I once heard Huffington Post co-founder and editor-in-chief Arianna Huffington speak about debt. She marveled at how stressed out Americans get about debt, and reflected how debt allowed her mother to give her the life and education that got her where she is today.
Most of us don’t share her attitude about debt. Our society tends to make debt a moral question, in many instances, equating a person’s debt level with their character. Many of us experience this judgement in the form of anxiety.
No one is advocating for reckless spending patterns and high unsecured debt levels, but it is important to take note of the emotional and physical toll.
A study by Social Science & Medicine found that high amounts of debt are associated with higher rates of stress and depression.
This is bad news for the millions of Americans carrying over $1 trillion in student loan debt. In fact, a study by Principal Financial Group finds that almost a third of people who take out student loans regret the decision.
Jenny Smith, a Financial Services Representative for The Principal shared these tips, which she says can help parents and students eliminate some of the stress and financial strain around student loan debt:
1. Don’t Make Your Budget Like a Bad Diet: Like a crash diet, being too restrictive with your budget will leave you discouraged, exhausted, and maybe hungry. The key is to be honest with yourself about your spending. Look at your spending history – you might be surprised to see where your money goes. Be sure to set a reasonable budget each month that allows you manage your debt without falling off the wagon.
2. Research All Options: According to The Principal Financial Well-Being Index, 23% of employees are saving for their children’s college education, but of that 23%, just over half are satisfied with their level of saving. Applying for scholarships is an obvious, but sometimes under-utilized approach to keep college costs down. Another opportunity to boost savings is to utilize a cash back rewards credit card and deposit your total rewards in to a 529 or other savings plan. With consistent savings, this could pay for a nice portion of debt.
3. Consider Refinancing: When asked if comfortable with the amount of debt employees have, about 39% are either somewhat uncomfortable or very uncomfortable with their debt level. Some loans have astronomical interest rates that can take a lifetime to pay off. In this situation, you may want to consider refinancing your student loans. By refinancing you may qualify for a lower interest rate and potentially save thousands of dollars and years of loan payments.