3 Student Loan Repayment Strategies for Young Professionals

By Brennan McCarthy, CFP®

College graduates entering the workforce still have to repay their student loans. They face the dual challenge of earning enough to support their families and paying their college debt. To alleviate the stress, a few student loan repayment strategies can make the process easier.

A smart approach is to find a loan repayment strategy that aligns with your overall financial goals. Whether you’re saving up for a home or just building long-term wealth, the right strategy balances consistency with flexibility and easily adapts to your financial objectives and life changes.

This blog features three student loan repayment strategies for taking care of your debt while moving forward with your adult life.

1. The SAVE Plan

The Saving on a Valuable Education (SAVE) plan was launched by the U.S. Department of Education in 2023. Its objective is to calculate payments based on the borrower’s income and family size while restricting the growth of unpaid interest.

The SAVE plan is based on the borrower’s discretionary income—calculated as the difference between your income and 225% of the federal poverty line (FPL) for families of your size. The FPL is recalculated every year to account for cost-of-living changes.

Under the SAVE plan, borrowers pay 10% of their discretionary income every year. If the monthly payment doesn’t completely cover the interest, the SAVE plan makes certain unpaid interest does not accrue. 

In addition, the SAVE plan gives people who borrowed less than $12,000 in student loans the chance to qualify for loan forgiveness after just 10 years. This is far shorter than the standard 20-25 years in other income-driven repayment plans.

2. Avalanche vs. Snowball

These two student loan repayment strategies focus on interest rates on outstanding loan balances.

The avalanche method assumes you have a certain budget for debt repayment. Every month, you make the minimum required payment on all open debt accounts. The leftover money in your budget would then go toward paying down the debt with the highest interest rates, moving down the scale as each one is paid off. Credit cards typically have the highest interest rates, with student loans and car loans on the lower end.

The snowball method doesn’t consider interest rates at all. After making the minimum monthly payments on your debts, the remainder goes toward paying the smallest debt first.

The idea behind the snowball method is that you build momentum by closing out more debts more quickly. It may be the better method if you’re trying to buy a home. However, it can take a little longer to free yourself of debt, and the snowball method won’t reduce interest payments as quickly as the avalanche method.

Although the avalanche method can save a great deal of time and extra money, it requires discipline. There also has to be enough discretionary income to cover your needs. 

3. Buying a Home With Pending Student Loans

Even if you have an outstanding student loan balance, you can still buy a home with deliberate planning. The main focus is reducing your debt-to-income (DTI) ratio, a statistic lenders use the most in approving loans. Student loans are major contributors to high DTI ratios.

You can improve your chances of getting approval for a mortgage by refinancing or using income-based student loan repayment strategies like SAVE. It’s also important to rein in credit card use and keep a solid credit score. Federal mortgage programs are particularly flexible for those with student loan balances.

Student Loan Repayment Strategies That Work

Boulevard Wealth Management focuses on the unique needs of our clients, especially families on the road to financial well-being. Student loan debt doesn’t have to keep you from your goals. We can help you with student loan repayment strategies that support your overall financial objectives. 

To schedule a meeting, contact us online, call (763) 401-4224 or email brennan@blvdwealth.com. 

About Brennan

Brennan McCarthy, CFP® is the Director of Financial Planning at Boulevard Wealth Management, an Eden Prairie-based firm (now operating in Bloomington, Minnesota) addressing client goals through a team-based, fiduciary approach. Brennan specializes in helping high-achieving young professionals simplify, organize, and optimize their financial lives. Creating tailored plans that address cash flow, tax strategies, portfolio optimization, and estate planning, Brennan focuses on aligning clients’ financial decisions with their personal goals and values. Since entering the financial industry in 2018, he has become known for his client-first approach and dedication to Boulevard’s mission of helping clients plan with purpose so they can live in peace.

A graduate of the University of St. Thomas and one of Minnesota’s youngest CFP® professionals, Brennan is passionate about empowering clients to pursue financial independence and navigate life’s complexities with confidence. Outside of work, he enjoys spending time with his wife, Meghan, and their three children, Marley, Brady, and Hollie. He’s a proud Minnesota sports fan—especially of the Vikings—and loves connecting with new people over a virtual coffee. To learn more about Brennan, connect with him on LinkedIn.