Q: I have a very large amount of student loan debt. Where would that go in your Baby Steps plan?
Dave: Baby Step 2 is where you pay off all debt except for your house. The fact that it’s a large amount of student loan debt doesn’t change anything.
Hopefully, with your very large amount of student loan debt, you also have a very large income. Believe it or not, there are some really sad situations out there where people have gone $200,000 into debt for a four-year degree in a field where they make $50,000 a year. That kind of thinking and behavior is ridiculous, but it’s out there.
Whatever you do, don’t treat this student loan debt as if it were a mortgage. In other words, don’t let it hang around for years and years and years. You’ve got to get focused and intense about paying off this mess and getting on with your life.
Remember, your income is your largest wealth-building tool. You can’t save and plan for the future when all your money is flying out the door to pay back debt!