The Smart Student's Guide to Repaying School Loans

You already know that skyrocketing UC Davis reg fees and other costs, like a Davis apartment, have made school loans an almost ubiquitous part of a college education. But did you know that how you pay these loans back can impact the rest of your life?

HuffPo recently offered some smart advice on when and how to acquit school loans:

Just because extended repayment programs exist, that does not mean it is best for you to enroll in them.

What is the wrong situation? Well if you are struggling to make your regular student loan payments because you have other financial obligations in the way, reducing those obligations might just be the more reasonable and more logical thing to do, even though to do so might be emotionally hard to face.

By delaying or postponing the rapid elimination of your student loan debt quickly you can easily waste early years that are critical to saving for retirement. Years you can never get back.

In this day and age with there being significant doubt if public programs like Social Security will be able to adequately assist you when you are old and unable to work, your retirement needs to be a primary consideration in dealing with your debt.

Here is an example. Let’s say you graduate from college at 22 with student loan payments of $400 a month. It takes you ten years to payoff your student loans.

Based on a stock market indexed mutual fund return of 12 percent, you would be 32 when you could apply your full $400 former student loan payment to your savings/retirement. Assuming you will retire at age 70, you would have $3,697,717 saved.

If you did not deal with your underlying debt and instead enrolled in an extended repayment program you would be pushing out your ability to save for up to 25 years. In that case your retirement savings would only be $583,389.

Wow! Who doesn’t want to retire with an extra $3.6 million? For more great information, please visit the link above.