How to talk to Millennials about their student loans

January 22, 2016 by Adeline Gerritts

About the author:

Adeline Gerritts

Content marketing specialist

Adeline strives to create a virtual community for advisors on the Advicent blog through collaboration with various departments across the organization to gather quality content about industry trends and hot topics.

Millennials have been a hot topic, especially in the financial planning world. They are the next big group of clients that will be (or should have already) entered the space looking for the expertise and guidance of a financial advisor.

Millennials are people ages 18-34. According to U.S. News, more high school students are moving onto college educations than ever before. In fact, the percentage of students enrolled in college rose by 15 percent from 1980 to 2012. This jump is significant, but it is not nearly as huge as the increase in student loan debt that has occurred. In the 10-year span from 2004 to 2014, the average amount of student loans has risen by 74 percent to an average of $34,500 per student. With more and more people completing higher education and taking on staggering amounts of student loan debt, there is also a larger amount of graduates not getting the job placement they expected or needed in order to pay off those loans. Millennials are scrambling to find ways to pay back the education they worked so hard for. Some are taking on part-time jobs outside of their careers, while others have considered taking more drastic steps towards living debt-free. In fact, Forbes reported that 30 percent of Millennials in the United States are willing to sell an organ in order to pay off their student loans.

Advisors can help calm the storm of Millennials paying off their student loan debt. The first step is reaching that audience. The second step is convincing them that you can help them achieve that financial relief. Here are some ways you can provide financial planning solutions for Millennials that feel like they are drowning in debt while building trust and nurturing a relationship with those clients that will continue far into the future.

Go over the options they have for repayment... ALL of the options.

Millennials like the freedom to choose, but you need to make sure they understand what they have the freedom to choose between. There are tons of repayment options out there, and it is easy for people to find that information online. They need an expert to help them sort through all of it and go over the fine print so that they are making the best decision possible when it comes to their finances and loans. Speaking of options, be sure to go over income-based repayment plans with your Millennial clients. One of the things we mentioned above is that graduates are not making the amount they thought they would be making upon their entrance into the real world. Many people do not know that they can pay the minimum they possibly can on their income, with that number flexible based on their income in the future.

Fit their plan to pay of their student loan debt with a financial plan that will continue to benefit them in the future.

This shows your Millennial clients that you can help them in more ways than one. It will also help gain clients whose business you will be able to retain in the future. However, be careful how you are presenting these things. Millennials do not want to feel pressured into signing up for things they do not fully understand. If you approach the situation incorrectly, you may end up hurting the client relationship rather than nurturing it.

Help them understand the importance of paying their loans on time.

This seems obvious when it comes to explaining a financial plan to clients, especially when it is centered around the client making payments. As a Millennial myself, I know that many of my peers do not know what their credit score is or how to check it. Make sure your clients understand what it is, why they need it, and how their honest and timely repayments can benefit them later on in life.

Explain the details of their student loan repayment.

I am a Millennial. I remember reading the paperwork for my student loans when I graduated from college. I remember reading paragraphs and paragraphs of information about what I had to pay, when I had to pay it, and many more details. I also remember all of the details going in one ear and out the other because I did  not understand it. I did not have anyone to explain what those things meant for my payments, so I assumed they either did not apply to me or did not make a difference to the dollar amount and schedule of my payments. Advisors can break all of this information down and present in a way that is easy to understand. Visuals are important and advisors have the tools to share all of that information in the clearest way possible.

They will be excited to start living a better life with a newly increased income. Keep them focused on what is important.

New graduates are typically not used to making big purchases such as a house, a car, etc. They will likely be tempted to start making payments towards purchases like that after living on a lower income and going through college for the last four years. Make sure they are focusing on paying off their debts before they start putting their new salary towards other large expenses, or they will only start hurting their credit and getting deeper into a debt-filled hole. Remind them of their parents or guardians, who are likely their co-signers. Their credit is tied to your student loans, so if you are putting all of your new increased income towards other purchases and not paying off your loans on time, they are negatively affecting their credit too. This is a great point to make to your clients if they do have a co-signer, because they will know that they are not the only ones depending on this loan repayment and will (hopefully) be more inclined to stay on track.

Do not let your Millennial clients slip away. Talk to them about their student loan debts and give them the power to plan effectively for their future.

Want to learn more about how you can employ effective communication strategies with your clients, Millennial and beyond? Click here to learn more about Advisor Briefcase®, or call (855) 885-7526 to speak with an Advicent representative.