Core Insights - The article addresses the challenges faced by recent graduates, particularly in managing student loans before securing employment [1][2] Group 1: Deferment Options - New graduates often struggle to manage living expenses and loan payments without income, making deferment options crucial [3] - Federal student loans typically offer a six-month grace period post-graduation, during which payments are not required, although interest may accrue on private loans [3] - Making small payments during the grace period can help reduce long-term interest costs [3] Group 2: Income-Driven Repayment Plans - Most federal borrowers qualify for income-driven repayment plans, which adjust monthly payments based on income [4] - Plans such as Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR) provide options for managing payments and potential forgiveness of remaining balances after a set term [5] - PAYE caps payments at 10% of discretionary income, while IBR bases payments on income and family size, forgiving balances after 20 or 25 years [5]

Investopedia / Photo Illustration by Alice Morgan / Getty Images Student loan borrowers are dialing back their discretionary spending. KEY TAKEAWAYS The median student loan borrower has cut $1,590 out of their typical yearly spending since student loan repayments resumed in 2023. The majority of borrowers have been able to manage the hit to their budget. But more borrowers are behind on their payments than usual. Student loan borrowers are cutting back spending in order to restart loan payments, acc ...

Core Insights - The article discusses the financial decision-making process of an individual, Rob, who is weighing the options between paying off student loan debt and investing for wealth accumulation [1][3]. Group 1: Financial Situation - Rob has $25,000 in student loan debt at a 5% interest rate with 10 years remaining on the loan [1]. - He has recently received a promotion that provides him with an additional $1,000 in disposable income each month [1]. Group 2: Employer Retirement Match - It is emphasized that taking advantage of the employer's 401(k) match program should be a priority, as it represents free money that compounds immediately [2]. - Employees are recommended to contribute at least as much to their 401(k) as the maximum company match amount, typically around 6% of their salary [2]. Group 3: Debt vs. Investment - The decision hinges on comparing the cost of paying off the student loan against the potential returns from investments [3]. - Eligible borrowers can deduct up to $2,500 of student loan interest, which lowers the effective cost of the loan [3]. Group 4: Potential Outcomes - If Rob focuses solely on paying off his student debt with an extra $1,000 monthly, he could be debt-free in less than two years, but would miss out on potential investment returns during that time [4]. - Alternatively, Rob could invest up to $1,200 per month (including the employer match) while making regular payments on the loan, which could yield returns but would be affected by the existing debt [5].