In today’s post I talk about how I paid off $132,000 of student loan debt. I share the exact amount I paid and the six year history that got me here.
Estimated read time ~ 10 minutes, estimated watch time ~6 minutes at 1.5x.
How it all started.
I took out $118,000 for 6 years of public in state school to get my Pharm.D. which I graduated with in May 2013. My federal student loans had an average interest rate of about 6.5%. After graduation I had $10,700 of capitalized interest added on to my debt.
May 2013 Student Loan Balance: $128,700
Repayment during residency was tough.
I made small income-driven payments as a pharmacy resident because that was really all I could afford on a resident stipend. Despite these payments, I couldn’t keep up with the interest and had $3,300 of capitalized interest added on to my debt. My highest point of student loan debt was $132,000 in July of 2014.
July 2014 Post-residency Balance:
$132,000
When I finished residency in late June of 2014 and finally started making pharmacist salary I really started trying to wipe out my student loans with a vengeance. The fact that I had paid about $4,000 toward my student loans during residency but my loans went up by $3,300 really frustrated me. So I knew the secret was to make high payments, pay extra, and work fast.
All in all in the calendar year of 2013 I paid $2,600 toward my student loans. And in the calendar year of 2014 I paid $12,741.50. During the calendar years that I was a student & resident I paid a total of $15,341.50 toward my student loans. Unfortunately because of capitalized interest I had accrued $19,591.49 of interest…. sigh.
My first year making real pharmacist salary.
Moving on to 2015. In my eyes I was finally making bank as a pharmacist. Earnings are all relative, to this day I feel loaded compared to resident salary and working two jobs as a student to scrape by. I went to school for so long and paid so much to make good money and I’m so grateful I’m able to earn such a comfortable living. Anyway, making good money meant I could really go after my student loans with serious effort.
In the calendar year of 2015 I paid $24,548.32 toward my student loans. And it felt like a lot of money. Of those payments, $7,409.80 went to interest. So if you combine 2015 with the previous years, I paid $39,889.82 toward my student loans, and $27,001.29 went to interest.
2015 Student Loan Payments:
$24,548.32
Despite the fact that I had paid nearly $40,000 over the past 2.5 years since graduation I had only reduced my principal by less than $10,000 ($9,888.53 to be exact). I was frustrated & beaten down but knew there was only one way out and that was forward.
The tax deduction that started it all.
In 2016 I remember filing my 2015 taxes, and submitting the tax form to claim the interest deduction on my student loans. I wasn’t a particularly savvy borrower and didn’t know a whole lot about the deduction, other than I filled in the box on TurboTax. But this year, when I filled in the box, I got a wakeup call.
I couldn’t claim the deduction because I was above the individual income cap. I lost it, I screamed at my laptop as though my rage could melt this ridiculous limit out of tax law. The only reason I made above the individual income cap was because I busted my ass in school and took out six figures of student loan debt to become a pharmacist. The government was taking my money twice, first when they taxed my income, and second when they collected thousands of dollars of interest, I was furious.
I felt like was working hard and getting screwed. Come on! I had paid so much toward my student loans… for what? To see the balance decrease by under $10,000… there had to be a better way!
This frustration started my entire journey to becoming a savvy repayer and dedicating myself to developing student loan repayment expertise. Because of this incident, you’re reading this very blog!
It turns out there was a better way, but I wouldn’t discover that until later in 2016. So for now I continue making extra payments and trying to really tackle my student loans.
Time to lower my interest rate.
In 2016 I paid Navient $10,500 (just under $3,000 was interest) before I refinanced my remaining $99,000 of student loans with Earnest for a 3.36% variable interest rate. I found out about refinancing from a friend and started researching. Ultimately, I got estimates for a few different companies and then chose Earnest and a variable interest rate because it was significantly lower than the offered fixed rate (around 1.2% lower) and I knew that if it started to creep up I would refinance again.
If you’re reading this and thinking about refinancing be sure to start with the Student Loan Refinancing Strategy Guide. Refinancing was the right choice for me but might not be for you.
2016 Refinancing Details:
Balance: $99,000
Interest rate: 3.36% variable
So for the second half of 2016 after refinancing I paid $14,000 toward my student loans, but unfortunately don’t have documentation of the amount that went toward interest. My 2016 grand total was $24,500 toward my student loans.
2016 Student Loan Payments:
$24,500
The year of the fence.
In 2017 my boyfriend at the time (now fiance) bought a house, no homebuying for me since I still had a mortgage worth of student loan debt. We decided to fence in the yard for my dog Link, that meant some tree removal and the cost of a fence. We split the costs evenly but it was still thousands of dollars.
Look at that face!
I’m happy we spent the money on the fence. Link loves the yard and I love not having to let him out on a leash in whatever undesirable weather we’re having.
Link is really important to me, I love him dearly. It makes me so happy to play fetch with him in the yard and see him running around sniffing to his heart’s content. Money spent on the fence was money I couldn’t use to pay down my student loans. A worthwhile exchange for me, because that spending still gives me a lot of joy.
My variable interest rate had crept up to just over 4%. So in July 2017 I refinanced again, this time locking my remaining $73,000 in for a low fixed interest rate of 3.37%. But with all the money I spent on a fence, my student loan payments suffered a bit in 2017. I paid $24,000 toward my loans that year.
2017 Refinancing Details:
Balance: $73,000
Interest Rate: 3.37% fixed
Student Loan Payments: $24,000
2018 was the year of the rally.
I looked at my remaining balance and realized I could be out of debt before I turned 30. So I set a new goal and started ramping up my payments to make sure I paid my student loans off before August of 2019.
A few things really helped me tackle my debt in 2018. The first, was a new job with a significant salary increase. The second was the nearly 300 hours of PTO I cashed out when I switched jobs. That money helped me pay for my wedding and my student loans.
In 2018 I put $44,000 toward my student loans. I was paying the lowest amount of interest ever and the principal balance was dropping fast.
2018 Student Loan Payments:
$44,000
In 2019 I finished this thing!
So here we are in January of this year. I’m starting out with a student loan balance of just over $22,000 . After six years of repaying my student loans, I realize I’m finally going to pay them off!
I finished my student loan journey by paying $22,500 in 2019 toward my student loans and only $180 in interest. I made my last student loan payment ever July 3rd 2019. I’m finally free and I can’t believe it!
My freedom face on the 4th of July!
Just over six years after finishing pharmacy school I paid $154,585.55 on my student loans. For me, this repayment pace had some balance. I repaid my debt fairly quickly and sacrificed some things to do it but was also able to travel a little and spend money on what mattered most to me.
Where are you at in your repayment journey? Leave me a comment below or on the Repayable Facebook page. I love hearing from my fellow repayers. Student loan repayment is a long road and the time goes by better with company!
*A quick note about the numbers. Some of my student loan repayment history is incomplete. I don’t have complete records from the lenders during my entire repayment period, especially early on and in the middle when earnest was bought out by Navient. I relied on bank statements to see how much I paid over time, but couldn’t see the amount of interest and remaining loan balance.
Congratulations!!! You’ve taken your last exam, written your last essay, and taken out your last student loan. Now that you’ve graduated, the logistical questions of paying back those student loans are starting to come up. No worries! In today’s post you’ll learn how to handle your student loans now that you’re finished with college.
Estimated read time ~8 min. Estimated watch time at 1.5x ~6 min.
What to expect right after graduation.
Federal loans and private loans might be treated differently. Federal student loans have a six month “grace period”. During this period you don’t have to make payments on your student loans. If you haven’t found work yet, this period is designed for you. If you’re already working, you may want to start making payments; if you’re planning to work toward loan forgiveness, you may want to apply for a Direct Consolidation Loan to remove your loans from the grace period so your early payments count toward the number needed for forgiveness.
Different lenders handle private student loans differently. Yours may offer a grace period or they may start collecting payments soon after graduation. Be sure to contact your lender to find out which it is so you don’t miss any payments.
Take an honest look at your debt and know your loans.
Student loans invoke fear of the unknown like nothing else. I mean, we all know that 70% of today’s graduates have debt, but how many of your friends have you actually discussed real numbers and real repayment strategies with? I bet it’s almost zero. There’s a real sense of shame that accompanies student loan debt, which contributes to fear and leads to avoidance.
Don’t follow that path. Look your loans right in the eye, know exactly how much you owe and who your servicers are. Learn which types of loans you have, federal or private and differentiate among federal loan types (Pell, FFEL, Direct, Grad PLUS) then proceed to the next section. Repayable’s Roadmap to Understanding Your Student Loans has everything you need.
Choose your repayment plan.
Exit counseling for student loans is…. lacking in depth at best. That means you may leave college with no real understand of your options and the advantages or disadvantages of each plan. I recommend checking out this post Picking the Right Repayment Plan for an in-depth review of your options.
In general, income-driven plans are best for anyone seeking Public Service Loan Forgiveness (PSLF), Income-Driven Loan Forgiveness (IDLF), or who can’t afford a higher monthly payment. The biggest downside to these repayment plans is that lower payments lead to longer repayment terms which means you’ll pay significantly more interest.
If your goal is to repay your debt quickly, the 10 year standard plan is a solid option. This plan will help you pay off your loans quickly and with the least amount of interest. The biggest drawback to this plan is that the monthly payment can be incredibly high, to the point of being unaffordable for some borrowers.
When it comes to the Graduated Repayment plan or Extended Repayment plan, I tend not to recommend either of these options. Under both plans you will pay more interest than another plan. The graduated repayment plan has payment increases every two years which often become unaffordable for borrowers. And because payments start low under this plan, sometimes the payments only cover the interest on the loan and don’t actually reduce the balance until the payment increases. One of the four income-driven plans is likely a better fit for a borrower struggling to afford monthly payments.
Consider your loan forgiveness options.
Some borrowers are interested in pursuing loan forgiveness after graduation, but for others the path to loan forgiveness is too far away. I suggest starting your exploration by reading Three Major Types of Loan Forgiveness.
Here’s a quick overview of the three largest federal student loan forgiveness programs.
Public Service Loan Forgiveness (PSLF). Forgives the entire remaining balance of student loan debt tax free after 120 months of eligible payments while working full-time for an eligible employer.
Teacher Loan Forgiveness (TLF). Forgives either $5,000 or $17,500 of undergraduate student loan debt tax free after five consecutive years of serving as a high quality teacher in a qualifying low-income school district.
Income-Driven Loan Forgiveness (IDLF). Forgives the remaining balance of student loan debt after 20-25 years of income-driven repayment. The forgiven amount is taxable.
What about refinancing?
With all the podcast ads you’ve probably listened to the siren song of refinancing companies promising to save you thousands of dollars. Refinancing can be a good option for some borrowers and detrimental to others. If you’re considering refinancing I recommend starting with the Refinancing Strategy Guide.
A couple of quick points about refinancing.
It’s the only way to lower your interest rate.
Best suited to borrowers with good to excellent credit (which you may not have yet had a chance to build).
Best for borrowers with high income relative to debt.
Best for borrowers with predictable income.
Privatizes federal student loans so not for borrowers pursuing one of the three federal loan forgiveness programs.
Can be particularly advantageous for lowering the interest rate on private student loans.
Take a moment to congratulate yourself.
You’ve done something awesome and finished your college education. You’ve mastered exam taking and you’re going to master student loan repayment too. Repayable is all about empowerment with clear actionable information you can use.
Now that you’ve made it through the starter guide to approaching your student loan repayment after graduation you’re set to take charge of your debt. If you have any questions, don’t hesitate to reach out. Join the community on Instagram, YouTube, and the Repayable Facebook Page.
What do you need to know about the two most common types of federal student loans? Today we’re going to talk about the differences between Direct subsidized and unsubsidized loans. Read on for more.
Estimated read time ~ 5 min. Estimated watch time at 1.5x ~3 min.
They’re both federal student loans
Both subsidized and unsubsidized student loans are made by the department of education. Both types of student loans qualify for Public Service Loan Forgiveness (PSLF) and Income-Driven Loan Forgiveness (IDLF). While they both qualify for Teacher Loan Forgiveness (TLF), remember that only student loans used for undergraduate education are eligible for TLF.
Interest is handled differently
Let’s start by talking about how interest is handled for Direct subsidized student loans. During certain times interest that accumulates is paid for by the Department of Education. Here are some examples of when you won’t be responsible for paying the interest on your subsidized student loans:
You’re enrolled in courses at least half time
You’re in the grace period (the first six months after graduation) and not a Direct Loan borrower between July 1, 2012, and July 1, 2014
You’re in deferment (a postponement of loan payments)
If you have Direct Unsubsidized student loans, you’re always responsible for paying the interest. That means if you choose not to pay, such as when you’re actively in school or in the grace period, the interest will capitalize. Capitalization means any interest you haven’t paid gets added to your principal balance and you pay interest on the new, larger, balance.
Once you’re actively in student loan repayment, interest is treated the same between subsidized and unsubsidized student loans and capitalizes on itself.
There are different maximum borrowing limits
The maximum total (lifetime) amount of subsidized student loans you can borrow is $23,000 for undergraduate students and up to $65,000 for independent graduate/professional students or dependent students whose parents are unable to get PLUS loans*. It should be noted that graduate and professional students are no longer eligible for Direct subsidized student loans after July 1 2012, so the graduate limits are including previous courses of study.
Unsubsidized student loans are available according to remaining aggregate limits. You can find out more details about those limits here.
Demonstrating financial need
In order to get a Direct subsidized loan, you must demonstrate financial need. Unsubsidized loans are available regardless of financial need. Remember, in order to get any type of federal aid, including federal student loans such as these, you have to complete the FAFSA.
What type of student loans have you borrowed to attend college? Let me know in the comments below or on the Repayable Facebook Page.
You’ve probably heard the “sage advice” that student loan debt is good debt before. But if you’re here, asking this question you’ve got thoughts of your own and want to get to the bottom of the financial impact of student loan debt. How do student loans affect a repayer’s credit? In today’s post we’ll talk about how student loan debt can affect your credit.
Estimated read time ~5 minutes, estimated watch time at 1.5x ~2 min.
The Positive Impacts of Student Loans on Credit Score
Student loans can have a positive impact on credit score. Student loans can boost your credit score by providing positive repayment history and increasing the average age of your credit. To a lesser degree, having different types of credit can also boost your credit.
Making student loan payments consistently and on time can boost your credit score. Repayment history makes up a major chunk of your credit score, about 35%. So repaying your student loans on time each month improves your credit score over time.
Student loans can increase the duration of your credit history because they take a long time to repay. Long repayment is a burden but carries a surprising benefit. Many young adults don’t have much history with credit. Student loans can serve as a sign that you have experience with credit and boost your score. The age of your credit history makes up about 15% of your FICO credit score. You can lose the boost in age of credit history if you decide to consolidate or refinance your loans after a long period of repayment. Consolidated loans are brand new loans so the “age of credit” starts over.
Having student loan debt can signal a good mix of credit. Creditors also like to see a diverse mix of credit. Credit mix impacts your FICO score by 10%. So while diversity such as credit cards and auto loans are one piece of the credit picture they’re not the most important piece.
Student loan repayment mistakes will hurt your credit score
In the same way on time student loan repayment history will boost your credit score, late payments and default can tank your credit score.
Missed or late payments will be reported as adverse credit history. Your payment history is responsible for 35% of your credit score. The later the payment the more negative the impact on your score. Frequently missed payments also decrease your credit score more. A single missed payment can reduce your credit score by 90 or more points, even if you’ve never missed a payment before.
Defaulted student loans are 270 days or more overdue. The history of default can remain on your credit score for 7 years. Rehabilitation can remove the history of default from your credit history. However, rehabilitation doesn’t remove the late payment history that led up to the default.
High debt relative to income can impact your ability to secure a loan. Debt-to-income is used as a measure of financial health. A high monthly student loan payment relative to your income won’t affect your credit score. However your debt-to-income ratio will be used to determine the affordability of a new loan, such as a mortgage. If it’s too high, you may have difficulty getting approved.
Savvy Repayer Checklist
Make your payments on time every time.
Make your payments in full.
Contact your student loan servicer immediately if you’re going to have trouble making a payment.
Have you noticed that your student loans affected your credit score either positively or negatively? Let me know in the comments below or on the Repayable Facebook Page.
You may have heard that student loans can give you a tax break, but what exactly does that tax break look like and is it worth it? In today’s post I’ll talk about how student loans impact income taxes for different groups of borrowers.
Estimated read time ~3 min estimated watch time ~2.5 min.
Your income determines if you can deduct student loan interest
Borrowers who file taxes as single can deduct up to $2,500 of student loan interest annually if their income is <$80,000. The deduction is progressively phased out between $65,000 – $80,000 of income.
Income limits for deduction if you’re married filing jointly
Borrowers who are married filing jointly can deduct up to $2,500 of interest annually if their combined income is <$165,000. The deduction is progressively phased out between modified adjusted gross income of $135,000 – $165,000.
How much is the student loan interest deduction actually worth?
The student loan deduction isn’t something so lucrative that you should hang on to your student loan debt for. Remember it doesn’t save you $2,500, it just reduces your taxable income by that amount. Best case scenario is just over $600, but that number will vary based on your financial situation.
You can deduct interest paid on both federal and private student loans
Both federal and private student loans are eligible for the interest deduction as long as they were used for a student enrolled, at least half time, in a program leading to a degree, certificate, or other recognized educational credential. You will get a 1098-E statement of your student loan interest paid from your lender(s).
Ultimately the student loan interest tax deduction isn’t a good reason to keep your student loan debt around. But if you’re repaying your debt anyway it’s helpful to know if you can deduct that interest from your taxes.
Paying off your student loans is one of those things you want to do as efficiently as possible. No one wants to spend one extra penny or one extra day paying off their loans because they took an approach that wasn’t right for them. In today’s post I’ll talk about how to decide which student loans to pay off first. Estimated read & watch time ~3.5 minutes.
Extra payments mean decisions
The only way to pay off specific student loans early is by making extra payments. Making your minimum monthly payment only sets you up to pay off your student loans according to the terms of your repayment plan (federal loans) or loan agreement (private loans). While reading this article, it’s important to note that these instructions are about what to do with your extra payments each month.
Start with your end goal
What is the final outcome you want for your student loans? Is it that you pay them off as quickly as possible, get student loan forgiveness, or pay them off gradually over time so you don’t have as much financial pressure day to day?
Your goal is important in determining which loans you tackle first. For example, if you’re working toward PSLF, but have private student loans, you’ll want to pay off your private student loans first.
If you’re paying off quickly
If you’re a borrower who wants to pay back your student loans as quickly as possible you’ll want to target your highest interest, highest balance loan first. It’s the most expensive loan you have, with the highest interest rate, so tackling it first with extra payments will make the most significant financial impact.
If you’re counting on loan forgiveness
If you’re counting on any of the three big federal student loan forgiveness plans (PSLF, Teacher Loan Forgiveness, or Income-driven Loan Forgiveness), pay off private student loans first. These loans aren’t eligible for loan forgiveness so you’ll want to pay them off as quickly as you can on your own to minimize the interest you’ll pay.
If you’re planning on Teacher Loan Forgiveness, you’ll want to pay private student loans first, then any graduate student loans you may have. These student loans aren’t eligible for forgiveness under Teacher Loan Forgiveness.
If you want small achievable goals
Another strategy is to use the “snowball method” to pay back your loans. With this strategy you would pay off the smallest student loan first to give yourself an early victory, then target the next smallest, and so on and so forth. Some borrowers find this strategy to help keep them motivated to make extra payments and tackle their loans.
This isn’t my favorite strategy because it’s not the most efficient use of your extra payments, but I definitely understand the desire to keep the motivation coming and get some wins early. My compromise for this strategy is to still target your highest interest loans first, but to pick the smallest of those higher interest loans to start with.
Private student loans are good early targets
Private student loans often have the highest interest rates that are sometimes variable. That makes private student loans good early targets for extra payments. Private student loans also don’t carry the same federal borrower protections, access to flexible repayment plans, and access to the three major federal loan forgiveness options. There’s nothing to lose and only interest savings to gain by paying private student loans back early.
Refinancing is an important consideration for borrowers with private student loans. If you’re hoping to lower your interest rate and pay of your student loan debt sooner refinancing may be a good option for you because the student loans are already private so there’s no risk of losing federal benefits. If you want to learn more about refinancing you can read more here.
Are you targeting specific student loans on your repayment journey? Let me know in the comments below or on the Repayable Facebook Page.
Whether you’re the kind of person who likes to make resolutions starting the first of the year or not, now is a good time to re-evaluate your student loan repayment strategy. It’s easy to pick a strategy and let it sit on autopilot. Today’s post is going to cover the basic student loan repayment options and help you evaluate your current strategy.
Estimated read time ~ 6 minutes. Estimated watch time at 1.5x ~4 minutes.
Evaluate Your Repayment Strategy
There are three things to consider when assessing if your repayment strategy is right for you.
How affordable is your current strategy?
Are your monthly payments easy to make, sometimes easy sometimes a stretch, or difficult to afford?
Does your current strategy match your student loan goals?
Are you wanting to pursue loan forgiveness, pay off your loans as quickly as possible, or pay as little as possible each month?
How do you feel about your current strategy?
Do you feel indifferent, empowered, or stressed out about your current strategy?
If your current strategy isn’t affordable for you and is stressing you out, it’s obvious it’s time to make a change. But if your payments are easy to make and you’re feeling indifferent it’s just as important to make a change.
Repayment Plans
The right repayment plan is the very first step to assess. You have the most control over your repayment plan choice when you have federal student loans. All of the repayment plan choices discussed below are for federal student loans. You can choose from income-driven plans to make your monthly payment more affordable and as one part of making eligible payments toward PSLF or Income-driven loan forgiveness.
If your payments are unaffordable, an income-driven plan can lower your monthly payment. The downside of an income-driven plan is that the longer you take to repay your student loans, the more interest you’ll pay. Ultimately if you can’t afford your monthly payments, that may be a worthwhile tradeoff.
However if you can easily afford your monthly payments, it makes sense to be on an aggressive repayment strategy such as the 10-year standard repayment plan. Under that plan you’ll make a fixed monthly payment and repay the entire balance of your student loans after 10 years. You’ll pay the least amount of interest under this plan.
For some borrowers student loan forgiveness is a very appealing opportunity. Right now, the most talked about loan forgiveness option is Public Service Loan Forgiveness (PSLF). In general student loan forgiveness programs are very specific in their eligibility criteria and the three federal programs only forgive federal student loans.
Here’s a quick breakdown of the three major federal student loan forgiveness options.
First up is PSLF, this program is designed to forgive the remaining student loan balance for borrowers working in public service jobs or at non-profit, government, or tribal organizations after 120 eligible payments are made (10 years minimum).
Next is Teacher Loan Forgiveness, designed to forgive up to $17,500 for specific highly qualified teachers in low-income school districts after 5 years of teaching.
Lastly is income-driven loan forgiveness, an option available to potentially everyone with federal student loans. This option forgives the remaining balance of student loans after 20-25 years of income-driven monthly payments.
You can read more about the different loan forgiveness options here.
Student Loan Refinancing
Finally, an option that suits the repayers with private student loans, federal student loans, or a mix of both. Refinancing is the only option that can potentially lower a borrowers interest rate. Here are a few situations to keep in mind.
If you have federal student loans, refinancing your student loans makes them private loans and ineligible for federal loan forgiveness programs and federal student loan benefits forever. You can’t make refinanced student loans federal loans ever again.
If you have private student loans, refinancing doesn’t carry much risk. If you can get a lower interest rate on the student loans, especially if you can get a fixed interest rate that’s lower, you’ve got the green light. You won’t give up borrower protections because you didn’t really have many to start with.
If you have a mix of student loan types, you may want to consider refinancing only the private student loans and leaving the federal student loans as they are. It all depends on your unique situation.
After looking at your student loans do you need a new repayment strategy this year or are you on track smashing out your goals? Let me know in the comments below or on the Repayable Facebook Page.
If you’re counting on loan forgiveness under Public Service Loan Forgiveness (PSLF), you’ll want to read this. Less than 1% of the borrowers who applied for PSLF have actually received forgiveness. What exactly is going on? Why are so few borrowers being granted PSLF?
Estimated read time ~10 minutes, estimated watch time ~7.5 min at 1.5x speed.
Reviewing the Rate of Forgiveness
First let’s look at the borrowers who have applied for PSLF and the categories they were sorted into. While less than 1% actually received loan forgiveness, a little over 1% have been approved for forgiveness but haven’t yet had their loans discharged.
It’s surprising to me that in June of 2018 289 borrowers had been approved for forgiveness, but come Sept of 2018 still only 206 had actually received that forgiveness. While FedLoan Servicing is the one to approve applications, the Department of Education gives the final notice to FedLoan to discharge the student loan. That process can take some time. It’s likely these 83 borrowers are waiting for the Department of Education
Reminder: If you’ve submitted your PSLF application and are waiting for discharge you must continue to remain employed full-time for an eligible employer & continue making eligible monthly payments.
The good news for borrowers, is that although they’re required to continue making monthly payments, they will be refunded for any overpayment after the 120 eligible payments have been made.
Discussion of PSLF Denials
Denial isn’t necessarily the final word in a borrower’s pursuit of PSLF. I suspect a large number of PSLF denials represent a “not yet” scenario. This would happen if a borrower hadn’t made all of the 120 eligible payments yet. That borrower could qualify for student loan forgiveness very soon depending on how many payments short they were.
79% of applications were denied due to not meeting program requirements.
Some of these denials really are the heartbreaking type of denial. Some denials represent borrowers who didn’t have eligible student loans. Most often in this scenario the borrower had an older FFEL loan that isn’t eligible for PSLF and wasn’t consolidated to the eligible Direct Consolidation Loan. Those borrowers represent true denials, they would need to consolidate their debt to a Direct Consolidation Loan and make 120 payments all over again… assuming there’s anything left to be forgiven after 20 years of payments.
29% of applications were denied due to missing information.
Denials due to missing information could potentially be remedied very simply. It depends on what type of information is missing. It could be employment certification information. In this situation borrowers may be able to provide the new information fairly quickly and still move on to forgiveness.
Analyzing Average Forgiveness
The average dollar amount of student loan debt being forgiven is pretty high at nearly $58,000 per borrower. This information suggests that the early borrowers who have had success receiving student loan forgiveness under PSLF might have unique demographics.
This group could represent a small subset of borrowers with masters or professional degrees, think pharmacists or physicians, people who have high salaries but also have significant amounts of student loan debt. The numbers suggest that PSLF may not be doing a great job capturing lower income lower debt public servants such as teachers. These are speculations, and my take on the data provided. Unfortunately demographic information about profession isn’t available in the data series.
How PSLF Stacks Up To Other Federal Loan Forgiveness Programs
Teacher Loan Forgiveness offers student loan forgiveness of up to $17,500 for qualifying teachers in qualifying low-income schools.
In 2009, the first documented year of forgiveness, Teacher Loan Forgiveness provided forgiveness for 14,550 borrowers. In FY 2017 Teacher Loan Forgiveness provided forgiveness for 42,297 borrowers.
Unfortunately the Teacher Loan Forgiveness Report doesn’t provide data about the total number of applicants, so I’m unable to make any comparison about approval percentages.
The Borrower Defense to Repayment program offers a discharge of student loans for borrowers if a college or university misled them, or engaged in other misconduct in violation of certain state laws. In 2016 several for-profit colleges closed and the program became more widely utilized.
As of September 2018 47,942 (24%) borrower claims were approved under the Borrower Defense to Repayment program. Of those approvals just over 15,000 (31.3%) had received partial discharge.
The Problems With PSLF
Poor communication and expectation management.
When PSLF was first announced in October of 2007, it promised loan forgiveness for public servants after 10 years of payments. In reality it’s quite a bit more nuanced than that. Borrowers must have the right type of student loans (Direct Loans), be on the right repayment plan (an income-driven plan), be employed full-time for an eligible employer (non-profit, goverment, tribal), and make 120 eligible payments.
The Employer Certification Form was the first opportunity a borrower had to complete some type of form that would help them ensure eligible employment and track their eligible payment progress. That form wasn’t released until 2012, five years after the announcement of PSLF.
It seems the nuanced requirements of PSLF have been poorly communicated and many borrowers have been unaware of nuances that have compromised their PSLF eligiblity.
Too many rules.
One of the most devastating rules has been the eligibility of only Direct Loans for PSLF. Many borrowers have an older type of student loan called FFEL loans. These loans aren’t eligible for PSLF, unless they’re consolidated to a Direct Consolidation Loan. Ineligible loan types can simply be consolidated to make them eligible, but it’s another piece of information a borrower must know and follow through on.
Important Note: consolidating eligible Direct Loans you’ve already made payments on will restart the 120 payment clock. If you’ve got Direct Loans and have already made eligible payments, don’t consolidate or you have to start over.
The intricacy of being able to consolidate student loan debt to become eligible for PSLF while consolidation could set another borrower back is unnecessarily complex. I think all types of federal student loans (except Perkins, because they have favorable cancellation terms) should be eligible for PSLF. Consolidation is a step that trips up borrowers and adds extra paperwork and processing for the Department of Education and servicers, it should be eliminated.
What do you think? Are you freaking out about the poor loan forgiveness rate for PSLF? Let me know in the comments below or on the Repayable Facebook page.
In 2018 I finally crushed my student loan repayment goal. Everyone is going to have their own set of financial circumstances and their own student loan goals. Below I talk about what it took for me to meet my goal and pay almost $44,000 toward my student loan debt last year.
Estimated read time ~7 minutes, estimated watch time at 1.5x ~5 minutes.
Last week I shared my 2018 student loan repayment progress, you can check that post out here.
A Very Specific Repayment Goal
At the beginning of 2018 I was coming off a disappointing year of repayment. In 2017 I paid <$24,000 on my student loans and was really disappointed in myself. I set a very specific goal, that I would pay at least $3,000 a month, each month, toward my student loans for a total of $36,000 in 2018.
The End Was in Sight
2018 was the first year that I really felt like I could see the end of my student loan repayment path. With just about half of my original $132,000 balance remaining to start off the year I could visualize being debt free.
Imagining myself being free of the weight of my student loans gave me the motivation to make small sacrifices and stick to my repayment goal each month. For me, knowing that I wouldn’t have to sacrifice for much longer made it easier to pay extra now.
All Extra Money Toward Loans
I knew one of the things that would help me meet my goal and then some would be to put all my extra money toward my student loans. That meant every time I picked up an extra shift at work, or got an influx of extra money, I put it all toward my student loans.
Last year was the first time I put an entire tax return toward my student loans, and that sucked to be honest because I wanted to spend it on something fun. But I knew it was getting to my #debtfreedream just a little bit faster.
Sometimes I would have pretty small amounts of extra money to put toward my student loans, maybe only $100. In the past I used to think that money was too small to matter much, after all it’s less than 1/10th of my minimum monthly payment. This year, I decided all amounts of extra money helped.
Gave Up Some Things
Typically I take one big vacation with my fiance every year. Unfortunately 2018 was a year of PTO denial and we couldn’t get any time off together to take our planned trip. That meant we didn’t have a big vacation and I ended up putting the money I would’ve spent on that toward my student loans.
In 2017 I spent thousands of dollars removing a couple of trees and fencing in the yard for my dog. But in 2018 I didn’t have any big expenses like that. Our couch is getting worn out, I can’t get the dishwasher open, and I cracked the plastic housing of my car’s side mirror, but I’m pushing those expenses off until they’re really necessary so I can keep plugging away toward my goal.
Tracked my Progress
What gets measured gets done. It’s very simple, so this year I tracked my progress and celebrated milestones. I paid off $100,000 in principal this year and took the time to take notice of that fact and celebrate it. I also tracked my monthly & quarterly progress to make sure I was where I wanted to be.
Started a New Job
Another huge reason I overachieved my student loan repayment goal was the fact that I started a new job. In September I was offered a position at Tuition.io, a student loan repayment benefit company, in Silicon Valley.
I’m still a licensed pharmacist, working on-call at the hospital a few shifts here and there. But now my full-time job is to help employers solve their staffing concerns by solving student loan debt problem for their employees. It’s a pretty awesome thing to do. I work remotely from Wisconsin so my cost of living expenses didn’t skyrocket.
Starting a new job wouldn’t necessarily help me pay off my student loans faster. In my case it did because I hadn’t been able to use a significant amount of my PTO for about a year at the hospital. That meant I had banked 290 hours of PTO. When I dropped down to on-call status from full-time those hours were cashed out.
Even though that money was taxed way more than I could have guessed, it still left me over $9,000 to split between saving up for my wedding and paying extra on my student loans. The PTO cash also really helped me prevent the situation where funding my wedding ate into my ability to pay down my student loans. Because with that lump sum and a little extra savings I’ve funded my half of the wedding, assuming I can stick to my budget!
My new employer is a student loan repayment benefit company. That means they contribute $100 a month directly toward my student loans. So while I’ve only gotten three months of that benefit, every little bit helps!
Those are all the things that really worked in my favor in 2018 to help me really tackle my student loan debt. I feel very grateful about all of it, and most of all very grateful that I’m almost done paying back my student loan debt.
I love hearing from my fellow repayers. So I want to know, what helped you reach your student loan repayment goals in 2018? Leave me a comment below or on the Repayable Facebook Page. See you next week!
Happy New Year everyone! Thank you all so much for stopping by to read the blog, commenting on my YouTube videos, and messaging me with your student loan questions. Repaying student loan debt is a long journey and it’s better with awesome folks like you along for the trip.
In today’s post I give a review of my student loan debt progress compared to the goal I set for myself. This is the first year, in all my years of repaying my student loans, that I crushed my repayment goal completely. Estimated read time ~5 minutes, estimated watch time at 1.5x ~4 minutes.
My 2018 Student Loan Debt Goal
Let’s refresh by talking about what I set out to accomplish with student loan repayment in 2018.
My goal was to pay $3,000 per month toward my student loans for a total of $36,000 for the year.
It was an ambitious goal but within reach.
I want to be clear, the specific number of this goal is right for me but might not be right for you. Don’t judge yourself or your student loan repayment goals against mine. Each person has different competing financial needs and income. The number only matters in context to my personal goal. My repayment goal doesn’t determine the value of your repayment goal.
The Start of 2018
At the beginning of 2018 I reflected on my 2017 progress and I was pretty disappointed. I hadn’t been nearly as aggressive as I had hoped. Looking back at my 2017 progress was a good reality check for me. In 2017 I put $23,600 toward my student loans. Not the worst, but really not very good either.
I started 2018 with a total student loan balance of $64,672.61 or about half of my original $132,000 balance.
2018 Student Loan Repayment Progress
2018 was a very successful year for my student loan repayment.
I paid $43,925 toward my student loans and my student loan balance as of Jan 1 2019 is $22,341.69
Ahhh!!! I’m almost out of student loan debt you guys!
2019 Student Loan Repayment Goal
2019 is going to be the year I pay off my student loans completely. One of the biggest things that’s helped me pay so much extra this year is that I can see how close I am to being out of debt. I’ve decided I want to be out of student loan debt before I turn 30.
To make that happen I’m going to pay at least $3,500 each month toward my student loans. That should mean I’ve repayed my student loans completely in July of 2019! Just 7 more months of student loan debt.
2019 is going to be a bit more challenging for me financially because I have a major competing financial interest, I’m getting married in October. My fiance and I are splitting the cost of the wedding and I already have my half saved, assuming I can stick to my budget. I don’t have anything saved for the honeymoon but I’m hoping I can use what I had been paying on my student loans every month to come up with the funds for my half of a really nice trip!
How was your 2018?
I love hearing from other borrowers working to repay their student loans. I’d love it if you could share how repayment went for you in 2018 and what your goal is for 2019. Leave me a comment below or on the Repayable Facebook Page or drop me a message, I’m jeni@repayable.org. Here’s to a 2019 that brings you closer to your #debtfreedream
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