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Tackle your student loans

How to keep "good" debt from becoming too much of a burden.

Getting on top of your student loan debt can improve your credit score and leave you with more money to put toward your retirement and your kids' college education. "Money borrowed for your education is called 'good' debt because it's an investment in your future," says Mark Kantrowitz, publisher of, a guide to student financial aid. "But too much of even 'good' debt is bad." To make your student loans easier to manage, you might:

  • Consolidate your student loan debt. If possible, streamline your payments into one monthly bill if doing so gets you a lower interest rate. Rates on federal loans currently range from 3.4 to 7.9 percent, while private student loans — which usually carry variable rates — currently range from 3 to 15 percent, says Kantrowitz.
  • Repay student loans automatically through your bank account. You won't have to worry about late or missing checks.
  • Make additional payments to principal. While this will reduce the interest you pay on your loans, it's a good idea only if you don't have other debts that charge higher interest. However, when considering additional payments to principal, don't sacrifice starting the habit of saving regularly for your future, particularly if it entails providing you with an employer match.

If you're going back to school

For some, their baccalaureate days are ahead of them. According to the National Center for Educational Statistics, almost 40 percent of college students today are nontraditional — many are working full or part-time[1]. Many adults are taking classes in pursuit of a second career or to improve their chances of finding a job after being downsized.

If you're considering a return to school and need financial aid, keep these tips in mind:

  • Start with a smart financial aid package. If you're over age 24, you may qualify for a Pell Grant as an "independent" student. That lets you omit your family's income and assets in your aid application.
  • Consider a financial aid appeal. If you're quitting your job to attend college full-time, ask for a special financial aid review. "Because your income will drop while you're in school, you could get a substantial increase in aid," says Kantrowitz.
  • Take advantage of tax breaks. Depending on your income, you may qualify for up to $2,500 in tax credits for tuition, fees and course material.
  • Don't retire with debt. Be careful about taking on more debt than you can repay before you retire. "Make a careful analysis of how much [school is] going to cost you versus how much you'll earn before you retire," says Kantrowitz.

College Planning Calculators
Get help sorting out the financial details of going to college.

Is college still a good bet? Rising tuition costs may leave parents wondering whether college is still a worthy investment. Consider this: The unemployment rate among college graduates is about five percentage points lower than for those with only a high-school diploma according to the Bureau of Labor Statistics. And the annual pre-tax income of households headed by a college grad is double that of less educated households. So while a college education is more expensive than it used to be, it's still likely a terrific investment in your child's future.

Fast Fact: Student loans have become more burdensome as the cost of college has increased. In 2011, the average graduate owed $22,900 — a whopping 47 percent increase over a decade ago, says Mark Kantrowitz, publisher of the student aid website


"Non-Traditional Students Key to College Completion Goal," The Washington Post, March 25, 2011


Mark Kantrowitz is not affiliated with the Principal Financial Group or any of its member companies.

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