by Repayable | Nov 27, 2017 | #Millenniallife, Mindset, Money Matters
Student loan stereotypes are often held as truths near and dear to the hearts of non borrowers. Today’s post is here to crush those stereotypes into oblivion with widely available data packaged up in a usable form. Why? Because if folks run around believing stereotypes instead of reality it makes solving student loan debt much harder.
Cheers to the facts so you can slay the student loan stereotypes. Estimated read time < 5 minutes.
5. You have debt because you didn’t work during college.
- In 2015 43% of full-time college students and 78% of part-time college students worked.
- In 1980 the inflation-adjusted minimum wage was $9.83/hour. Currently the minimum wage in Wisconsin is $7.25/hour.
The buying power of minimum wage has significantly decreased since 1980.
4. You borrowed mostly for booze and spring break.
- According to a 2016 Student Loan Hero survey 79.8% of students said they did not use student loans to pay for things other than educational expenses, such as vacations, dining at restaurants, or entertainment.
- The 20% of students who used their student loans for other expenses were more likely to use the money to pay for cell phone bills and car payments than for vacations and alcohol.
Eighty percent of students said they did not use student loans to pay for things other than educational expenses.
3. You should’ve gotten scholarships to pay for college.
- Annually the private sector offers around $3 billion dollars in private scholarships.
- There is around $14.6 billion available in Pell Grants and another $20 billion in institutional grants.
- This fall approximately 20.4 million students attended college. That’s an average available amount of around $2,000 per student per year if all college students split up the available funding.
If the available grant and scholarship dollars were divided among all college students, each student would get around $2,000 per year.
2. You borrowed so much because you went to a private college.
- In 1980 the inflation adjusted cost of tuition and fees + room and board at four year public institutions was $7,015.
- In 2015 the cost of tuition and fees + room and board at four year public institutions was $19,189.
The inflation-adjusted cost of tuition and fees plus room and board at four year public institutions has increased 274% since 1980.
1. You have student loan debt because you were irresponsible.
- The annual cost for tuition and fees plus room and board at a four year public institution is over $19,000.
- The minimum wage is $7.25/hour in Wisconsin.
- The amount of scholarship and grant money available if split evenly among borrowers is about $2,000.
- In 2017 if you work at minimum wage for 20 hours per week (+$6,963 after taxes), obtain scholarships and grant money annually (+$2,000) and attend a public 4 year institution (-$19,189) you won’t have enough money to pay for college let alone books, and other necessary expenses.
- Objectively speaking for the average student working part time and obtaining scholarships and grants is not enough to cover the actual costs of attending college. The shortfall is over $10,000 every single year. After four years that’s a $40,000 deficit yet the average student has only $30,000 in student loan debt. Students and their families are being creative and working hard to minimize the amount of debt they borrow for college.
Despite working and obtaining scholarships the estimated shortfall for four years at a public institution is $40,000.
Times have changed, this is the true picture of paying for college.
In 1980 you could work a minimum wage job for $3.10/hour and pay $3,499 each year to attend college. That means the college student had to work 22 hours per week at minimum wage to pay for their costs.
Today you could work a minimum wage job for $7.25/hour and pay $19,189 each year to attend college. That means the college student had to work 51 hours per week at minimum wage to pay for their costs.
Costs have gone up and the buying power of minimum wage has gone down. The burden of student loan debt is not a result of work ethic, partying, failing to apply for scholarships and grants, attending private college, or being irresponsible. The burden of student loan debt is a result of increasing costs.
You’re a smart repayer who knows their facts and doesn’t take crap from anyone. If you learned something new please give this post a share and help slay the stereotypes!
Resources
Like this:
Like Loading...
by Repayable | Nov 20, 2017 | #Millenniallife, Advocacy, Loan Forgiveness
Student loan forgiveness is one hotly debated topic. The fact that we have student loan debt at all is probably the only topic debated more.
Today’s post is going to share my personal experience and why I didn’t choose Public Service Loan Forgiveness (PSLF) despite the fact I have eligible employment and it would have saved me tens of thousands of dollars.
This isn’t to say that you have to share my mindset or that you should feel guilty about making the financial choice that’s best for you. This post is here to share a perspective you might not hear from anyone else through my own experience. It’s not about getting you to make a certain choice. It’s about helping you see there are countless alternatives to the standard school of thought so you can give yourself permission to pursue the one that fits your financial needs and moral compass.
$128,000 in Federal Loans at 6.8% Interest
I graduated in 2013 with my Pharm.D and went straight to residency. I made the decision to make income based monthly payments of around $360 per month because there was no way at $47,000/year I could afford the 10 year payments of almost $1,500 per month. After finishing residency and despite paying $6,000 toward my student loans my amount went up to $132,000 because I couldn’t keep up with interest.
It was Time to Go For It
After becoming a salaried pharmacist I had a choice to make. Continue in my income-based repayment plan and wait nine more years for Public Service Loan forgiveness or take matters into my own hands, control my destiny, and decimate my debt aggressively.
Here are the financial deets.
You can do the math, it’s going to cost me $60,000 more if I pay my loans off myself in 10 years instead of waiting for forgiveness. So why the hell would I make this choice?
I Believe PSLF Isn’t Meant for Me
Here’s the thing, whether I pay $1,100 a month (my income-based payment) or $1,500 a month I can still live the life I want to. I’m incredibly fortunate and have a job that fairly compensates me and sets me up for financial success despite my six figure debt.
There are a lot of people who aren’t so fortunate. Think about a social worker who has $57,500 of student loans for their masters degree so they can help the most vulnerable patients in the hospital obtain affordable access to medical equipment, home care, etc. This social worker makes $50,000 annually. They will pay about $79,200 in a standard 10 year repayment plan and around $48,000 under PSLF that’s a $31,000 savings.
Because the social worker makes less than I do as a pharmacist, a larger percentage of their monthly income goes to necessary living expenses. Their forgiven dollar amount is less than mine would be and the savings can ease the real impact student loan debt has on their every day life. More good is done in their life by spending less money.
If I Take PSLF, if Comes at a Cost to Someone Else
The fact of the matter is, when PSLF was designed they had lower debt, lower income borrowers in mind. Unfortunately they attracted a lot of high-debt high-income borrowers like myself and many other pharmacists, physicians, and high income folks working at non-profit institutions. That means there’s not enough funding to go around.
I Care About My Fellow Borrowers, Not Tax Payers
We all pay our fair share of taxes here in the middle class, and if my tax money can be used for something I believe in I don’t mind paying taxes. That’s why I chose not to utilize PSLF because I didn’t need it, I could afford to pay my loans with marginal financial sacrifice. I want this money to be there for people who need it. If I use it, it won’t be.
What About You?
What do you think about the idea of “saving” loan forgiveness for someone who needs it? What do you think about the idea of borrowers who can afford to pay their loans under standard repayment taking advantage of the savings offered via PSLF? Let me know in the comments below or on the Repayable Facebook Page.
Like this:
Like Loading...
by Repayable | Nov 13, 2017 | Refinancing
Photo credit: Raquel Martínez
Now that you’ve started getting rate quotes for refinancing your student loans you’ve probably noticed there are two different rates for each refinancing company. Each lender offers both a fixed interest rate and a variable interest rate. What’s the difference? And which one is better for you? Learn what you need to know to choose the best option for you. Estimated read time ~ 8 minutes.
Fixed Interest Rate
An interest rate that remains the same over the entire loan term and does not fluctuate based on market rates.
Practically speaking, fixed interest rates offer stability and eliminate any worry about skyrocketing interest rates. The trade off for stability is often a higher interest rate meaning you may pay more interest.
Best For:
- Borrowers who plan to take their time repaying their student loan debt.
- Borrowers who don’t like the idea of a changing interest rate.
- Borrowers who refinance during a period of rapid inflation.
- If the offered fixed rate is within 0.5% of the variable interest rate.
- If the fixed rate is the lower than the variable interest rate.
Variable Interest Rate
An interest rate that changes over the term of the loan based on a market benchmark rate (such as the LIBOR index).
Practically speaking, variable interest rates are often considerably lower than fixed interest rates and offer the borrower a chance to save big on interest. The trade off for a lower initial interest rate is instability. Your interest rate may rise above the level of your comparable fixed interest rate.
Best For:
- Borrowers who plan to repay their student loans in less than five years.
- Borrowers who won’t be kept awake at night by an increasing interest rate.
- Borrowers who refinance during a period of low inflation.
- If the variable interest rate is at least 1% less than the fixed rate.
Choose Your Best Option
- How much is your fixed rate and how much is your variable rate? If your variable interest rate is within 0.5% of your fixed interest rate, the security of a fixed rate likely outweighs the potential savings of a variable rate. If the fixed rate is lower than the variable rate the fixed rate is the obvious choice.
- How do you feel about your interest rate changing with the market? Your variable interest rate will change over time, there’s no doubt about it. In today’s market your variable rate will likely slowly increase over time. If that makes you feel sick, anxious, or like you’re going to lose sleep then a variable rate isn’t for you.
- How aggressively are you repaying your student loans? If you’re being super aggressive and repaying your student loans within the next 2-5 years a variable rate could make a lot of financial sense. You will start out with a lower interest rate when your debt is at it’s highest. That means your savings will be the biggest early on. Because you’re repaying quickly your debt will decrease quickly so even if your interest rate goes up it will accrue on a smaller amount of debt so it will take you a while to lose your initial savings. If you plan to take longer than five years a variable rate may not be the best for you.
- How stable is the market? Many variable interest rates are based on the LIBOR index which has been slowly increasing recently. The United States is still in a period of low inflation meaning it’s unlikely you will see your interest rates sky-rocket. If the market becomes unstable and inflation starts to shoot up a fixed rate provides much more security. Variable interest rates are often capped at around 8%.
What did you choose when you refinanced your student loans? Leave a comment below, on the Repayable Facebook page or send me an email jeni@repayable.org Cheers to your #debtfreedream and choosing the interest rate that makes sense for you!
Like this:
Like Loading...
by Repayable | Nov 6, 2017 | #Millenniallife, Getting started
Samuel Zeller
It can feel like the only way to get out of student loan debt is avoid anything fun and only pay down your student loan debt aggressively. Yet you want to live the life you imagined your college degree would earn you, a life without ramen noodles, clearance only clothes, and every night spent home. How do you live your life fully and repay your student loans while making the dollars add up?
Read on for strategies to repay your debt without missing out on everything.
Have a little fun
Repaying your student loans doesn’t have to mean spending all of your extra money on your debt. You can still have some fun, you just can’t have all the fun. If you love to travel maybe a large trip once per year and a smaller weekend getaway are enough to get you through repaying your debt. If you want to go out with friends, decide how often that fits in your budget.
Be conscientious and choose to spend on the fun activities that enrich your life so you don’t look back and feel like repaying your debt was a black hole sucking in all your joy.
Decide if you want stuff
Many people get happiness from experiences rather than things. Decide if you would rather have new stuff or save your money for something else. When you do need stuff try to plan your purchase so it meets your needs and you don’t end up having to buy something similar in a few months.
Instead of telling yourself you can never buy anything fun re-frame it as choosing not to buy stuff because you prefer to spend your money on travel, sky diving, football tickets, you name it.
Plan for your future
When you’re focusing on getting out of debt it can be easy to bankrupt your future self. You know, the one who wants to get married, or buy a home, or retire someday. Be sure to put away for some minimum requirements.
You need an emergency fund. How big of an emergency fund is up to you. You need at least one month of expenses at a minimum, although three months is better.
Contribute up to the max match in your employer-sponsored retirement plan if you can afford it. Don’t leave any of your employer’s money on the table, that is something you will miss out on because you won’t be able to get that match later.
If you have a big life goal like a wedding or a house to pay for decide how far into the future you’re willing to push that purchase. If you’re willing to wait until you’re out of debt then wait. If not, prioritize saving for this now.
You can’t have it all but you can have some…
What is it that you’re most afraid of missing out on? My priorities are getting my employer match, having a three month emergency fund, and traveling at least once a year. I don’t compromise spending in these areas to pay extra on my loans but I will compromise other types of spending such as buying stuff, going out to eat, or getting drinks.
-
Weigh your desires against your debt
Think about how much happiness you’re going to get from paying for what you want and then think about how much happiness you get from making progress on your debt. If you don’t get that much satisfaction from repaying your debt think about how much worry having that debt brings you. Choose the option that maximizes your happiness.
Most of us are in student loan debt repayment for the long haul, anywhere from 2 to 25+ years. Think like you’re running a marathon, not a 5K. That means you need to develop a repayment strategy that considers your long term goals and that strategy will be different for everyone.
I want to know what you’re most worried about missing out on because of your student loans? Share your thoughts in the comments below or on the Repayable Facebook page. As always you can email me jeni@repayable.org with any questions, I’m here to help!
Like this:
Like Loading...
Recent Comments