‘Should I just make minimum payments for 10 years so that they can get forgiven?’: Recent grad debating on paying off $30,000 in student loan debt early or waiting for forgiveness. What's the best strategy?

Hi Money Minder,

So, I just graduated and have a hefty $30,000 in student loan debt hanging over my head. Luckily, I’m crashing at my parent’s place rent-free. I was thinking about tackling these loans head-on and paying them off early. I’ve got 8 federal student loans with interest rates ranging from 2.5% to 5.5%, and I’m rocking the public employee gig for the state government.

What’s the smart move here? I’ve heard public employees can get loans forgiven after 10 years, but does that apply to us state workers too, or just the federal crew? Any chance these loans could magically disappear before the 10-year mark? Should I just stick to minimum payments for a decade and hope for the best? Or is there a better plan for my extra cash?

Thanks!

Firstly, congratulations on your recent college graduation, that is a significant achievement! I understand that dealing with a substantial student loan debt of $30,000 can feel overwhelming, but you are already taking the right step by seeking guidance on how to handle it. Living with your parents and not having rent to pay puts you in a favorable position to tackle your loans early.

Given that you work as a public employee for a state government, you may qualify for Public Service Loan Forgiveness (PSLF) after 10 years of making qualifying payments. While this forgiveness program typically applies to federal loans, state employees might still be eligible, but it would be prudent to confirm this with your loan servicer or the Department of Education.

In terms of your interest rates ranging from 2.5% to 5.5%, it’s essential to assess individual loans and prioritize paying off those with the highest interest rates first. By making early payments towards high-interest loans, you can save money on interest in the long run.

Regarding the possibility of early loan forgiveness, it’s crucial to understand the specific qualifications and requirements for forgiveness programs. Making minimum payments for 10 years to potentially qualify for forgiveness may be an option, but being proactive in paying off your debt sooner can save you money and prevent accruing more interest.

With your extra money, consider creating an emergency fund, investing in retirement accounts, or contributing to a high-yield savings account. Building financial stability and security for the future is equally important while managing debt.

In conclusion, a practical approach would involve assessing your loan terms, exploring forgiveness options, prioritizing high-interest loans, and making informed financial decisions with your extra income. Remember, taking control of your debt now will set you on a path towards financial freedom in the long term.