When should borrowers ask for help if they are struggling with student loan debt? To find out more about the key moments in a student loan lifecycle when borrowers should seek professional help, GOBankingRates spoke to Chris J. Gaddis, MBA, managing partner at Shokunin Financial. We also spoke with Erik Kroll, certified financial planner and owner of Student Loans Over 50, and Jake Cousineau, author of “How to Adult: Personal Finance for the Real World,” about tell-tale signs it’s time to speak to a professional about student loan debt.
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Before Applying to Colleges
Gaddis said that there’s an argument to be made for speaking to a financial advisor about student loans before applying to colleges.
“Many students do not take into account the long-term impact of the school they choose and the debt they take on,” Gaddis said.
Speaking with a financial advisor before applying to colleges may allow students to better strategize on their education options. Gaddis uses the example that some students may consider attending state schools and then transferring to a private university after two years. This can help reduce overall student debt by thousands of dollars.
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Before Accepting a Financial Aid Package
If a student has decided they want to apply for college enrollment, be mindful that you may receive a refund with your financial aid package. A federal student aid refund is a FAFSA refund check that may be issued to students who receive federal loans if the entire loan extends more than the cost of tuition, fees and room and board.
“Many times students are given refunds with their aid package and end up taking on thousands in extra debt they spend on beer and food,” Gaddis said.
FAFSA recommends spending the money issued from a FAFSA refund check responsibly. If you’re not sure what to do with a refund check, speak to a financial advisor about how to spend the money wisely.
After Graduation and Before Repayments Begin
The two biggest factors that impact student loan debt for postgraduates are their choice of profession and repayment plan.
Both determine how long and how much of the student loan debt borrowers will be able to repay. Student loan debt is also not eligible for bankruptcy, meaning that loans can impact borrowers throughout their key retirement earning and saving years.
“A financial advisor can help develop a repayment plan and put this into action,” Gaddis said.
If the Debt Is Near or Above 1x the Borrower’s Income
If the student loan debt is near or above 1x the borrower’s income, Kroll said this is a good time to speak to a professional.
“A student loan professional can really help with forgiveness strategy and with income-driven repayment plans,” Kroll said. “If a borrower is looking at those issues, then a financial advisor can really help optimize their loan strategy.”
If the Borrower Is Overwhelmed by Loans
Feeling overwhelmed by student loan debt is a common feeling for many student loan borrowers. Often, Cousineau said that these feelings stem from three places:
- An income that makes it difficult to pay off student loans
- Poor discipline and budgeting skills
- A tenuous grasp of their loans and general personal finance
The good news is that despite feeling overwhelmed, almost all student loan borrowers can tackle their loans if they take the time to understand them.
Cousineau said that before seeking professional help, student loan borrowers should understand the ins and outs of their loans. This covers the following areas:
- Terms of the loan, including principal, annual percentage rate (APR) and amortization
- How much the borrower will have to pay each month to eliminate debt in a reasonable amount of time
- What the borrower’s options look like for repayment
What if you understand your loans, but still feel overwhelmed or struggle to make payments?
“If you understand your loans, have a responsible budget and still are not on track to ever pay off your student loans, it is probably time to speak to a professional,” Cousineau said.
Conduct Due Diligence in Finding an Advisor
Do not work with anyone who charges specifically for help with your student loans, especially on an ongoing basis or if they say they will make payments on your behalf. Remember not to give anyone access to your login credentials either.
“You shouldn’t let any advisor or company take your login credentials. It’s too easy for them to change the credentials on you and make it really hard for you to change things back,” Kroll said. “Any company that puts you into forbearance or claims to make the payments for you are also red flags.”
If you are looking for a financial advisor to assist you with your student loan debt, remember to conduct your due diligence. Kroll said the person you speak to must have specialized knowledge of student loans. Some borrowers may choose to work alongside a certified student loan professional (CSLP) or another financial advisor with a strong student loan background.
Borrowers may also continue to educate themselves about their student loan debt, even when working with an advisor. Free tools and resources that can help you out on your repayment journey are available through the Federal Student Aid website, an office of the U.S. Department of Education.
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