Save Millions (OK, Thousands) on Your Student Loans. Here's How.

January 25, 2017

Here’s a not-so-fun fact: if you went to college in the last decade or so, you’re statistically likely to be buried under a mountain of student loans. In fact, the data shows the student loan debt burden for the average Coloradan to be over $25,000. We’d say “yikes,” but frankly, we’re a little surprised it’s not higher than that. Plus, as anyone who’s been in the job market can tell you, a bachelor’s degree continues to replace a high school diploma as one of the basic qualifications for entry-level jobs. With millennial wages lower than those earned by previous generations at this stage in their careers, the situation seems pretty…well, depressing.

So it sounds like the jig is up; millennials should just pack up and, if they haven’t already, move back in with their parents. Forget about ever buying a house! Retirement?! Ha, that’s a funny idea.

Okay, let’s pump the brakes here. Is the situation really that dire? Not necessarily. Although about half of adults with student loan debt say they’re delaying retirement in order to pay their loans back and still make ends meet, all is not lost—yet.

First of all, if you’re a PERA member, you may qualify for your loans to be straight-up forgiven (say what?). The Public Service Loan Forgiveness (PSLF) program allows qualifying government and not-for-profit employees to have the balance of their loans forgiven after 120 qualifying payments. Just in case you weren’t a math major, that’s 10 years.

If you’re signing up for PSLF, you may want to consider the U.S. Department of Education’s income-driven repayment plans. Smart cookies (like you, naturally) who combine these two programs can save a whole lot of cash. It works something like this: a borrower elects the payment plan with the lowest monthly payment (and a repayment term of 25 years), and then  has the remaining balance forgiven after 120 qualifying payments—ultimately, that means he or she is  foregoing payments on over half of the loan balance. In the case of the average Colorado borrower cited earlier, that would be a savings of about $12,500! An added bonus: the forgiven loan balance is not considered taxable income under the Internal Revenue Code (unlike other types of loan forgiveness programs).

Cha-ching.

But hold up for a second. Before you do anything, make sure you go to StudentAid.gov and read the fine print. You don’t want to plan on having those loans forgiven, and then wind up owing more than you expected.

And in the meantime? Remember that saving for retirement and repaying student loans are not mutually exclusive. Sure, you may have to skip the expensive beers (and, upside, hangover) or Uber ride to Red Rocks this summer, but you really don’t want to wait to start saving for retirement until your loans are paid off. That’s because time is way, way more valuable than money.