This month a lot of students will walk the stage and leave college behind. Unfortunately many of them won't be making this transition alone. If they're like most college grads, they'll be taking some student debt with them.
There are many reasons why I'm not a fan of student loans. The main reason is you're essentially stuck with them. In most cases, the only way to get out of a student loan is to pay it or die!
To make the terms even harsher, a lot of states are revoking your driver's license if you don't pay your student loan payments.
The good news is a new degree typically means more income. Whether it's a new career or a bump in pay at your current employer, a degree has the potential of increasing your monthly cash flow. I recommend avoiding an increase in lifestyle and using this new found income to pay down your debts.
What about those loan forgiveness programs?
If you're able to get your loans forgiven that's great! There are a lot of programs out there that will forgive your student debt if you serve in a public service role for a specific number of years (typically between 5 and 10).
If you're looking to get your student loans forgiven, be prepared; it's not necessarily free. In most cases you will be taxed on your forgiven debt. For example, if you have $30,000 in student loans forgiven this year, the IRS views this as $30,000 in additional income.
This means you'll need to be ready to potentially pay an additional $7,500 in taxes next April (depending on your tax bracket). While this may put a damper on your tax refund, it definitely beats paying the full $30,000!
If you are going to have debts forgiven or discharged this year, I recommend getting your budget together and start stashing some money away!