Trouble with Student Debt? Your Banker Can Help

Going to college or vocational school can cost a lot of money, and many of us use student loans to defray some of those tuition payments, book costs, housing and athletic fees. It’s not unusual to graduate with a diploma or certification and a debt load of $40,000, or even more if you graduate from a high-priced institution of higher learning. For the class that graduated from U.S. colleges in 2016, the average debt for higher education ranged from $20,000 to $36,350. In Nevada, the same study showed that 52 percent of 2016 graduates had student loan debt, with the average debt burden of $24,128.¹

Borrowing for an education can be a smart choice because college and higher education grads usually earn more over their careers and have a smaller unemployment rate.² However, when you’re just starting your career, those student loans may limit your options on everything from where you live to where you work – and for how long you work.

Restructuring that debt load can deliver several possible benefits:

• lower interest rates
• shorter pay-off timeframe
• more financial freedom
• more lifestyle freedom

So, if you’re still carrying student loan debt years after you wore your mortarboard, talk to your local banker about your student debt and what you can do about it.  Here are some possibilities:

Consolidate loans from a variety of sources. You may have loans from traditional lenders like banks, from your alma mater, from the government, and even from relatives – all of which have to be paid back. Some of these loans may have low interest rates, and others high interest rates. If you charged your last semester’s books on a credit card, you could be paying 17% on The History of Frogs or some other textbook, years after you forgot everything you ever knew about frogs.

Also, few student loans are collateralized. They aren’t backed by anything but your promise to repay the debt. Uncollateralized loans almost always come at a higher price than loans that are backed by an asset. For example, a mortgage, which is backed by real estate, generally has a lower rate than a credit card.

Add up your student debt and consolidate what you owe at a single low rate. You may be able to pay off your current creditors – from State U. to Uncle Bob – and make a single monthly, or quarterly, payment to gradually dig yourself out of debt.

Ask your bank about its loan programs.  You may be able to lower your monthly expenses with a loan from your local bank with a lower interest rate than your existing student loans. Ask your banker about loan options* to see if you can get better interest rates for your education dollars.

Ask your banker about a home equity loan. If you own a home, consider using your home equity to pay off expensive student debt. A home equity credit line* is actually a collateralized loan. Because your home credit line is backed by real estate, the rate is usually lower than the uncollateralized student debt you may still be carrying around. Consider using a lower-cost home equity loan to pay off pricey student loans that are backed by nothing more than your good word.

Go automatic. Your bank can set up automatic payments that are deducted from your checking or savings account to pay off student debt faster. Using auto-pay imposes self-discipline and can offer a painless way to pay off student debt faster, saving interest while increasing the options that life sends your way. Consider paying down the loan principal faster by increasing the auto-pay amount.

Talk to your banker about restructuring, using home equity, and other strategies, to pay off that student debt once and for all, and enjoy greater financial freedom.

1. https://ticas.org/sites/default/files/pub_files/classof2016.pdf

2. https://www.bls.gov/careeroutlook/2016/data-on-display/education-matters.htm

*Nevada State Bank loans are subject to credit approval. Terms and conditions apply. See a banker for details.

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of Zions Bancorporation, N.A. Member FDIC