Ask the Classy Frugalist: Should Student Loan Debt Repayment Be My First Priority?

A few weekends ago, I attend the BossedUp Trainer Certification Program with a bunch of other amazing entrepreneurs, side hustlers, and all around boss ladies. During lunch, I sat next to another trainer who asked: “What do you recommend for people with student loan debt? This is a critical issue and it doesn’t seem like many financial advisors are paying attention to it.” I have to agree. While most financial professionals understand that student loan debt is a critical issue not many people in the financial industry have a lot of recommendations for how to handle this debt well.

So, for today’s “Ask The Classy Frugalist” post I’d like to talk about student loan debt, particularly how to prioritize your student loan debt in the midst of your other financial goals. I think this is a common area of confusion for many people – especially recent grads. Have other questions about student loans or student loan debt repayment? Ask me using my Contact page. I’d be happy to write more about this topic.

For so many of us – myself and my husband included – student loan debt feels like the monkey on our backs we just can’t shake. Whether you owe a few thousand dollars or hundreds of thousands of dollars, repayment can feel like an endless process that gets in the way of your other goals like getting married, buying a home, going on your dream vacation, or taking a lower-paying job that you’re more passionate about.

I think the biggest trouble with student loan debt is shame. In explicit or implicit ways, we millennials have been made to feel ashamed of our student loan debt. And, in many ways, we’ve been made to feel like getting into this debt was all our fault. We screwed up and now we have to pay the price by starting our adult lives miles behind the financial starting line.

In order to face our student loan debt head on, I think we need to first deal with our shame around this debt. First, I am a firm believer that Millennials are not the only people at fault for our student loan debt. There are a lot of forces at play – skyrocketing prices of higher education, minimal governmental support, false promises starting in early childhood about the value and need for higher education for everyone as well as lack of knowledge on the part of parents and students. You are not alone. Second, whether you’re feeling shame, indignation, ambivalence, or anything in between toward your loans, you have them. They are yours, for better or worse. The best thing that you can do is deal with them like you would any other financial goals in your life. Ignoring them isn’t the answer. Third, and most importantly, just because these loans weigh heavily on you emotionally  and financially does not mean debt repayment should be your first and only financial goal – especially when you’re just starting out.

In fact, I don’t believe that student loan debt repayment should be your first financial priority. I think there are some other things you may need to tend to first. Here are a few questions to help you figure out where your student loan debt should fall in your list of financial goals:

1.     Have you done your research? Often people head full bore into debt repayment without considering the repayment options available to them. One of the benefits of federal loans is that the government provides many programs designed to make student loan debt repayment easier – especially for lower income earners. While private lenders tend to offer less repayment options, it’s important to look into any repayment options or perks (i.e. – interest reduction for paying monthly payments on time). Similarly, you might also see if your employer offers any student loan debt reduction benefits. This is the time to put all of your options out on the table.

Tip: Use the Repayment Estimator to see which programs may be available to you and then talk to your loan servicer. You can change your repayment plan even if you already started repaying your loans. As you look at the programs, pay attention to the repayment period, the total balance (principal + interest), monthly payment, and any amount that will be forgiven. While some programs may be advantageous now, they may saddle you with more debt over the long haul.

2.     Do you have a realistic budget? Do you have a budget in place that’s working for you so you aren’t living from paycheck to paycheck? Are you paying all of your bills on time? Do you have a plan in place to pay the minimum on all of your student loans in addition to all of your other expenses? This should be your primary goal – especially when you’re just starting out.

Tip: Need help getting your budget in place? Find a system that works for you – my favorite is You can learn more about budgeting from the Money Boss’ three-part budgeting series. She makes budgeting doable by breaking it down into small, tangible steps.

3.     Do you have money set aside for an emergency? I’m not talking about the whole 3-6 month emergency fund. Do you have something to tide you over just in case you get into a fender bender, need to fly home for a funeral, or have to pay for an appliance. This could be an amount between $500 and $2000 depending on your life situation. Nothing can derail your repayment plan faster than an emergency.

Tip: Looking to create a short-term emergency fund for yourself? Check out this post from money under 30 and learn more about building a short-term emergency fund or “Bank Account BufferTM”.

4.     Do you have any high interest debt? Not all debt is created equal. High interest debt – debt with an interest rate of 10% of more – can really take a toll on your budget, especially if you’re only paying the minimum. This debt is usually associated with credit cards, but there are some private student loans that fit into this category too. Once you’ve got your budget and your buffer under control, you’ll want to tackle this debt.

Tip: Take a look at the interest rate on all of your debt – whether it’s student loan, credit card, car loan, mortgage, medical, or any other form of debt. Want to see how your interest can add up? Check out this calculator.

5.     Have you started saving for retirement? I know, I know. Who wants to think about retirement (which is light years away) when you’ve got immediate concerns like student loans? But, with such a large goal it’s important to get started early. Even a little bit – like 1% of your income – can really add up over time. The earlier you can start putting money away, the more time your money has to grow. If your company offers a match, make sure to meet it otherwise you’re leaving free money on the table.

Tip: Struggling to weigh your student loan debt vs. retirement? Check out this video featuring financial guru Jean Chatzky.

6.     What other goals do you have? Once you’ve gotten through the top five steps above, now is the time to put all of those other goals out on the table. Are you hoping to buy a car, save for a down payment on a house, start your own business – whatever your goals are lay them out on the table.

Tip: Consider your values – what are those things that you really care about? How urgent are each of the goals on your list? It’s important to find a balance between funding today’s needs and tomorrow’s goals and that balance will look different for everyone. This is a good time to check in and make sure you and your partner are on the same page in terms of your goals and where debt repayment falls on that list.

There’s no one right answer. For some, student loan debt will near the top of the list. For others, they will focus on meeting other goals first. Either way, it’s important that you go into this with your eyes open. For my husband and I, student loan debt is one of our top goals but it’s not at the top of the list. Instead, we’re working to repay our debt while also building up our emergency reserves, saving more in our retirement and health savings accounts, as well as making some of our travel dreams a reality. We used to help us create a plan to pay off our student loan debt. Every time a new influx of cash comes in, we can return back to our plan and see how this extra cash will help move the needle even closer to our goal.

Where does student loan debt repayment fall on your priority list and why?