company now to see if you qualify.
- Refinance private loans now; federal loans in 2021. Take advantage of variable rates tumbling to under 2.0% and fixed rates below 3.0% by refinancing your student loans. High income earners who want to pay down their student loans rapidly should consider variable interest rates, which are lower up front but may increase over time. Since the rate is lowest at the beginning when the balance is the highest, the total interest costs will usually be lower over the life of the loan.
For lower income earners with tight cash flow, consider refinancing over a longer term, such as 10 or 15 years, at a fixed rate. Since interest rates are at all time lows, locking in a low rate now for the entire life of the loan will keep your total interest costs to a minimum. Bonus tip: maximize your tax-deductible savings first when building your budget since the government charges more for your money than the bank.
- Buy a practice! The fastest way to eliminate your student loan debt is to increase your earnings. COVID-19 has prompted more dentists to sell, increasing the supply of available practices. Take advantage of this opportunity by purchasing a practice and increasing your cash flow immediately. This will allow you to both pay down your student loans faster, and have the flexibility to set up your own retirement plan and run tax deductible “doctor perks” through your practice. You’ll also be building equity in your own business, which is icing on the cake!
For more information on tax and business planning services to help you achieve financial independence as soon as possible, call 877.306.9780.
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