Welcome back to “Ask an Advisor,” the advice column where real financial professionals answer questions from real people. The topic can be anything in the world of finance, from retirement to taxes to wealth management — or even advice on advising.
Today’s question is on a topic that burdens millions of Americans: student debt. In total, U.S. adults owe a staggering $1.78 trillion for their educations, according to the Federal Reserve. That’s more than any other type of debt except mortgages.
And this debt is pervasive. More than half — 54% — of college graduates in 2021 took out student loans, according to the website LendingTree, owing an average of $29,100 at graduation. In general, 43.4 million Americans — 13% of the population — are saddled with student debt, according to the Fed.
As a result, millions of Americans begin their adult lives with a significant financial handicap. From the moment they start their first jobs, they must balance the expenses of daily life with the debts of their college years — and they can’t always afford both.
That brings us to today’s question. A young woman in New York, highly educated and working in an elite profession, still feels blocked by her student loans from living a fully independent life. Here’s what she wrote:
Dear advisors,
I’m a 33-year-old occupational therapist in New York City, and I’m feeling trapped by my student debt. I want to move out of my parents’ apartment, but I can’t imagine paying for both my loans and a New York rent.
As of right now, I owe about $49,400 for my graduate school education. I pay $510.88 each month, including my interest of 7.9%, through a Pay As You Earn income-driven repayment plan.
Read more: 3 strategies to help clients with student debt after the Supreme Court’s decision
As long as I keep living at home, this debt is manageable. I work with disabled kids at a public school, and my salary is $89,191. But I don’t want to live at home, and rents in New York are insane — the average studio apartment now costs about $3,400 a month.
How can I afford that on top of my loans? Is there some strategy or tool I could use? Can you help me form an escape plan?
Thanks in advance,
Mired in Manhattan
And here’s what financial advisors wrote back: