Stewardship and Student Loans: Wisdom for Managing College Debt
If you’re paying down student loans, it may be comforting to know you’re not alone: More than 42 million Americans are making payments toward their college education.1 While higher learning is certainly a valuable investment, the resulting debt can leave borrowers feeling like they’ve become a “slave to the lender,” as described in Proverbs 22:7.
At Blue Trust, one way we help people become better stewards of their money is to help them approach debt with careful consideration and a solid plan for repayment. Although both components are important, this article will focus on navigating student loan repayment with both practical wisdom and biblical principles.
Evaluating Your Loan Landscape
Before developing a repayment strategy, take time to thoroughly review your loan situation. It’s just as Luke 14:28 advises: “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?”
Start by determining whether your loans are federal or private, as this distinction significantly impacts your repayment options. Federal loans typically offer more flexible repayment plans and forgiveness opportunities than their private counterparts.
Your loan type will also factor into when your repayment obligations begin and whether they’re eventually eligible for loan forgiveness. If you’re still in school or recently graduated, familiarize yourself with grace periods to develop your strategy before the first bill arrives.
Determining How Much to Pay Each Month
Once you know the details of your student loan, consider your amount of debt and cash flow to help you determine how much you could pay each month. As Christians, we want to be good stewards of our resources, as seen in the parable of talents (Matthew 25:14-30).
For those with additional resources, consider accelerating your repayment schedule. A word of caution: Verify that extra payments are going directly toward your principal, as this can significantly lower your total interest paid over the life of the loan.
If you’re struggling to make the minimum payment, explore relief options sooner rather than later to avoid falling into delinquency. Federal loans offer deferment and forbearance options, although interest may continue accruing during those periods, potentially increasing your total repayment amount.
Exploring Forgiveness Options
Scripture teaches us to be “shrewd as snakes and innocent as doves” (Matthew 10:16). This wisdom applies to taking advantage of legitimate loan forgiveness and repayment programs available to you.
Income-driven repayment plans can make federal loans more manageable by tying monthly payments to your income level. These plans may extend your repayment timeline but can provide needed breathing room in your monthly budget.
Public service workers—including those in nonprofit and government positions—may be eligible for Public Service Loan Forgiveness programs. After making 120 qualifying payments, lenders could forgive your remaining federal loan balance. Other professionals, including teachers, health care workers, and military service members, may also qualify for specific forgiveness programs.
Consolidating and Refinancing
Some borrowers may be able to simplify repayment and lower their interest rates through consolidation or refinancing. Federal loan consolidation combines multiple loans into one, potentially simplifying repayment. However, consolidation may reset the clock on forgiveness eligibility or change other loan terms, so research the implications thoroughly.
Private loan refinancing can offer lower interest rates, especially if your financial position has improved since you initially borrowed. Be aware, though, that refinancing federal loans with private lenders permanently removes access to federal benefits like income-driven repayment and forgiveness programs.
When comparing refinancing options, look beyond interest rates to examine unemployment protections, cosigner release provisions, and repayment flexibility. The lowest rate isn’t always the best overall option when considering your complete financial picture.
Considering Other Factors
Taxes may also play into your monthly payments. The interest you pay on some education loans qualifies for annual tax deductions (income limitations apply) and reduces your taxable income, even if you don’t itemize. In addition, your tax filing status—whether you’re filing single, married filing jointly, or married filing separately—can factor into your monthly payment amount, especially if you’re on an income-driven repayment plan.
Don’t forget that student loans represent just one aspect of your overall financial picture. Balancing loan repayment with other priorities requires discernment and intentionality.
Developing a Grace-Filled Repayment Mindset
Paying off student loans is a journey—one that may require a shift in perspective. Instead of viewing your college debt as a burden, we recommend seeing it as an investment in your future. The knowledge and skills you gained enable you to serve others and provide for your loved ones.
Remember that unexpected circumstances may temporarily derail your repayment plans. Extend grace to yourself during these seasons, adjusting your strategy while maintaining commitment to your obligations.
Finally, always keep in mind that faithful stewardship isn’t merely about eliminating debt; it’s about managing all resources in ways that honor God and advance His purposes.
At Blue Trust, we’re committed to helping you apply biblical wisdom and technical expertise to make wise financial decisions. Our advisors are available to help you integrate student loan repayment into your comprehensive financial plan, creating clarity and confidence for your future. If you do not have a Blue Trust advisor and are interested in speaking with one, please reach out to info@bluetrust.com or call 800.841.0362.
1 Education Data Initiative. “Student Loan Debt Statistics.” https://educationdata.org/student-loan-debt-statistics.