Word to the Wise

Destroy student loans with Naomi Boyd



Destroy Student Loans with Naomi Boyd

College is the best years of your life. It’s where you’ll take the first step to making your dream career a reality.

After graduation, you begin climbing the ladder of success until three daunting words start tugging at your leg: student loan debt.

In 2019, according to Student Loan Hero, Americans were burdened by student loan debt more than ever before, at $1.56 trillion. 

That’s alarming, but you don’t have to carry that burden. Instead, think about your individual goal – what are you taking loans out for and why – and work backwards. Begin with the end in mind. 

We sat down with our finance chair and the executive director of the Center for Financial Literacy and Education, Naomi Boyd, for tips on how to manage student loan debt from a 30,000-foot view. 

1. Buy a product, not a consumable

“I think, if we can, focus students on trying to move toward taking out a student loan to only pay for tuition, we will make enormous progress in cutting the amount of student loan debt in this country. Your education is something that has a lifetime benefit, and taking out loans to pay for tuition can create longevity in the global marketplace by establishing students as credit-worthy investors when they are very young. We should discourage students using student loans, especially private loans, to pay for living expenses, which are consumables and do not have any lasting impact. Ten years post-graduation you’re going to be more upset that you’re still paying for where you lived rather than your education. The economic life of an education is infinite.” 

2. Explore all of your options

“If you’re thinking about grad school, again, it’s not a consumable – you’re buying a tangible product. Make sure you explore all of your options. For instance, look for GA (graduate assistant) positions. They will pay all of your tuition and give you a stipend.” 

3. Follow the rule of thumb

“Your student loan debt should always be less than your starting salary. If you follow that rule of thumb, you’re probably going to be able to work out a reasonable repayment schedule that will not financially cripple you in the long term. Financial institutions are in the business of making loans. Do not take out the maximum of what they offer to you; instead only take what you need and give back the remaining funds. A lot of students don’t realize that they can give back the excess of their student loans that they do not necessarily need to cover their costs.”

4. Consolidate when you graduate

“There’s no early repayment penalty for student loans, so that’s vastly reducing your overall debt burden and your repayment amount. Students need to consolidate their student loans when they graduate to take advantage of flexible repayment terms, principle repayment and even interest-rate reductions that are offered by educational consolidation firms.”

5. Look at it like a mortgage 

“This way, you’re better able to manage your debt because you can extend your repayment for 30 years – it’s like a mortgage. You can repay it early and have more manageable payments, which when you’re starting off is really important. I’ve seen students really struggle post-graduation, who have really good jobs, because they don’t consolidate. It’s important to know this option is available and that it also helps with the interest rate.” 

6. It’s OK to change your mind 

“It is impossible to decide what you’re going to do for the rest of your life when you’re 20. If you find yourself in a position where your student loan debt is well above what your starting salary is and you’re not loving what you’re doing, or not able to make a living at it, it’s OK to change the course of your path. I mean, I loved being a dancer and I was really good at it, but it wasn’t sustainable physically or financially. I love being a finance professor, too, maybe even more than being a dancer. I think, oftentimes, our students feel like they’re stuck in a certain path, and then think that’s what they have to do. The message for all of our students should be that it’s OK to change your path and adding to your education is never going to be something that you will regret because you’re going to continue learning your entire life.”