You’re a millennial, you’ve got student loan debt. The vast majority of us will have student loan debt in numbers not seen before by previous generations. My student loan debt was comfortably into the six-figure range at $128,000 when I graduated in 2013. That’s what it cost for six years of college education at an in-state public college.  The first two years were undergraduate and left me with $8,000 in debt.

Then I went to the University of Iowa College of Pharmacy and tuition skyrocketed. With steady tuition hikes of 2-5% per year I graduated with $118,000 in federal student loan debt. Wait, I said I graduated with $128,000. Where did the other $14,000 come from? Interest. My unsubsidized and subsidized federal student loan interest rates are sitting at a pretty 6.55%… Disgusting. During the 4 years of pharmacy school my unsubsidized student loans piled up interest.

Interest is why you have to tackle your student loan debt aggressively. 2013-2014 was my first year out of pharmacy school. I did residency (basically an internship for a licensed pharmacist) which paid approximately $45,000/yr. Not enough to make the $1500/month payment on the 10 year repayment plan.

I knew better than to defer my loans (interest continues to accumulate) so I enrolled in an income-based repayment plan. My required payment was about $180/month. I payed anywhere from $300-1000 per month as I could afford. Despite paying $6,600 on student loan debt when I finished residency one year later my loan amount had gone up. I now had $132,000 in debt.

2015 is my first entire year making pharmacist salary. I have been aggressively paying back my student loans and have a 10 year repayment plan. My minimum monthly payment is $1500. I get paid bi-monthly so I pay the $1500 with the first paycheck and with the next paycheck I pay an additional $1,000-$1,500.

The second payment really knocks my debt down.  Of my required monthly payment nearly $600 is applied to interest with the remaining $900 applied to the principal. Nearly all of the extra payment is applied to principal.

 Your loans won’t pay themselves and the only way to have true financial freedom and liberty to do what you want is to be debt-free. With this strategy I will have <$100,000 in debt by the end of 2015 with a goal payoff year of 2018. 

Make your payments aggressively.

Anyone who advises you otherwise doesn’t understand the current state of student loans. They don’t understand that current interest rates are higher than the return rate most people are getting on their 401K this year and higher than a car loan or a mortgage rate. Do no listen to them. They think you have a few thousand dollars in debt at a 1-2% interest rate.

Tackle your student debt. It’s guaranteed to accrue 6.55% interest on six figures regardless of what the stock market is doing or how your investment portfolio is performing.

I’ve talked a lot about student loan debt but what about other debt? My advice, avoid it if at all possible.

I know you worked your ass off during college, sacrificed to get a good job, and now you’re making real money and want to treat yourself! That’s fine. Give yourself the opportunity to celebrate with your first real paycheck. Take a vacation, buy some new clothes, do something that has an end.

Don’t put yourself further into debt by buying a brand new Mercedes or BMW. Until you can buy luxury things without debt you haven’t earned them.

If you’ve been limping along with an ancient car that’s not reliable it may be time to upgrade. Save for a decent down-payment (~10-20% of the purchase price) and then buy a reliable used car or modestly priced new car. I’m suggesting you buy a Honda not a Mercedes or a Subaru not a Range Rover.

What about a house and kids and a family? My advice is contrary to the expectations of previous generations. Don’t put yourself further into debt by adding a mortgage on top of your mortgage worth of student loan debt!

Exceptions to this would be if renting in your area is astronomical compared to purchasing your own home (unlikely because they’re both real-estate but not impossible), or if you have the opportunity to purchase an investment property (i.e. apartments, duplex, etc) that can help you make additional income.

Even if you’re starting a family remember that a baby doesn’t need a ton of space (they barely move their first year of life) and toddlers don’t remember much. Kids aren’t picky, they want a safe, loving environment to grow and play in. Whatever housing you have that provides that is good enough!

Avoid credit card debt at all costs! It’s fine to use credit cards, in fact you should! You’re financially safer if someone steals it and most have rewards you don’t get from using a checking account. Be sure to keep track of all your expenses and pay the balance off each month.

I pay my credit card off every time I get paid. It really helps me keep tabs on my spending.

If you need to put something you can’t afford on a credit card analyze if it’s a need or a want. Ideally you have a decent savings account to help with these scenarios but a credit card can serve as a bridge in an emergency. Be sure to pay what you can afford and not the minimum to pay it off ASAP.

Here are the key takeaways:

• Aggressively tackle high-interest student loan debt by going after the loans with the highest interest rates first
• Don’t get into unnecessary debt like credit card debt and car loans
• Wait to buy your first home unless it’s an investment property
• Pay your credit cards off every billing cycle and consider paying the bill off as often as you get paid

What are your biggest debt struggles? What’s one debt you avoid or recently paid off? Let me know in the comments, send me an email jeni@millennialmaxims.com, or join our Facebook group and share your favorite goal(s)!