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.
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
Yes, this post is hard core cheesin’ being posted right before Thanksgiving. But it’s not some trite gratitude post minimizing the struggles borrowers face. Rather it’s a post about how sometimes struggles, and successfully navigating those struggles, are all about perspective.
This year for the first time, I’m genuinely grateful for my student loan debt. Read on to for what I think my student loan debt has given me. Estimated read time ~4 minutes. Estimated watch time ~ 3 min at 1.5 x speed.
Strong Work Ethic
Like the many of you reading this right now, I sacrificed through college. I worked two jobs and more than full-time every summer, winter, holiday, and spring break. If I had a chance to earn money, I did it to minimize the amount of student loans I had to take out. I did this at the same time I studied and improved my GPA during pharmacy school. I really never viewed anything else as an option.
That work ethic developed and was tested throughout my education, residency, and later as I started a side hustle while working full-time as a clinical pharmacist. Without the constant need for work and crucial impact that made on my mindset, Repayable wouldn’t exist today.
Financial Pressure
$132,000 in student loan debt put a strain on my finances. This amount of debt forced me to make a decision about how I wanted my relationship with money to go. I could choose to follow vague ideas about what to do with money, or I could find a better way on my own.
The financial pressure of my situation helped me set clear boundaries on spending and develop meticulous habits when it came to managing my personal finances. I realized quickly what I valued and what my money could do for me. Then I rigorously cut the extra fluff out.
Something to Fight Against
Most people would try to frame this in the positive, something to fight for. But for me student loan debt serves as more of a villain, something to be defeated.
I like the idea of resistance and striving against something. Villains unleash great motivation and power within me. I tap into a part of myself that’s often sleepy in every day life, I think perhaps the thing I tap into is resilience and the strong desire to be successful in spite of something difficult.
Empathy
I worked hard, sacrificed, and still ended up with a lot of student loan debt. I often get criticized for the amount of debt by folks who have no clue. I’ve suffered feelings of defeat, hopelessness, and lack of progress.
While I certainly haven’t lived anyone else’s story I understand how anyone can end up in a bad situation and feel stuck. I’m not here to judge other people’s choices, I’m here to help them make the right choices for their own goals.
In the end my student loan debt has reinforced a strong work ethic, focused my money habits, strengthened my resilience, and given me empathy toward my fellow human beings. Not bad for something that seemed like it may crush me and hold me back from my full potential.
You’ve finished school and you’re a few weeks into residency. While it’s awesome to be finally practicing what you went to school so long for, it’s pretty likely you racked up some major student loan debt to do it. The problem is, as a resident, you don’t make even close to enough money to pay back all that debt like you will once you’re finally staff. So what’s a resident to do when you want to stay on top of your student loan debt and set yourself up for success when you graduate residency?
After reading or watching today’s post you’ll know exactly what you can do with your student loans to set yourself up for repayment success when you do finally finish residency. Estimated read time ~ 6 minutes estimated watch time at 1.5x speed ~4 minutes.
Get started.
The first thing you’ll need to do to figure out what to do with your student loans is to learn and acknowledge the basics of your debt. Answer these three questions and move on to the next step.
What type of student loans do you have? (Federal, private, both)
How much student loan debt do you owe?
Are you a resident at a government on non-profit institution? (i.e. a VA or a 501c3 hospital?)
Option 1: Public Service Loan Forgiveness (PSLF)
One of the most common options residents choose to pursue is PSLF. PSLF forgives the remaining balance of Federal student loan debt after a borrower makes 120 eligible monthly payments on an income-driven repayment plan while employed full-time for an eligible employer (government or 501c3 organization).
This can be a good option for residents that have significant amounts of Federal student loan debt. Remember, loan forgiveness options only work for federal student loans so any private student loan balances will still need to be repaid in full.
If this is the route you’re planning to go here’s the most efficient way to get it done:
Consolidate your loans into a Direct Consolidation Loan right now. This allows you to enter repayment right away instead of wasting six months in the grace period. If you don’t do this you’ll accumulate interest in the grace period and won’t be making an eligible payments toward loan forgiveness so will delay your forgiveness by six months.
Enroll in your income-driven repayment plan of choice. If you qualify, the PAYE plan is the best because the monthly payment is 10% of discretionary income and never more than the payment under the 10 year standard plan.
Start making payments as soon as your loan is consolidated.
Option 2: Income-Driven Repayment, No Forgiveness
Maybe you’ve decided loan forgiveness isn’t for you because you have a lot of private student loan debt or not quite enough federal student loan debt to make forgiveness worth it. Or maybe you don’t like the idea of a loan forgiveness program that can be eliminated by a congressional vote. Whatever the reason, you’re not planning on using student loan forgiveness.
You want to avoid entering forbearance on your student loans. As a resident, you qualify for this option. The problem with forbearance is that interest will continue to accrue on your student loans the entire time you’re not making payments. That interest can cost you thousands of dollars each year!
For most residents, your best bet is going to be to enroll in an income-driven repayment plan. That way you can make low monthly payments and at least pay off some interest. You also have the option to make extra payments each month if you can afford it, but don’t have the pressure of a high monthly payment on a resident salary.
If you have private student loans your options may look different. You’ll want to talk directly to the servicer of your private student loans to arrange a repayment strategy that works for you during residency. Private loan servicers may encourage forbearance rather than offering up a lower monthly payment option. If this is the case ask them if you’re still able to make monthly payments while your loans are in forbearance. That way you can work to pay down your debt without the pressure of a high monthly payment.
When you’re almost finished with residency.
If you’re not considering loan forgiveness you may want to consider refinancing once you’re getting paid market salary for a post-residency graduate. If that’s something you’re interested in check out this post, which is all about whether refinancing during residency is a good choice or not.
Are you a resident trying to figure out what to do with your student loans? Leave me a comment below or send me an email jeni@repayable.org having been a resident myself I’m always happy to help other young professionals start off strong with their student loans!
Have you read the example about an orthodontist with over $1 million in federal student loan debt? The situation seems totally preposterous and unimaginable.
Estimated read time ~ 10 minutes Estimated watch time at 1.5X about 5 minutes 30 seconds.
The gist of the Wall Street Journal article is that an orthodontist borrowed federal student loans to the tune of $600,000 to pay for his education at USC. He’s now repaying that debt under an income-driven repayment plan and his monthly payments don’t keep up with interest. So his loan balance continues to grow every single month and is currently over $1 million. After 25 years of income-driven repayment the loan balance is projected to be over $2 million.
A series of problems with funding for higher education contribute to this unimaginable student loan situation. While not common currently, there are 101 borrowers with balances of at least $1 million, if we don’t approach funding higher education and student loan debt in a new way we’re going to see these >$1 million cases more frequently.
Before you brush this off as an impossible scenario created solely by the irresponsibility of a few borrowers, here’s a rundown of how this super debt happens.
Inelastic Demand
Federal student loans are directly correlated with the price of tuition and fees at universities where students can use federal student loans to fund their education. As more funding is available, tuition and fees increase. In other markets an increase in price would presumably lead to a decrease in demand. But that’s not the case with higher education.
Despite tuition hikes, students continue to demand education at the same rate. The demand for education is inelastic, not based on price, because students have access to as many student loans as necessary to fund their tuition. Colleges and universities realize this and continue to raise tuition and fees accordingly.
Perpetual Tuition Hikes
College tuition has increased at a rate well above inflation for the past few decades. In constant 2013 dollars, tuition and fees at a four year public university were $2,147 in 1980 and nearly quadrupled to $8,070 in 2013 (NCES Table 330.10). In 30 years the rise of tuition and fees exceeded the rate of inflation by almost 400%.
When parents and students estimate the cost of attending college it’s wise to factor in tuition hikes of at least 5% annually.
Reduced State Funding
Why are colleges raising tuition and fees at such exorbitant rates? One factor is a reduction in state funding of public universities. Public universities obtain their funding from both federal and state sources. State funding is primarily in the form of grants and other funds that can be used for general appropriations (keeping the lights on, paying staff, new construction, etc) while federal funding is primarily in the form of student loans.
In 1980 public universities received the majority of their funding from the state, today the balance has flipped and they now recieve the majority of their funding from federal sources. That means, in order to continue funding general appropriations at the same level, colleges pass the loss of funding on to borrowers. Borrowers have more access to student loans so borrowers are the ones footing the immediate bill for state budget cuts.
High Paying, High Cost Professional Degrees
This seems like an oxymoron, the best paying careers are contributing to the problem of super debt. But it’s true. Degrees that tend to pay a lot on the back end tend to cost a lot on the front end. The colleges offering these degrees will often assure borrowers that they’ll make “good money” and be able to easily repay their student loan debt after graduation. These fields pay well, but without loan forgiveness no W2 employment pays well enough that a borrower can repay a million dollars in student loan debt.
When someone goes to medical school they’re on a long road. First, they have four years of an undergraduate degree to pay for, next they have four years of medical school. Medical school is where it gets expensive, even if you attend a public in-state university you’re looking at a price tag of over $150,000 for tuition and fees plus cost of living on top. After graduation, specialization requires residency and fellowship which can take another five years to complete. If the borrower decides to enter forbearance to avoid struggling to make payments on their student loans while making a resident stipend the interest can get out of hand quickly.
High Interest Rates
Interest rates are the next major contributor to super debt. Borrowers only have access to a maximum of $23,000 in subsidized federal student loans. That means any loans over that amount are in the form of unsubsidized loans which start accruing interest immediately. Interest rates for unsubsidzed loans are typically between 6-7%.
That means while students are still taking out student loans they’re immediately accruing thousands of dollars of interest. IF this interest is left to compound for the years of education and residency required in specialty fields the balance quickly becomes unmanageable. Then when high debt borrowers enroll in an income-driven repayment plan, the monthly payment doesn’t keep up with interest and the loan amount continues to rise. Leaving huge amounts of student loans to be forgiven after the borrower has made payments for 20-25 years.
Inefficient use of Taxpayer Dollars
Ultimately we have a system that is inefficiently using tax payer dollars. Rather than fund our public universities up front and pay the immediate costs (translating to lower tuition for borrowers and lower loan amount) we use taxpayer money to forgive debt that has been accruing 7% interest for years.
The most efficient use of taxpayer money is to reduce the cost of college by adequately funding their operating expenses instead of waiting to pay for college education via loan forgiveness because the cost of the borrower’s education is much more than their high paying career can afford to repay.
Ultimately, tax payers are going to pay for higher education one way or another. Whether it’s forgiving super student loans or providing funding for universities up front. It makes sense to advocate for up front application of our tax dollars to reduce up front costs and get our money’s worth out of that spending.
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