The average monthly student loan payment is more than $350. This can be a strain on anyone's budget, but for some, it's unsustainable and things can go downhill—fast.
If this sounds like an all-too-familiar struggle, you may have a student loan emergency on your hands. Here's how to know for sure and what you can do to fix it.
3 Red Flags of a Student Debt Emergency
When your debt has become too much of a burden, you should prioritize paying off your student loan early. If you see any of the warning signs below, it may be time to take action.
1. You're Uncomfortable with Your Balance
Douglas A. Boneparth, the president of Bone Fide Wealth and co-author of The Millennial Money Fix, emphasizes the fact that the numbers themselves, while important, aren't the only part of the equation that matters.
In other words, it's not just the balance you carry, but the way you feel about the balance. Some student loan borrowers, Boneparth continues, deal with high student loan balances but refuse to de-prioritize other goals. For example, even though Boneparth and his wife had six-figure debt, they also wanted to start a family—and that meant buying a home so they could get established in the right community for the next phase of their lives.
If you have a high balance but also other financial priorities, it's okay to stick to your current payment plan so you can manage both. But if your balance makes you uncomfortable and even too scared to think about other priorities, then that's something you should examine inwardly.
No one can tell you if your debt load is too high. It's up to you to decide if you're comfortable with your balance and repayment plan or if you want to accelerate your debt payoff.
2. Your Interest Rates Are in the Double Digits
Sometimes, the problem with student loans lies with the interest rate, not the balance. And if your interest rate is high, then it's time to either get a lower rate or work on paying it off faster.
High interest rates are a game changer because they keep your monthly payments expensive and increase the total cost of your debt. The sooner you can lower your interest rate or pay the debt off, the more you can mitigate the problem.
If you refinance your student loans, you can reduce your interest rate and your monthly payments. In fact, the purpose of refinancing is to achieve a lower interest rate—and you'll get new repayment terms at the same time.
When you choose your new terms, you can opt for lower monthly payments or a shorter repayment plan. So you can either take advantage of the flexibility of lower payments or use the shorter repayment plan as an impetus to get out of debt faster.