By: Anne Tergesen
As millennials struggle to repay record levels of student-loan debt, many are making costly mistakes that threaten to undermine their long-term financial security.
For instance, roughly one in four is behind on repayments or in default, which can result in a host of negative consequences, from damaged credit to garnished wages. Meanwhile, many others are struggling to find enough money, after making their loan payments, to save for retirement. Among 401(k) participants with student debt in plans administered by Fidelity Investments, two-thirds say they have reduced or stopped their 401(k) contributions or have taken out a 401(k) loan or hardship withdrawal.
With total college-loan debt in the U.S. more than five times what it was just 20 years ago, “the consequences of managing that debt have never been greater,” says Heather Jarvis, an attorney who teaches financial professionals about student loans.
What follows are six student-loan mistakes people commonly make and how you can avoid them.