The Student Loan Pause Is Ending. What Should You Do?

Recently, I've found myself in the same conversation with my NextGen clients: "What should I do with my excess cash & how should I pay off my student loans?" This warranted a post to share my thoughts and best practices:

As September 1st marks the end of the negated student loan interest, many young professionals are grappling with a crucial financial decision: How to handle their excess cash before the interest-bearing period begins. This juncture presents a golden opportunity that can profoundly impact their financial well-being in the long run. Here are the best practices to consider:

• Minimize Interest Accumulation: By making lump sum payments before the interest-bearing period begins, borrowers can significantly reduce their outstanding balance. A lower principal means less interest accumulating over time, translating into substantial long-term savings.
• Build a Stronger Financial Foundation: Eliminating student loans early allows young professionals to establish a stronger financial foundation. With the burden of debt lifted, individuals can focus on other crucial financial goals, such as seeking professional guidance to build a comprehensive financial plan.
• Seize Investment Opportunities: While some advocate investing excess cash for potentially higher returns, it's essential to consider the associated risks, especially given market volatility. Paying off debt ensures a return on investment in the form of reduced interest payments. By freeing themselves from student loans, individuals can channel their excess income into building a robust investment portfolio.
• A Path to Financial Freedom: Early repayment of student loans expedites the journey to financial freedom. Reducing debt empowers individuals to take charge of their finances, enabling them to pursue their passions and interests without the constraints of financial obligations. Achieving financial freedom at a young age opens doors to opportunities that would otherwise be out of reach.

If you are carrying student loans and have the means to pay down the balance, seizing this opportunity is pivotal. Act now to avoid the interest stacking up. If you're interested in learning more about this topic or any other wealth-related matter, don't hesitate to reach out. We are here to help you on your journey to financial freedom.

Rex Berger

Private Wealth Manager

Phone: 617-378-3010

[email protected]

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