“Hello, my name is Jeni and I have a mountain of student loan debt.” “Hello Jeni.” reply the millions of millennials drowning in debt.

I know my education was an investment in my future and this post isn’t here to whine about the high cost or to dictate what ought to change about rising costs and increasing debt. Today’s post is here to show you how to break free from student loan interest rates that are bankrupting you.

Let me take you back to January 2016 when I was filing my taxes. It was my first entire year making pharmacist pay and really taking it to my student loans. Ha! I’ll show you student loans! I shouted victoriously as I chucked thousands of dollars per month at the formidable loans. As I filed on Turbo Tax I pulled up my 1098-E and this is what I saw.

Do you see how much interest I paid Navient in 2015? Nearly $14,000 !?! Oh well I thought to myself At least the government is going to owe me a bunch of my tax money back… Haha oh how delusional was I? Turns out there’s an $80,000 cutoff for individual income. If you make over that, you can’t deduct your student loan interest… Now I was livid.

I was gonna find a way to fight this injustice. My federal loans were sitting pretty at 6.55% interest. I spent so much money on this debt and still owed six figures!

So I started looking around at refinancing options. They all seemed kinda sketchy and unreliable to me. I checked out a few options which had specific terms of repayment, fees for transferring loans, and early repayment fees all for a measly 1% interest rate discount and just weren’t worth it for me.

Then a friend (thanks Travis!) recommended I check out SoFi. Which I immediately did. I put in my income information and got quoted at about 5.4% for a fixed rate and about 4% for a variable rate… Now I was on to something. While these were lower rates they still weren’t good enough to entice me.

Then it happened. I was listening to Grammar Girl (one of my fav podcasts!) and she started talking about student loan refinancing through Earnest. So I decided to check it out and it’s the best financial decision I’ve made in a long time!

How to Refinance Student Loans w/ Earnest

(Use these links and we both get $200 when you refinance)

Step One: Get an Estimate

You want to make sure that refinancing makes sense for you so go to earnest.com using this link (so we both get $200). And right away on the home screen click the 2 min get your rate box.

When you click the button you’ll have to fill out this form with identifying information (name address), income information, student loan balance, assets, rent/mortgage, college information (name of college, degree, and graduation date). You’ll also have to create an account using your email address and provide your social security number so they can do a soft check of your credit (soft means it won’t show up on a credit report).

After that you click “get your rate”. Soon  you’ll have an estimated interest rate. Mine was 3.36% variable and 4.7% fixed.

Step Two: Ask Their Friendly Customer Service Anything

So, you’ve got your rate estimate and have decided that it makes sense for your to refinance. But now you’ve got a million questions… well at least I did. I immediately contacted their customer service via email. Amazingly they responded to me that day! And multiple times. I exchanged at least 10 emails with a variety of questions about early repayment, penalities, transfer fees, how to make extra payments, fixed vs variable interest rates.

Step Three: Fill Out Your Profile

There are four main areas of your profile (aka your loan application). In your profile you will provide information about your education, employment, finances, and personal (DOB, address, etc). I was required to upload a picture of my driver’s license but otherwise it was super easy.

**A quick note for any other pharmacy folks out there. I had to do something non-intuitive when entering my education. I only completed two years of pharmacy pre-requisites in undergrad and never obtained a degree because I got into pharmacy school right away. That meant I had to list the University of Iowa as a bachelor’s degree and then select “transferred” instead of completed. Then select the University of Iowa again and enter my Pharm.D. If you get stuck just open up a chat or send a quick email. The customer service at Earnest helped me figure out why I couldn’t enter my education and solved the problem for me.

Step Four: Submit Your Application and Wait for Approval

Earnest will turn your application around quickly. For me it took just over 24 hours. They gave me final rate estimates for fixed vs variable and then it was time to decide to move forward with refinancing.

Step Five: Choose Your Payment Amount

One of the coolest things about Earnest is it’s flexibility. After you’re approved you can see the effect of changing your monthly payment on interest and duration of repayment. There’s a cool slider that you move to change your monthly payment and it will show you the estimated interest rate along with the time ’til payoff. It’s a super handy real-time way to see the financial impact of increasing or decreasing your monthly payment amount. Not my slider below, though I wish it was… add a zero on the end of the payment amount and that’s what mine looked like 🙂

Step Five: Choose Fixed or Variable Interest Rate

This can be a personal decision and may be based on your personal risk tolerance. There’s a handy FAQ which has a ton of helpful information about the application process. There is a specific FAQ about choosing variable vs fixed rate which I found very helpful. Essentially it tells you that the variable interest rate is determined by the 1-month LIBOR index (see link for historical rates). I’ll walk you through my thought process behind choosing a variable rate but you should make the decision that’s best for you.

I plan to repay my student loans by the end of 2018 (lofty goal I know since I have ~$98K left).  The LIBOR index has been <1% since late 2008. It continues to approach 0%. Interest rates like these are based on inflation. Which right now is also very low. So in terms of market stability I think the risk of my variable interest rate shooting up to the capped 9.95% is low.

My variable interest rate is 3.36% vs 4.7% fixed rate. So that means every month on a variable rate I’ll have to pay about $275 in interest and if I choose the fixed rate I would pay about $385. As more time passes I will save more money so if the variable rate increases it would have to increase a lot for me to have made an unwise choice. Another thing I considered was in order for refinancing to have been a bad choice my variable interest rate would have to nearly double…

Final Steps: Link Your Accounts,Upload Statements, Sign

Your last steps will be entering the account and a routing number for the checking account your monthly payments will be made from. Then you enter your existing loan servicers and determine the 10-day payoff amounts for your loans. Then you upload your most recent loan statement, even screenshots are good enough as long as they have current balance, interest rate, account number, and date.

Then if everything looks good to you all that’s left is to review the terms of your loan agreement, electronically sign the document, and submit it.

 

 

That’s it! You just halved your student loan interest rates! Way to take control of your financial security 🙂 Tell me what you’re going to do with the thousands of dollars you no longer have to spend on interest in the comments below or in the Millennial Maxims Facebook Group.