by Repayable | Jun 12, 2018 | Ask Jeni
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.
How do I pick the right student loan for graduate courses? What are the benefits of a Direct PLUS federal loan vs a private loan such as Sallie Mae?
If you have access to federal student loans they are almost always your best bet. Here’s why.
- Typically federal student loans, including Direct PLUS loans, have a lower fixed interest rate than private student loans.
- Federal Direct loans are also eligible for loan forgiveness but private student loans aren’t eligible.
- Federal student loans also have the most flexibility during repayment, there are income-driven plans and options to defer payments. Private student loans have less repayment flexibility.
Federal student loans have numerous repayment options, are eligible for loan forgiveness, and typically have lower fixed interest rates than private student loans. If you have access to enough Direct PLUS loans to cover the cost of your graduate courses, pick those over private student loans. If you don’t quite have enough money in Direct PLUS loans, borrow the Direct PLUS loans first then carefully borrow the amount you still need to cover your courses from a private lender.
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by Repayable | Jun 6, 2018 | Mindset, Think Pieces
Getting out of student loan debt is a long term goal. It’s no easy feat to wipe out tens of thousands of dollars in education-related debt. For most of us, becoming student loan debt free is an undertaking that takes years to accomplish. Today’s post is going to talk about the totally normal waxing and waning of motivation that happens when you decide to tackle your student loan debt.
Read this if you want a fresh perspective on why your motivation for repaying student loan debt cycles. Estimated read time ~5 minutes. 1.5 x watch time ~4 min.
To describe the changes in motivation that happen throughout student loan debt repayment I’m going to use the trans-theoretical model, better known as the stages of change. This model is commonly applied to behavioral changes such as beating addiction or making another health-related lifestyle change. The stages of change also apply to tackling your student loan debt.
Stage 1. Pre-contemplation
Borrowers in this stage are not thinking seriously about repaying their student loans and tend to defend their current lack of concern. Many don’t see student loan debt as a big deal. The benefits of borrowing money outweigh the adverse consequences so they are happy to continue borrowing.
This is the stage most actively enrolled college students are in. Students need money to pay for their education so they continue to borrow and spare themselves from worrying about the long term impact of repaying the loans until a future time.
Stage 2. Contemplation
Borrowers in this stage are able to consider the idea that they can do something about their student loan debt but feel ambivalent about taking the next step. On the one hand their student loans gave them the education they needed, and ignoring repayment may give them more money to spend each month. On the other hand, they are starting to experience some adverse consequences like wage garnishment, offset tax returns, and collection calls if in default or rapidly accumulating interest, failure to pay down principal, or not enough cash flow if in the wrong repayment plan.
This is the stage many recent graduates are in and this is often the stage many defaulted borrowers are in. The consequences of student loan debt are starting to surface and come to a borrowers attention.
Stage 3. Preparation
Borrowers in this stage have usually made a recent attempt to figure out what to do about their student loan debt. Borrowers are less ambivalent about taking the next step because they see the cons of doing nothing are starting to outweigh the pros. They are usually taking some small steps towards changing their repayment approach. They believe that change is necessary and that the time for change is imminent. Equally, some people at this stage decide not to do anything about their current repayment strategy.
When borrowers reach out to me with an email, this is typically the stage of change they’re in. Borrowers in this stage have often done some reading online or perhaps unsuccessfully contacted their loan servicer to figure out what their best student loan repayment strategy is. This stage can happen at any time for a borrower.
Stage 4. Action
Borrowers in this stage are actively taking steps to change their repayment strategy and making big steps towards significant change. Ambivalence is still very likely at this stage. There is a great risk of “relapse” in this stage because borrowers are likely to encounter several difficulties and a lack of information.
Borrowers in this stage are calling their loan servicers, completing necessary applications, and actively making adjustments to their repayment strategy. This stage happens after borrowers have reached a decision about their student loan repayment strategy.
Stage 5. Maintenance
Borrowers in this stage have successfully changed their repayment strategy and are continuing to keep up with maintenance paperwork (such as annual income certification) and are making on time monthly payments. These borrowers have learned to anticipate expenses and have developed effective financial strategies to stay on track. Borrowers may lose sight of their goal temporarily, but don’t tend to see this as failure.
The Cycle of Motivation
During the long process of repaying student loan debt, some borrowers will experience default, or relapse. Relapses can teach important lessons and strengthen a borrower’s resolve to get out of debt for good. The drawback is that relapses can also trigger a borrower to give up on their quest for a #debtfreedream. The key to recovering from a relapse is to review the repayment process up to that point, identify strengths and weaknesses, and develop a plan to resolve those weaknesses to solve similar problems the next time they occur.
Relapse is a factor in the action or maintenance stages. When it comes to substance abuse and lifestyle change, research clearly shows that relapse is the rule rather than the exception. If you’re struggling and need a little help you can always DM @therepayable on Instagram or send me an email jeni@repayable.org
A lapse is different from a relapse. A lapse is a slip up with a quick return to your maintenance repayment strategy whereas a relapse is a full-blown default. For borrowers a lapse might mean you splurged financially somewhere and failed to keep your goal of making an extra student loan payment. But you’re still on track to pay off your student loans. For borrowers counting on PSLF a lapse would be failing to re-submit your annual income certification on time and letting your income driven repayment plan change back to a standard repayment plan. You’ll pay more money than you needed to before getting loan forgiveness but you’re not ineligible because of it.
I hope this article gave you some language to think about your student loan debt and any potential slip-ups you’ve made. I would love to know what stage you’re in, let me know in the comments below or on the Repayable Facebook Page.
Next week’s post will share a few strategies you can use to move yourself forward from one stage to the next and talk about my journey through the stages of change.
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