5 Ways Your Student Loans Are Hurting You and How to Tackle Them

Young man fretting over student loan bills
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Your student loans can have a negative impact on your future. The amount that you owe can make it difficult to move forward and to start planning for a financial future. According to , college students are graduating with an average of $28,956 in student loans. This number may be even higher if you attended a private college or if you did not qualify for other forms of financial aid while you are in school. It can be crippling to have too much student loan debt, especially since many entry-level jobs do not pay very much money.

Here are five ways that your student loans may be hurting you and what you can do to manage your student loans.

Debt to Income Ratio 

Your student loans can affect your debt to income ratio. This is the ratio that determines how much your income is taken up by debt payments. Lenders will look at this to determine if you qualify for a car loan or for a mortgage. If your ratio is too high you may not be able to qualify for a loan. Another possibility is that you may qualify for loans but at a much higher interest rate.

Reducing Your Ability to Take Risks

If you know that you have set monthly payments to make, you may not be in a position to take the risks that you need to in your twenties. You may end up choosing the more stable company instead of the startup with the bigger growth opportunities because you want the stability to help you cover your payments. It can be difficult to take a year off to travel when you still need to make payments every month. When you have a student loan hanging above your head, you may pass up on a lot of opportunities that can help you out.

Makes It Harder to Buy a Home

Many recent college graduates are putting off buying a home because they do not want to take on the additional commitment with student loans hanging over their heads. It can be more difficult to save up a down payment to put on the home, which affects how much you can afford to spend on a home. Additionally, with higher debt to income ratios, it can be difficult to qualify for a mortgage.

Taking Away the Amount You Can Save for Retirement

One of the biggest ways student loans can affect you is by how much it can limit you from saving for retirement. If you can barely cover your student loan payments, then you may have a hard time contributing a lot to retirement. However, if you put more money in retirement accounts as soon as you start working, you will find that your savings begin to build faster as the interest you earn begins to add more each month than your contributions.

Get Control of Your Student Loans

  1. Start by creating a budget that will help you prioritize your spending so that you can pay off your loans more quickly. A budget and a debt payment plan can help you focus your money and make it easier to move forward. The sooner you get out of debt, the more quickly you can begin to work on your other life goals.A budget can help you identify areas where you can cut back. It is easier to cut back on expenses when you first graduate from college and you are used to being poor. 
  2. Work to find extra money to put toward your debt each month. This may mean taking on a second job so that you can pay the loans more quickly. It may also mean cutting back on the things you do not need like a gym membership or vacations. Another way you can find money is to put your bonuses and tax refunds toward your student loans, which can speed up how long it takes to pay them off. 
  1. Find programs that can help you manage your payments. If you find yourself in a difficult situation, you may want to look into income-based payments or consider working in a program that offers help with your student loans. If you can tighten up on spending for a few years, you may be surprised at how quickly you can pay off the debt.