When you have six figures of student loan debt it can feel like you’re never going to get out. Well, at least that’s my experience carrying that kind of debt. But now that I’ve been repaying my debt for about four years, I’ve finally paid off $100,000 of student loan debt.
Read on for the strategies I’m using to make the final push and pay off the last $31,000 of student loans. Estimated read time ~ 3 min watch time ~2.5 min.
In case you’re unfamiliar with my personal student loan story, it goes like this. I’m a first generation college student and attended a public, in-state university to get my Pharm.D. I worked two jobs during college and got scholarships to help pay for costs. Despite that, I borrowed $118,000 in federal student loans to become a pharmacist. By the time I graduated I owed $128,000 due to interest on my unsubsidized loans. Add on a year of residency to specialize and despite making payments my balance grew to $132,000.
I made the mistake of paying very aggresivly under my existing federal repayment plan. The problem was that my average interest rate was around 6.5%. After a year or so of that I wasn’t making the progress I expected and learned about refinancing. I refinanced my student loans for a 3.36% interest rate and learned an expensive lesson.
But here we are today and I’ve used my low interest rate to make some major progress on principal. $100,000 of progress to be exact. Here are the strategies I’m using to get me to the finish line and out of student loan debt for good.
Check your student loan balance often.
For me, I check my student loan balance every time I get paid which happens to be bimonthly. Keeping an eye on my balance reminds me how annoying interest is and keeps the reality of my debt fresh in my mind.
Lately, checking the balance has also been very encouraging. I love seeing how fast the principal is decreasing.
Make extra payments.
This is the number one way I’m on track to get out of six figures of student loan debt in the next year. I have to pay more than the minimum monthly payment.
I make a point to make an extra payment every time I get paid. I do it after paying all my bills (including retirement and savings) and before I decide how much “fun money” I have left after all that is paid.
I live in the Midwest and have a relatively low cost of living compared to other parts of the country, so the size of the extra payment you can make is probably going to be different. That’s fine, just keep the mindset that every little bit extra you can pay now gives you returns in time and interest down the road.
Acknowledge milestones.
Be sure to acknowledge and mark your successes paying down your debt. Even if it’s something like acknowledging the fact that you chose the right repayment plan, or slashed your interest rate refinancing, or submitted the employer certification form required for Public Service Loan Forgiveness.
Giving yourself credit where it’s due is great for motivating you to stay on the long path to freedom. Set up milestones that mean something to you and pat yourself on the back for a second before returning to the grind of repayment. Just don’t get too crazy treating yourself!
Imagine freedom.
Spend some time thinking about what your life will look like when you don’t have to make your monthly student loan payment anymore. Think of how that will feel financially. Think of what you’re going to use your money for instead.
Use that vision and the desire to be free from your student loan debt to fuel you to keep on keepin’ on! I know the fight can be a long one but I’m here to cheer you on every step of the way. I know you can find your #debtfreedream
How much progress have you made on your student loan balance? I love hearing everyone’s student loan stories so be sure to leave me a comment below or on the Repayable Facebook Page.
If you’ve ever thought about refinancing your student loans but felt like you weren’t exactly sure what would change then this post is for you. Estimated read time ~3 min, estimated watch time at 1.5x ~ 2 minutes.
Eligibility for Federal Student Loan Benefits
Once you refinance your federal student loans they become private student loans and lose eligibility for all federal student loan benefits. The benefits you could lose include access to income-driven repayment plans, loan forgiveness in case of borrower death or permanent disability, and forbearance and deferment.
The ability to enter deferment can be particularly important for borrowers who may go back to school full-time, otherwise they would have to continue to make student loan payments during school.
Eligibility for Loan Forgiveness
The major Federal student loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF), Income-Driven Loan Forgiveness, and Teacher Loan Forgiveness, only work for Federal student loans. Many state-specific loan forgiveness programs also only apply for federal student loans.
Bottom line: if you want student loan forgiveness, don’t refinance.
Interest Rates Based on Your Financial Potential
One of the major benefits of refinanced student loans is that a borrower can save some serious money on interest. We’re talking tens of thousands of dollars for borrowers with the highest amounts of student loan debt.
That’s because refinancing companies base your interest rate on your ability to repay your debt by looking at your credit score, your income, your total debt, and your financial assets. The borrowers with the best finances are very likely to get an incredibly competitive fixed interest rate. In contrast, Federal student loans which have the same interest rate for each borrower.
Do you have Federal student loans or have you refinanced? Let me know in the comments below or on the Repayable Facebook page.
Well we’re half way through 2018 which means it’s a handy time to check in with your student loan repayment goals. Read or watch this if you want to see how things are going for me and check out my tips for making extra student loan payments.
Estimated read time ~5 minutes estimated watch time at 1.5x speed ~ 2.5 minutes.
It’s all about your individual student loan repayment goal.
Everyone is going to have a different student loan repayment goal that makes sense for them. There is no “one size fits all” dollar amount that is right for every borrower. You’ve got to pay what is reasonable for your student loan amount, your income, and the rest of your financial goals.
The best repayment goal is $3,000 each month toward my student loans. I’ve refinanced and my required monthly payment is $1,345 each month so that means I pay at least an extra $1,645 a month on my student loans. Paying $3,000 each month is aggressive enough that I can pay my debt back quickly but still leaves me enough room in my monthly budget to spend on the experiences and things that matter most to me.
Track your repayment progress.
It’s easy to set a goal and then not check in with it until the end of the calendar year. But by then if you’re not on track it’s too late to make any changes. So I check in with my repayment progress quarterly (every three months) to be sure I’m on track and celebrate any extra success I may have had.
In the 2nd Quarter of 2018 I paid $9,840 on my student loans.
My goal was to pay $9,000 ($3,000/month X 3 months) so I was able to pay a little bit extra during the second quarter.
Use extra income for your student loans.
It seems obvious that you would want to use your extra income to pay down your student loan debt but it can be harder to practice than you might think.
The money I used this quarter to pay extra came from some consulting work I do on the side. It can be tough to convince myself to apply a percentage of that to my student loans because I hustle on top of my 40 hour work week to earn that money so sometimes I want to treat myself with it.
What has helped me to use this extra income for my student loans is to remind myself that paying even a few hundred extra means less time I’m beholden to student loan debt. Even shaving a month or two off of that debt buys me a freedom that I can’t find when I buy things or even when I travel.
Keep the big picture in view.
One thing that’s been very rewarding for me is to track my progress over the entire year.
In 2018 I’ve paid $20,385 toward my student loans. I feel great about that number. I started with almost $65,000 in January and now I have just over $45,000 left to pay off.
Each payment gets me a little bit closer to my #debtfreedream.
What are your student loan repayment goals? I would love to hear them and cheer you on toward success. Let me know in the comments below or on the Repayable Facebook Page.
Read this if you’ve heard a lot of buzz about student loan refinancing but don’t think it’s right for you. Refinancing isn’t for everyone so if you think it’s not for you, you’re probably right. Estimated read time 4 min.
When you already have Federal loans with a low fixed interest rate.
If you have federal student loans that already carry a low fixed interest rate refinancing won’t offer you much.
For example if you have interest rates between 3-4% it’s unlikely refinancing is going to significantly reduce that rate.
The real benefit of refinancing is the reduced interest rate and the thousands of dollars that can save borrowers. Refinancing comes with a tradeoff of less payment flexibility, the loss of loan forgiveness options, and sometimes other federal loan benefits.
If you’re not saving money by getting a significantly lower interest rate, student loan refinancing isn’t helpful and there are still negative tradeoffs.
When you’re considering loan forgiveness.
Refinanced student loans are private student loans. Private student loans aren’t eligible for federal loan forgiveness programs like Public Service Loan Forgiveness (PSLF), Teacher Loan Forgiveness, or Income Driven Loan Forgiveness.
If you refinance your federal loans you can no longer get your student loans forgiven.
If you’re considering loan forgiveness at all, student loan refinancing isn’t helpful and cancels any hopes of loan forgiveness.
Caveat: If you have private student loans already, you can definitely consider refinancing those loans. Your private student loans are already ineligible for loan forgiveness so you may be able to lower their interest rate by refinancing.
When you don’t have consistent income.
Payment flexibility is one of the things you lose when you refinance a federal student loan. Payment flexibility varies by refinancing company but none are as flexible as the federal repayment plan options.
If you don’t have consistent income refinancing your student loans isn’t helpful because if you experience income instability there aren’t flexible income-driven repayment plans to fall back on.
When you’re struggling to make your monthly payments on Federal loans.
If you’re struggling to make your monthly payments with your Federal loans it may be tempting to look at refinancing as a way to lengthen your repayment term and lower your monthly payments.
Federal repayment plans are your best choice in this situation. You can arrange an income-driven repayment plan and pay as little as $0 per month based on your income. All the while qualifying for income-driven student loan forgiveness.
If you’re struggling to make your monthly payments on Federal student loans, refinancing isn’t helpful because you lose many important borrower protections that keep you out of default.
What do you think?
Have you been enamored by the appeal of student loan refinancing only to decide it’s not very helpful for your situation? I’d love to hear about it. Leave me a comment below or on the Repayable Facebook Page.
If you’re considering refinancing your student loans and want to make sure you don’t miss something major this strategy guide is your place to start. It covers everything you need to know to decide if refinancing is the right choice for you. By reading the posts you’ll get a solid walk-through of the refinancing process from start to finish.
Decide if Refinancing is Your Best Option
This is the place to start.The best refinancing candidates are high earners with good to excellent credit and predictable income. If you’re considering student loan forgiveness refinanced loans aren’t eligible for forgiveness so refinancing might not be best for you. Check out the post to start thinking about the pros and cons of student loan refinancing.
Find a Refinancing Company that Offers the Benefits You Need
When you refinance your student loans those loans are now private. That means you can lose important federal benefits. Refinancing companies vary widely on which benefits they offer to borrowers. For example some refinancing companies will forgive your remaining student loan balance if you die but some don’t. Depending on your life insurance situation this may be a benefit you need. Check out these posts to get an idea of how borrower benefits can change when you refinance.
Now that you know you’re a good candidate for refinancing you’ll want to make sure to avoid pitfalls. You don’t want to get scammed, lose benefits you need, or miss out on student loan forgiveness because you refinanced. Read through these posts to build your confidence.
Interest rates can vary widely between refinancing companies. You’ll want to use the quick rate estimator on the refinancing websites to get an estimate of their rates. Put in accurate information so you get accurate estimates. A word of caution: I haven’t had much success with companies that claim to take your information once and supply all your rates, in my experience these sites left out my most competitive offers. Read through this post for a list of the top refinancing companies and a quick-start guide to shopping for the best student loan refinancing interest rate.
Choose two or three of the companies with the lowest interest rate estimates and offering the benefits you need and submit formal applications. Formal applications will pull a hard credit check and show up on your credit history. That’s why it’s helpful to do the rate estimators first to narrow down the playing field to the most competitive interest rates. You’ll want to have all the required information ready to go to speed the application process along.
That’s it. Follow these steps and you’ll be ready to snag a lower interest rate on your student loans. I’ve saved tens of thousands of dollars refinancing and I’m a huge believer in refinancing your student loan debt if it’s the right choice for you. How was your refinancing experience? Leave me a comment below!
Ask Jeni is brought to you in partnership with tuition.io, a company dedicated to helping the best companies free their employees from student loan debt.
My household income is about $230,000. I have $50,000 in student loan debt and my wife has $20,000. Would my wife be a good candidate for student loan forgiveness? She makes about $25,000 per year. Are there any options for my debt? We both have federal loans.
Let’s start out by looking at student loan forgiveness for your wife. By herself, your wife is an excellent candidate for income-driven student loan forgiveness. That means she would make payments under an income-driven plan for 20-25 years and the remaining balance would be forgiven.
However, how you file your taxes will determine whether only her income is considered or if your total household income is considered. If you file as “married filing jointly” your household income will be considered when determining the income-driven monthly payment. If you file as “married filing separately” then her income alone will be considered. Married filing separately doesn’t qualify for the same tax incentives as “married filing jointly” so be sure to talk with a tax preparer or accountant about which option makes the most sense for your financial situation.
What about the options for your student loan debt? Given your income of $205,000 a year or so $50,000 in student loan debt should be very maneagable. It gives you a debt-to-income ratio of 0.25:1 which is excellent. Your ideal loan options will depend on your personal goals.
Without knowing the specifics of your financial situation I can’t know for certain but it’s unlikely you will have any loan balance to be forgiven after 20-25 years of income-driven payments. You can use the Repayment Estimator on the Federal Student Aid (FSA) website to see how much interest you pay under different repayment plans and how long your repayment term is.
If you’re looking to get out of debt quickly you may be a good candidate for student loan refinancing. I don’t know about other debts such as a mortgage, car, etc but your student loan debt-to-income ratio is excellent and you have high personal income. If you also have an excellent credit score you have a lot of the characteristics refinancing companies are looking for.
Refinancing is a good option if your current interest rate is high and you can significantly lower it. For example I refinanced my federal loans from their 6.67% interest rate to a fixed rate of 3.37% this move will save me nearly $20,000 over the life of my loans. When you refinance your student loans your loans become private loans and lose their federal student loan benefits.
I’ve written a lot about refinancing so check out these posts if you’re considering it:
A higher monthly payment will also help you pay less interest. If you have flexibility in your household budget you can make extra monthly payments, making sure to instruct your loan servicer to direct them to principal. You can also choose a more aggressive repayment plan so your required monthly payment will be higher. If you want to get out of debt fast, paying aggressively on your student loans will minimize the interest you’ll pay and save you money.
Recent Comments