If you're in your 20s, you're probably going through one of the toughest financial periods of your life -- especially if you went to college. Increasingly, recent grads have had to prioritize paying off student loan debt over other important milestones, according to a recent survey from the American Institute of CPAs. Among those responding, 40 percent have put off a car purchase, 29 percent have delayed buying a home, and 15 percent say that they've even pushed back marriage plans because of their debt.
It's a tough balancing act -- starting a life, and perhaps a family, while at the same time paying back heavy student loans in one of the most challenging job environments in decades. Yet many young adults are finishing their undergraduate studies only to go on to pursue graduate and professional degrees, generally adding to debt levels.
Let's take a look at five things you can do to balance all the competing demands on your money and still find a solution for your educational debt.
1. Know What You Owe -- and How You Owe It
There are many kinds of student loans, and you may have taken out more than one. You need to know the terms under which you'll have to pay your loans back. Some loans offer payment deferment options or interest subsidies, while others start the finance-charge clock running as soon as you graduate or require immediate monthly payments. Ideally, you want to prioritize high-interest-rate loans first, which typically means focusing on private loans ahead of government loans. But you should also take grace periods into account, as they aren't all the same length of time. Contact your lenders to find out all the important facts as well as to confirm your mailing address so that you won't be out of touch and end up late on payments.
2. Find Out About Forgiveness
One great way of handling student loan debt is to have it written off once and for all. Thanks to the Public Service Loan Forgiveness program and similar options, many borrowers can have student loan debt forgiven if they qualify by working in certain professions, including teaching, public-interest law or medicine, or the military. Volunteers for AmeriCorps or the Peace Corps also can receive funds earmarked to pay off student debt, or have loans partially cancelled. Check out this list of resources for more information.
3. Get Your Money's Worth From Graduate School
If you're considering a graduate degree, be sure to closely consider the extra costs of years of additional education and compare them against the potential benefits. In many cases, graduate degrees can be far more expensive than undergraduate tuition, yet the job prospects for graduates are still far from certain.
For instance, the legal profession is expected to see a drop of 7.3 percent in employment this year, according to hiring solutions and research group Bright.com. Meanwhile, according to one survey, almost 90 percent of law students borrow an average $80,000 to pay for their law degrees, before joining a glutted job market with an average starting salary of just $62,000 a year.
So be smart about whether to go to grad school and which school you choose.
4. Be Careful With Consolidation
Consolidating your loans can reduce your monthly payment, which is attractive to cash-strapped 20-somethings. But it also extends the period over which you're repaying those loans, potentially leaving you saddled with debt for decades. That might sound like a reasonable trade-off now, but one reason that so many borrowers have put off car and home purchases is that their credit isn't strong enough to handle car loans or mortgage debt. Also, watch carefully to make sure you preserve options like deferment or forbearance on loans after you consolidate in order to avoid losing some repayment flexibility.
5. Help Your Own Kids Out Early
If you've started a family, get an early start on helping your children avoid the troubles you might have suffered by saving for their college education while they are young. With tax-advantaged 529 plans and Coverdell Education Savings Accounts, you can put money aside and have it grow tax-free for use on educational expenses. The earlier you start, the more time you'll have to watch that money grow, allowing even modest savings to turn into meaningful resources that will help them avoid taking out so much student loan debt of their own.
You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+.