Smart strategies to help millennials pay off debt

Millennials aren't necessarily that different from other generations.

Many young adults in their 20s and early 30s have financial goals, from buying a home to saving for retirement. But these goals may seem out of reach for many because of one major factor holding them back: debt.

"Debt is saddling a generation, particularly the older end of this generation," said Douglas Boneparth, a 30-year-old certified financial planner with Life and Wealth Planning in New York City.

Nearly one-third of millennials, who range from about 18 to 35 years old, have student loans. Their total debt burden can increase significantly as they enter their 30s and are paying off a mortgage and credit card debt as well.

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According to a recent study by the online financial education site iQuantifi, the average debt load for those between the ages of 21 and 25 is $13,116. That debt load more than triples for those in their late 20s to $46,622. And the average total debt load is more than five times greater for older millennials in their 30s at $69,552.

Brandon Will, 27, is no stranger to debt. He owes about $37,000 in student loans and $8,000 on credit cards. "I do feel like my debt sets me back in the grand scheme of things as far as buying a home or whatever the case may be," he said. "I think it's a priority to get this stuff taken care of right now."

Boneparth said that, like many millennials, Will may be unaware of options available to help pay off loans and other debt more cheaply or quickly. Here are a few strategies that can help millennials reduce their debt burden:

Income-Driven Repayment Plans

Use income-driven repayment plan to reduce monthly student loan payments. These three plansIncome-Based Repayment (IBR), Pay As You Earn and Income-Contingent Repaymentare designed to help make student loan debt manageable by calculating a borrower's monthly loan payments based on their income.

After 20 to 25 years of on-time, qualifying payments, your remaining loan balance may be forgiven. But only federal student loans will qualify. Find out more at studentaid.ed.gov. While these plans can help free up cash flow, Boneparth points out that it may take longer to pay off student debt using an income-driven repayment plan (and you can end up paying more in interest as the life of the loan may be extended).

Refinance or Consolidate

Refinance or consolidate your student loans to lower the interest rate. Your goal with any loans should be to pay as low an interest rate as possible. Try to get a fixed rate, even though variable rates are often lower. Most economists agree that interest rates are poised to rise in the next year or soand when they do, the interest on your payments will rise, too. So you want to fix your rate if you can. Shop around for the best rates. MagnifyMoney.com has a helpful tool that will let you compare loan options in one chart.

Negotiate Higher Pay

Negotiate for higher pay and put extra income toward paying down debt. Most millennials never negotiate their salary because they are uncomfortable, don't want to be perceived as pushy or are worried about losing their job. Only 37 percent of millennials have ever asked for a raise, according to a recent PayScale report, despite the fact that 43 percent of those who asked received the pay increase they were looking for.

What could earning an extra $5,000 a year mean for a 25-year-old? "An extra $5,000 a year can add up to $500,000 in extra earnings over the course of your lifetime," said Lauren Lyons Cole, a New York-based financial planner. "So it's far easier than cutting coupons, or trying to budget. It's a really good way to impact your bottom line."

After landing a new job earlier this year, Will increased his monthly student loan payments and is now eager to move on to the next stage of his life. "In the near future, I may be looking to buy a home ... as I further my life."

But he knows reaching that goal will take time.