Many people make poor choices in their youth that they come to regret. Since you were living on the edge but have turned things around, you can now look ahead to a brighter future.
Of course, it may be hard to imagine getting to that future when you have to overcome a wall of debt to get there, including $82,000 in student loans and a $110K mortgage. First, know that you’re not alone, and it isn’t just misspent youth to blame. Experian data shows Americans collectively owed $17.57 trillion as of the third quarter of 2024, up 2.4% from 2023.
Getting financial advice can be well worth it, but it’s right to be wary of financial advisers who try to sell you whole life insurance policies that aren’t right for you but which earn them a big commission. Here are some options for climbing out of a deep hole.
First, decide which debts to pay off early. It’s better to pay off high-interest debt — such as credit-card debt — before eliminating lower-interest debt like mortgages and student loans.
The average credit card interest rate as of January 2025 is 21.47%. In contrast, mortgage rates are in the 6 to 7% rate and the interest rate on federal student loans ranges from 6.5 to just over 9%.
Not only do mortgages and student loans come with lower interest, but unlike credit-card debt, the interest on mortgages and student loans may be tax deductible.
Read more: The US stock market’s ‘fear gauge’ has exploded — but this 1 ‘shockproof’ asset is up 14% and helping American retirees stay calm. Here’s how to own it ASAP
If you have federal student loans, you can even choose different repayment plans, including an income-driven payment that limits monthly payments to a set percentage of income. These plans eventually eliminate any remaining debt after 20 to 25 years of on-time payments.
Once you’ve decided which high-interest debt to tackle first, aim to pay it off ASAP by making extra monthly payments, using either the Snowball or Avalanche method. It’s up to you which method you choose.
Snowball Method. With the Snowball method, you pay off debt with the lowest balance first to succeed quickly and stay motivated.
