Student Loans and Star Wars: The Empire of Debt vs the Borrower Alliance

Student Loans and Star Wars: The Empire of Debt vs the Borrower Alliance

Star Wars Episode VIII is set to drop this week and I’m a little bit into it. This week’s post is going to paint student loan debt as the Galactic Empire and borrowers as the Rebel Alliance. Cheers to blowing up the Death Star as many times as it takes!

The Original Star Wars Trilogy…

is about the struggle for freedom against the oppressive Galactic Empire. The Rebel Alliance is a group of rag tag freedom fighters from across the galaxy with one thing in common, a desire to be rid of the Empire.

 

Student Loan Debt is the Galactic Empire

Both student loans and the Empire produce a sense of fear that crushes hope as it spreads. The impact of student loan debt only continues to grow as borrowers are forced to borrow more and more money to pay for the rising costs of college as they strive to meet the demand for an educated work force. Like the galaxy felt with the spread of the Empire so borrowers feel with the rising costs of college, it’s not your first choice but how else can one survive?

 

Borrowers Will Pick a Side

Under the weight of their debt borrowers will make one of two choices. They will succumb to the crushing pressure of the Empire and tolerate their mistreatment without hope, or they will form an alliance to defeat the evil Empire.

 

You Are the Rebel Alliance

Many of you reading this have chosen the rebellion. Like the members of the Rebel Alliance, borrowers come from all walks of life (although I think we’re all human) and share a common goal, freedom. In order to be successful, borrowers will need to adopt the characteristics of a rebellion. You will need to be relentless, innovative, and determined. And like any rebellion, borrowers need a plan of attack.

 

Steal the Plans to the Death Star

Repayable is like the stolen plans for the Death Star, without the risk of being chased down by Darth Vader or having your home planet blown up by Grand Moff Tarkin. In the book you’ll find exactly the strategy you need to blow up your own student loan death star and deal a major blow to the Empire. The blog and YouTube channel provide the up-to-date intel you need to continue the relentless attack on your loans.

 

Your Current Mission

The most recent intel gathered by the Alliance leads to your next mission. A plan exists in the Congress of the Republic (actual Congress) to eliminate the student loan interest tax deduction. The plan has made it through the Senate. It’s up to our Borrower Alliance to fight against the Empire and tell our representatives how to vote for our needs. Thankfully this doesn’t require x-wings, only a couple of emails and phone calls.

Do take action to eliminate this threat to yourself and other rebels. Many Bothans died to bring us this information. JK, it’s publicly available. Call your representatives anyway.

You can find your state representative here and find a link to an example script here (just update the highlighted text to tell your own story).

The Do’s and Don’ts of Public Service Loan Forgiveness

The Do’s and Don’ts of Public Service Loan Forgiveness

Photo by Glenn Carstens-Peters on Unsplash

Some repayers are in deep student loan debt and forgiveness provides the only light at the end of a very long repayment tunnel. Today’s post is going to lay out the right things to do and the things you want to avoid doing when you’re trying to get Public Service Loan Forgiveness (PSLF).

If you’re after PSLF success this article is for you. Estimated read time 4 minutes.

Do

  • Know the specifics of PSLF. You must maintain full time employment by an eligible employer and make 120 payments on eligible loans for forgiveness.
  • Submit the Employment Certification form annually and when you change employers.
  • Keep making your monthly payments under an income-driven repayment plan and keep your loan in good standing.

Don’t

  • Consolidate your Direct Loans if you’ve been making payments for awhile. If you consolidate, the 120 payments will start all over with your new Direct Consolidated Loan.
  • Refinance your loans. Federal student loans are the only type of loans that qualify for PSLF.
  • Stop working for an eligible employer until you’ve received loan forgiveness, even if you’ve made 120 payments.  If you move to a private sector job after meeting the PSLF eligibility requirements but before you apply for loan forgiveness, you will not be eligible for forgiveness since you must be working for a qualifying employer at the time you apply for and receive forgiveness.

Two important steps to take right now.

  1. Submit your Employment Certification form. If you don’t hear back from the Department of Education or Federal Loan Servicing after a month call FedLoan Servicing at 1-855-265-4038
  2. Figure out how many qualifying payments you have made and how many you have left to go. If you haven’t submitted an Employer Certification form yet this you can count the number of payments you’ve made since your grace period ended and subtract from 120. If you’ve already submitted your Employer Certification form you can find out how many qualifying payments you’ve made by logging in to your FedLoan account and viewing your loan details or by looking on your most recent billing statement.

 

Resources

Employment Certification Form

Public Service Loan Forgiveness Basics

Public Service Loan Forgiveness FAQ

Slaying the Top 5 Student Loan Stereotypes With Data

Slaying the Top 5 Student Loan Stereotypes With Data

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

The Social Reason I Decided Not to Use Loan Forgiveness

The Social Reason I Decided Not to Use 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.

The Difference Between Fixed and Variable Interest Rates

The Difference Between Fixed and Variable Interest Rates

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!

 

Repaying Student Loans Without the FOMO

Repaying Student Loans Without the FOMO

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…

  • Decide what you want

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.

  • Think long term

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!

 

How You Can Make a Difference For Student Loan Borrowers

How You Can Make a Difference For Student Loan Borrowers

The 115th Congress is wrapping up their crowded agenda for 2017. With over 2,000 legislative search results for “education” the topic is hot and members of congress aren’t experts on every piece. That presents borrowers with both opportunity and urgency to help their legislators understand the needs of borrowers. To make your future better, borrowers like you need to become effective advocates- and you need to start today. Here’s what you need to know to become the advocate you and the rest of us borrowers need. (more…)

How Much Does Refinancing Student Loans Impact Your Credit Score?

How Much Does Refinancing Student Loans Impact Your Credit Score?

Photo credit: Tim Gouw

Read this if you’re thinking about refinancing your student loans but are worried about the impact that could have on your credit score.

Estimated read time ~3 minutes.

Submitting formal applications for student loan refinancing shows up on your credit score. So what? How does refinancing actually impact your credit score? Read on to find out when refinancing can negatively impact your score.

The Basics of Your Credit Score

There are six main factors that determine your credit score; your on-time payments, credit usage, total accounts, average age of credit, derogatory marks, and  credit inquiries.

Student loan refinancing applications count as credit inquiries and are factored in to your credit score and are reported for two years. What does this mean if you’re refinancing?

Where Student Loan Refinancing Comes In

Each formal student loan refinancing application will count as a credit inquiry.

Stick to rate estimators which run a soft credit check (which doesn’t affect your credit score) to shop for the lowest rates. When you’ve found the lowest rates select three or four companies to apply to and submit your applications in one batch.

Overall Impact

If you have a good-excellent credit score and use credit responsibly three or four inquiries from refinancing will have minimal impact on your credit score.

It is important to note that a rejected application for refinancing will also show up on your credit score. Plugging accurate information into the rate estimators found on refinancing company websites can help you understand if you’re qualified for refinancing.

In June I re-refinanced my student loans for a fixed rate of 3.37% through Earnest. I submitted formal applications to Earnest, CommonBond, and ElFi. My credit score has gone down by two points since then, which is an insignificant change.

If you’ve been avoiding refinancing because you’re worried it might tarnish your golden credit score, it’s time to take a closer look. The savings a low interest rate can land you are worth the minimal impact to your credit.

 

Have you refinanced? How did it impact your score? Let me know in the comments below or on the Repayable Facebook Page.

Refinancing, Are You For Real? How to Know if Student Loan Refinancing is Legit

Refinancing, Are You For Real? How to Know if Student Loan Refinancing is Legit

Photo credit: Ben White

Read this article if you’ve heard about refinancing but you think it’s too good to be true. Estimated read time ~4 min.

So you’ve heard about refinancing and you’re pretty sure it’s a super scam. Either you’re going to get your identity stolen Haha suckers, you can have my negative net worth! or you’re pretty sure you’ll lose some major federal benefit you need and get effed bad! Like c’mon what if someone like Bernie Sanders comes in and wipes the slate clean… then what?! Although I can’t be sure about a glorious white knight saving our country from student debt I can guide you to legitimate companies and help you avoid a scam and make sure you only refinance if it’s the right choice for you.

Red Flags

Any company that charges a fee for applying to refinance or actually refinancing your loan. There is never a fee for refinancing your student loans. If you see one it’s a scam.

Get What You Need

Make sure you get what you want out of the deal, that’s why you’re refinancing in the first place, for your own benefit! I have a full post on this topic you can read here. But here’s the quick list.

  • If you’re counting on loan forgiveness then refinancing is not for you. It will make you ineligible for most types of loan forgiveness.
  • Do you need loan forgiveness if you die or do you have enough life insurance to cover your debt? Some refinancing companies offer forgiveness some don’t.
  • Do you need flexible monthly payments? If so refinancing may not be your best choice. The federal government has the most flexible payment options.
  • Do you need periods of forbearance (i.e. paused payments but interest still accumulates)? Some refinancing companies offer forbearance and some don’t.

Legit Companies

Here’s a list of vetted companies. Some of the links are referral links which means I’ll get paid and you will too if you use that link and end up refinancing your loans.

Earnest Perks: $200 for you and $200 for me.

RISLA Perks: none

Laurel Road Perks: $250 for you and $250 for me.

SoFi Perks: $100 for you and $300 for me.

CommonBond Perks: $0 for you and $250 for me.

Elfi Perks: $100 for you and $400 for me.

 

So what’s holding you back from refinancing? What keeps you wondering if it’s the right choice for you? Leave a comment below or post on the Repayable Facebook Page. I’m here to help you make the smartest choice for your financial situation.

Additional Resources

How to Choose the Student Loan Benefits You Need

Sign-up for to get the Refinancing Master List as soon as it’s ready!

Get it Together: The Information You Need to Refinance Your Student Loans

Get it Together: The Information You Need to Refinance Your Student Loans

 Image by: Mari Helin-Tuominen

Read this if you’re getting ready to refinance your student loans and want the process to go as quickly as possible. Estimated read time ~5 minutes.

Once you’ve figured out the benefits you need for refinancing, picked out the companies that offer those benefits, and chosen the three companies with the lowest interest rate estimates it’s time to submit formal applications.

Loan applications can be time consuming because they require a reasonable amount of supporting information. Here’s what you’ll need to get together for most refinancing companies. Prepping ahead means  you can simply upload the documents and hit submit when you’re ready to apply!

1. Official identification

  • This is typically a driver’s license, passport, or birth certificate
  • Time-saving tip is to snap a pic of it with your cellphone for quick upload

2. Supporting income documents

  • Recent pay stubs, often the last two paychecks or 30 days worth
  • W2
  • Time-saving tip is to go straight to the pay information on your employers website if they give you electronic access to your paystubs etc.

3. Documentation of assets

  • 401k/IRA statements
  • Bank statements
  • Time-saving tip is to link your account information online if the refinancing company offers that option so you don’t have to provide statements

4. Documentation of other debts

  • Loan balances and monthly payments for any other outstanding debt you may have like car loans, mortgage, and credit card debt
  • Time-saving tip is to link up these online accounts to the refinancing company website to save time

5. Student Loan statements

  • Most recent monthly statement that contains your name, account number, payoff amount, and payment mailing address
  • 30 day payoff statement that contains your name, account number, payoff amount, and payment mailing address

6. A license to practice

  • If you’re a licensed professional you may have to provide a copy of that license (i.e. pharmacist, physician, dentist, etc.) to the refinancing company to show that you’re eligible to practice in your state of employment

To Save Time Organize

  • Put all this documentation in a folder you can quickly and easily access.

 

Here’s to a stress-free application process because you’ve got it together! When you refinance let me know how it goes. What did you do to expedite each application? Comment below or on the Repayable Facebook Page. Here’s to a better interest rate and feeling like a student loan refinancing champ!