Financial Guru Suze Orman: Why Student Loans Should Be Your Top Payment Priority

Financial expert Suze Orman has a clear message for anyone with student loan debt: prioritize paying off your student loans each month before any other bills.

Here’s why she says student loans should be your top financial priority and how to manage these payments effectively. The answer lies in the unique nature of student debt and its long-term implications on your financial life.

The Consequences of Neglect

Defaulting on your student loans isn’t just a minor hiccup—it’s a financial earthquake that can shake the very foundations of your future. 

Unlike other types of debt, student loans come with a set of severe consequences if left unpaid:

• Wage Garnishment: The government can legally take a portion of your paycheck to cover missed payments.
• Credit Score Damage: Late payments can significantly lower your credit score, making it harder to secure loans, rent apartments, or even land certain jobs.
• Loss of Federal Aid: Defaulting can make you ineligible for additional federal student aid, closing doors to further education opportunities.

The Snowball Effect

Student loan debt has a nasty habit of growing when neglected. Interest accumulates relentlessly, and before you know it, you’re facing a mountain of debt that seems insurmountable. 

By prioritizing these payments, you’re not just meeting an obligation—you’re actively preventing a financial avalanche.

How to Budget for Student Loan Payments

Consistently paying your student loans on time does more than just keep collectors at bay. It helps establish a solid foundation of financial responsibility.

This habit can spill over into other areas of your financial life, setting you up for long-term success.

Now that you understand the importance of prioritizing your student loan payments, let’s talk about how to make it happen.

Creating a Student Loan-Focused Budget

The first step is to create a budget that puts your student loan payment front and center. 

Here’s a simple approach:

1. Calculate your monthly income after taxes.
2. List all your essential expenses, with your student loan at the top.
3. Allocate funds to other necessities like rent, utilities, and groceries.
4. Whatever’s left can be divided between savings and discretionary spending.

Trimming the Fat

To free up more money for your student loan payments, take a hard look at your expenses. Are there areas where you can cut back? 

Consider:

• Reducing dining out and cooking more meals at home
• Finding a cheaper phone plan
• Cancelling subscriptions you rarely use
• Using public transportation or carpooling to save on gas

Exploring Repayment Options

If you’re struggling to make your payments, don’t despair. There are several options available:

• Income-Driven Repayment Plans: These adjust your payment based on your income and family size.
• Loan Consolidation: This can simplify your payments and potentially lower your interest rate.
• Refinancing: For private loans, refinancing could lead to better terms and lower monthly payments.

The goal here is to make your payments manageable without defaulting. Don’t hesitate to reach out to your loan servicer to discuss your options.

Tips for Staying on Top of Student Loan Debt

Now that you understand the importance and consequences, let’s look at some practical tips to keep you on track.

Automate Your Payments

Set up automatic payments from your bank account. This ensures you never miss a due date and can even qualify you for interest rate reductions with some lenders.

Pay More When You Can

Whenever possible, pay more than the minimum. Even small extra payments can significantly reduce your overall interest and shorten your repayment period.

Avoid the Debt Trap

While managing your student loans, be cautious about taking on additional debt. New credit card balances or personal loans can make it harder to prioritize your student loan payments.

Communication Is Key

If you’re struggling, don’t suffer in silence. Reach out to your loan servicer before you miss a payment. They may be able to offer:

• Temporary forbearance
• Deferment options
• Alternative payment plans

Remember, they’d rather work with you than have you default.

The Big Picture on Student Debt

Americans now owe a staggering $1.7 trillion in student loans, (ref) making it the second largest category of consumer debt behind mortgages. 

For the millions of individuals impacted, paying off student debt is a major obstacle to other financial goals like buying a home, starting a family, saving for retirement, or launching a business.

But until systemic changes occur, Orman says the onus is on individuals to take control of their student debt. Making student loans your top financial priority each month is the single best way to do that.