Out of 327 million people in the United States, 45 million of them carry student loan debt, totaling around $1.56 trillion in outstanding loans. The average undergraduate in 2018 owes about $29,800. Considering those statistics, it’s not uncommon for a married couple to both have student loans. If one spouse continued through grad school, this “average” couple could be late 20s or early 30s and owe a combined student loan debt of nearly $100,000 at a time when they are early in their careers, growing their family, and trying to buy a home. Loan payments alone could be over $1,100 each month!

If you or someone you know is in a similar situation, trying to make money stretch for short-term goals, like buying a home, and long-term goals, like retirement, cash flow should be the most important factor. Ideally, you want to make your student loan payments as affordable as possible without sacrificing other savings, like contributing to your 401(k).

The standard federal student loan repayment plan is generally 120 payments or 10 years. This will likely result in the highest payment option; however, you’ll pay the least amount in interest over the life of the loan. But remember, the goal is to make your payments affordable without sacrificing other financial goals, so you may want to consider changing the terms of your loan. Graduated repayment plans are also 10-year terms, but the initial payments are generally lower. Your payments will increase every two years. The extended repayment plan can increase your terms to 300 payments over 25 years. The extended repayment also has two options, fixed payments for the entire term, or graduated payments that increases every two years. Extending your payments over 25 years results in paying much more interest over the life of the loan.

If you have multiple federal student loans, you may consider combining your loans with a Direct Consolidation loan through the U.S. Department of Education. Private student loans cannot be included in a Direct Consolidation loan, nor can spouses consolidate their loans together. Generally, the interest rate on a consolidation loan is a weighted average of the interest on the loans being consolidated. You’ll pay about the same amount of interest over the life of the consolidated loan.

Once you combine your loans, you may want to consider the multiple income-driven repayment plans available. Ideally, these plans mirror the growth in your income with monthly payment being 10% to 15% of your discretionary income. The length of the repayment period generally fluctuates with how much you owe and may result in a lower initial payment and less interest over time.

Each student loan consolidation is unique because your loans, your spouse’s loans, your family size, and your income are all factored into the payment terms. Online calculators at studentaid.ed.gov or finaid.org can help you estimate your payment options before you apply.

Overall, student loan debt isn’t necessarily bad because it isn’t revolving debt, like a credit card. However, you don’t want it to be burdensome. At the end of the day, you need to make sure you have the cash flow to make the payments and still invest in your future. Generally, if you’re making more on your investment than you’re paying in interest, it is okay to carry that debt as long as you are making payments on the loan. Your own retirement, family, and lifestyle are important variables in your cash flow equation.

William G. Lako, Jr., CFP®, is an Executive in Residence at Kennesaw State University’s Coles College of Business and a principal at Henssler Financial and a co-host on Atlanta's longest running, most respected financial talk radio show "Money Talks" airing Saturdays at 10 a.m. on AM 920 The Answer. Mr. Lako is a CERTIFIED FINANCIAL PLANNER™ professional.

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