Many Connecticut residents emerge from college with a hefty student loan burden to accompany their shiny new degree. When financial chaos strikes, student loan debt can place enormous pressure on already strained finances. Many people know that they need to create a debt management plan, but are unsure where to begin. Prioritizing student loans in relation to other types of debt is a great place to start.
In some cases, it makes sense to pay down student loan debt before attacking other outstanding obligations. An example is for those who hold student loans with excessively high interest rates. Student loans that have a relatively low balance are also good candidates for early repayment. Another group who should consider focusing on student loan debt first are those who are considering seeking personal bankruptcy protection. Bankruptcy will not eliminate student loan debt, but could lead to the discharge of many types of unsecured debt.
In other cases, paying down credit card debt first makes the most sense. Individuals who are interested in securing flexible or non-standard repayment terms on their student loans may want to focus on paying off credit card debt first. Individuals who qualify or plan to qualify for the Public Service Loan Forgiveness program may also want to direct their money elsewhere in the short term. It is also important to understand the tax benefits that come with student loan interest payments before making a decision on which debts to pay first.
This information may be helpful to those in Connecticut who are searching for a debt management plan of attack. Understanding how to prioritize student loans, credit card debt and other financial obligations can help make it easier to structure a solid plan. In many cases, the order in which debts are repaid can have a great deal of influence over the final outcome.
Source: Forbes, "Student Loans Vs. Other Debt: Find Your Most Powerful Debt Payoff Strategy", Andrew Josuweit, Aug. 27, 2017