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How to Minimize the Impact Student Loans Have on Your Future

Student loans can have a major impact on your post-graduate career. Arm yourself with these tips to minimize the effects and maximize your future goals.

If you're in college, you've likely taken out student loans to pay for at least some of your educational costs. Taking on student loan debt can be a worthwhile investment in your education and future—according to the College Board, the median annual salary for those with a bachelor's degree is $29,000 more than the median salary of high school graduates. However, your debt can also be severely limiting to your future career goals if you end up struggling to afford your payments. Let’s take a look at how debt can affect your post-graduate life and ways you can minimize its impact.

Debt and where you work

If you have a substantial amount of debt, you won't have the luxury of choosing a job you're passionate about without thinking about the pay. You must make sure you can earn a large enough salary to cover your payments. Instead of simply pursuing a role that interests you, you may have to settle for a position that pays well, even if you find the work tiring or tedious.

Conversely, suppose you have federal loans and intend to apply for Public Service Loan Forgiveness (PSLF). In that case, you must work full-time for a qualifying nonprofit organization or government agency for at least 10 years to qualify. If you leave and work for a for-profit corporation, you’ll lose your eligibility for PSLF, so your career choices will be more limited until your debt is paid off.

Related: 5 Secrets to Landing Your Dream Job After College

Debt and where you live

Some states have programs that help repay student loans in exchange for living and working in certain cities, areas, or fields. For example, the Arizona Veterinary Loan Assistance program provides up to $100,000 in loan repayment benefits to veterinarians who work in the state in a qualifying facility for at least four years. In New Jersey, professionals who work in science and engineering fields may be eligible for the New Jersey STEM Loan Redemption program, which provides eligible loan borrowers up to $2,000 per year (for up to four years) to help them repay their loans. If you move out of state before fulfilling the program's requirements, you'll lose access to repayment benefits and may even have to repay the state for the benefits you already received. To take advantage of these types of programs, you may have to stay in your current location until you've satisfied a program's service commitment, so be sure to inquire about any requirements before applying.

Debt and starting a business

If you dream of starting your own business, you'll need cash to get your idea off the ground. For graduates with student loan debt, finding the money to do so can be challenging. Researchers from the Federal Reserve Bank of Philadelphia found that increased student loan debt negatively affects the formation of new small businesses­­­­—because starting a business often means taking on more debt. Your balance may cause you to put off your entrepreneurship dreams until your debt is repaid in full.

Debt and switching jobs

If your employer is one of the few that offers student loan repayment benefits—the Society for Human Resource Management reports that just 8% of employers do—leaving your job can be a difficult choice. ­­­­­­­­­­­­Not only will you lose your employer's contributions, but if they require you to work for a certain amount of time after enrolling in the program, you may also have to return a portion of the money you received, just like the location-based assistance programs. As a result, you may end up feeling stuck in your current role. 

Related: The Importance of Career Prep: How to Plan for Your Dream Job

How to minimize the impact of debt on your future career

As you can see, student loan debt can be a heavy burden with long-lasting effects on your life and career. To minimize the impact of your debt on the trajectory of your goals, you have a few different options.

Limit how much you borrow

If you’re not in college yet, you have a good amount of control over how much debt you take on because you have the option to attend a cheaper school to save money. If you’re in college already, you have at least some control over your debt by reducing your expenses and applying for more scholarships, grants, and other financial aid programs that don’t require repayment. A good rule of thumb that can help you is to borrow no more than you expect to earn in one year of working full-time after graduation. For example, if the median wage for elementary school teachers is $61,690 in your area, you should limit your total student loan debt to $61,000 or less.

Explore repayment plans

If you're unable to afford your federal student loan payments, find out if you're eligible for an income-driven repayment (IDR) plan. These plans recalculate your payment amounts based on your discretionary income, so you may qualify for a much lower monthly payment based on the job you took or want to take. If you stick with the new payment plan and have a balance at the end of your repayment term, the remaining balance is discharged and eliminated.

Explore refinancing options

If you have high-interest student loans, including private loan debt, refinancing may allow you to qualify for a loan with a lower rate and save money in the long run. Refinancing isn't always a good idea for everyone—federal loan borrowers will lose benefits and protections connected to their loans—but if you have loans with double-digit interest rates, it could be an effective way to make your debt more manageable.

Start a side hustle

To make ends meet, your full-time job alone may not be enough. In a recent study from Handshake, 40% of college seniors plan to pursue freelance work after graduation, with one-third saying they'd do it on top of working a full-time job. It’s important to note that working an extra job during the evenings or weekends can help you repay your loans faster, but it can also be stressful, and it may limit your ability to network with your full-time coworkers and impact your ability to grow in your field.

Related: Starting a Side Hustle: How Students Can Turn Their Passion Into Profit

Student loans are tough to navigate because of how much they impact your life from the moment you take them on until the day they’re finally paid off. Arm yourself with knowledge about how your loans work and find the best methods to manage your debt. A final important reminder: You don’t have to be out of college to start your student loan payments. If you have a job while you’re in school, consider making small payments on your loans each month—you’ll be surprised how far it goes toward your debt-free future.

Many organizations specifically offer scholarships to help young professionals pay off their debt sooner! Use our Scholarship Search tool to help expedite your loan repayment timeline.

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