Thinking About Student Loans? Be Strategic — Consult a Professional

As young college graduates start their careers, many find themselves struggling with heavy student debt loads. Those burdens may be leading young workers to delay key life decisions like investing for a secure retirement, buying a home, starting a family or launching a business.

We’ve previously covered this troubling dynamic, which could have a negative effect on long-term economic growth. Which leads to the question: what steps can students and families take now to ensure student loan debt doesn’t weigh down your future opportunities?

Here’s one strategy to consider: Get professional help. Working with a financial professional who specializes in student loan consulting can help you start off on the right foot, or help you get back on track.

How student loan financial planning can help

A recent article in Financial Planning magazine notes that as student loan burdens grow, more financial professionals are offering student loan consulting services to help young people and their families better understand how student loans work, and how to get the best terms.

Advisors, who apply debt-management and cash-flow projections to the repayment of the myriad of loans students and their families carry, can save those people tens of thousands of dollars…

…[Planners] can offer their clients perspective and strategies in evaluating repayment options. Do those clients expect to see their incomes rise and enable them to repay their loans more quickly? Will they qualify for federal loan forgiveness if they’re in a public-service profession like teaching or health care? How can they take advantage of federal income-based repayment options? These are questions a professional can answer.

The key factor here is learning how to think about student loan debt strategically. There’s a serious need for these services, given the alarming evidence that many borrowers don’t understand how their loans work or how a heavy debt burden can affect their future opportunities. Surveys show that many student loan debtors don’t understand basic facts about the mechanisms of debt, like the length of their loans or the interest rates they pay.

Working with a professional isn’t just a way to get the best terms on a loan. Expert guidance can also help you take advantage of overlooked scholarships and other forms of financial aid — key factors that can reduce the overall amount of debt you take on while pursuing your education.

And if you already have accumulated student loan debt, professional advice can still help. In some cases, a debtor may benefit from refinancing or consolidating multiple loans, on more favorable terms. A professional financial advisor can also show you where to look for loan forgiveness opportunities that might be available.

A visit with a financial professional to talk about your student loan debt may cost you a few hundred dollars. But that could be a small price to pay if it saves you thousands — or tens of thousands — in the long run. That’s an impressive return on investment.

Watch out for student loan scams

At the same time, take care when seeking advice. There’s no shortage of unscrupulous scammers (particularly online) promising to help you with student debt, in exchange for hefty fees, who then fail to deliver. Don’t let anyone exploit your anxiety or unfamiliarity with how student loans work. What you’re looking for is not an easy fix, but an informed, professional financial advisor who can help you think strategically about the role of debt in financing your education.

An opportunity for financial professionals

Financial professionals who may be seeking to broaden their practices should also take heed of this trend. There’s a large and growing market for credible, professional advice on how to handle student loan debt. If you have clients you’re advising on financial matters and you’re not focused on helping them plan for their kids’ college costs, it might pay off to learn more about the student loan market and introduce this topic so you can help them make smart choices.

The reality is that, like buying a home or an automobile, financing a college education is one of the most significant expenses many people will have in their lives. And in most cases, it will be worth the cost, since a college degree opens up more career paths and earnings opportunities. But remember to treat it like you would any other investment, and make sure you’re making the right decisions to get the right return.

*Project Invested does not give tax, legal or investment advice and readers should consult a professional adviser if they have questions.