Ask Jeni: How Can I Balance Student Loan Repayment with Enjoying Life

Ask Jeni: How Can I Balance Student Loan Repayment with Enjoying Life

by | Jun 19, 2018 | #Millenniallife, Ask Jeni

Ask Jeni is brought to you in partnership with tuition.io, a company dedicated to helping the best companies free their employees from student loan debt.

 

I am trying to figure out how to balance living and enjoying life now while seeing my student loans as my “mortgage” or deciding to refinance and trying to pay off as much as possible. Is there some middle ground? I don’t want to sacrifice my life now as there is NO guarantee for the future. Do you have any advice on how to evaluate the best move so I can balance the importance of paying off debt but also enjoy life?

 

This is such a great question and it requires a ton of unpacking! The repayment strategy that fits best with your life is one that meets both your financial goals and your life goals. It can be tough to strike a perfect balance but here are some tips that every borrower can apply.

 

1. Make an active decision about your repayment strategy.

It often feels like student loan debt is looming over you and try as you might to ignore it, student loan debt nags at your consciousness. If your student loan debt is hanging over you it can often help to make an active decision about your repayment strategy. That means taking a good look at what you want for yourself financially and what you want for your life and finding a strategy that helps you balance those desires. I’ve often seen borrowers who get a lot of relief just from examining their situation and making an active choice, whether that’s repaying student loans slowly and over a long time like a mortgage or repaying student loans aggressively and sacrificing in the short term.

 

2. Figure out how much an aggressive repayment strategy would cost you each month and what you would have to sacrifice.

If you’re considering repaying aggressively (by refinancing or making extra monthly payments), a good first step is to simply figure out what aggressive monthly payments would look like and see how much that would actually impact your quality of life. You may be surprised to see that although aggressive repayment would require financial sacrifice, you don’t have to sacrifice as much as you thought and that you can still afford to do the most important things that enrich your life.

 

3. Make sure your financial house is in order before tackling student loan debt aggressively.

Aggressive repayment is just that, aggressive. That means there’s not a lot of margin for error on your part, so you want to have your ducks in a row. You need to have an emergency fund with at least three months expenses. You need to be contributing enough to your employer-sponsored retirement (if you have one) to get the full employer match. If you don’t have an employer-sponsored retirement you need to be contributing to an IRA. If you’re not able to afford to do these things, then I would advise against aggressive repayment.

 

Hacks to Get Motivated to Repay Your Student Loans

by | Jun 13, 2018 | #Millenniallife, Mindset, Money Matters

Last week’s article discussed the normal cycle of motivation while repaying your student loans.  If you’re looking to ramp up your motivation, today’s post will give you a few hacks to get from where you are to where you want to be. I’ll also share my journey through the stages of motivation.

 

Estimated read time ~ 8 min. Estimated watch time at 1.5x speed ~ 5 minutes

Hack#1

 

Pursue your curiosity and allow yourself to learn information without being obligated to take action.

Early on, borrowers often feel a huge weight of indecision. There’s too much information out there and it seems impossible to make a choice. By approaching learning with a sense of curiosity and no obligation to take action, you can look into the stuff you’ve been wondering about and start to learn and piece together the world of student loan debt. When you remove the pressure of action you aren’t crippled by the possibility of making an incorrect choice, because you’re not making a choice, you’re simply gathering information.

 

Hack#2

 

Make a decision about what you’re going to do with your student loans.

 

Once you’ve started collecting information you’re in the preparation phase. In order to move into the action phase a decision needs to be made. You’ll have to decide what exactly it is you want to do with your student loans.

 

If you don’t know what you want to do with your student loans, it’s going to be tough to take actions that land you in an ideal repayment situation. It’s OK to have one or two different options that you can start taking actions on. Your actions on both will help you move toward either choice and may help you finally decide which one is best.

 

Hack#3

 

Develop a plan that you can financially sustain and consistently work toward for the long term.

 

In order to have an action to maintain until you achieve your goal, you need to be able to sustain it. If your repayment goal is too aggressive, an emergency may arise and you won’t have the cash flow you need to both pay your student loans and deal with the emergency. If you make a misstep early on because your plan was too aggressive, you may lose motivation to work toward your goal entirely. That can leave you feeling unmotivated to sustain your repayment plan. You can always increase the intensity of your goal later if you find you’ve got a lot of room in your budget.

 

My Student Loan Motivation Journey

 

During College

 

While I was in college I wasn’t particularly motivated to worry about repaying my student loan debt. I worried enough that I worked two jobs, applied for scholarships, and borrowed only for tuition and fees but I didn’t worry enough to check my student loan balance regularly or think about the interest accumulating on my unsubsidized loans.

 

Immediately After Graduation

 

When I graduated college I became a pharmacy resident which meant instead of a six figure salary I was looking at a salary that was less than half of that. I was motivated to make payments and figure out a repayment strategy because at this point I realized I had accumulated $10,000 of interest on my unsubsidized student loans while I was in school.

 

Although I could enter forbearance and not make payments because I was in residency I didn’t want to do that because I would still accrue interest, and at an average interest rate of 6.5% for $128,000 that interest would accumulate fast. I had originally picked a 10 year standard repayment plan but discovered those payments were $1500 per month and I couldn’t afford to pay that much with my resident salary. I enrolled in the income-based repayment plan and paid about $380 each month and paid extra when I could afford to. That year I paid $6,000 on my student loans but that wasn’t enough to keep up with interest and my loan balance crept up to $132,000.

 

After Residency

 

When I was finally making full-time pharmacist salary I knew I had to tackle these loans quickly. The rate of interest accumulation was staggering, and I would dig myself into a deep hole quickly if I didn’t repay aggressively. So that’s what I did, I changed my repayment plan back to the 10 year standard plan and paid extra. My first year I paid over $28,000 toward my student loans, but then I had an unwelcome surprise.

 

I paid almost $14,000 in interest and couldn’t deduct any of it on my income taxes. I was really mad because the government was taking my money twice. I was being taxed on my earned income and then paying interest on my federal student loans. Then I discovered refinancing, halved my interest rate, and entered a 5 year repayment plan.

 

After Refinancing

 

After I refinanced my student loans I had an initial flood of motivation. My monthly payment was $1345 and my goal was to spend at least $3,000 a month on my student loans. However, I also realized I wanted to travel and I had the cash flow to do it if I just didn’t make an extra payment on my student loans that month.

 

So for a couple years I went on skipping extra payments and averaged paying about $2,000 a month toward my student loans. It’s not that this was terrible, but I wasn’t exactly meeting my goal.

 

Today I’m going to be out of student loan debt by September 2019, if I could be more aggressive it’d be awesome to be out before my 30th birthday (August 2019), but we’ll have to see about that. Because the end is so close for me I’m incredibly motivated again and I can almost taste the freedom from my student loan debt. I’ve been paying at least $3,000 per month on my student loans since January 2018 and I don’t let myself off the hook for making those payments.

 

Today, I owe just over $48,000 on my student loans. My motivation to get rid of that debt is here to stay until it’s gone.

 

What’s your student loan motivation journey? Have you had up’s and downs? What stage are you currently at? Let me know in the comments below or on the Repayable Facebook Page.

Exploring America’s Disdain for Student Loan Borrowers

Exploring America’s Disdain for Student Loan Borrowers

by | Apr 16, 2018 | #Millenniallife, Advocacy, Mindset

“Whatever happens around you, don’t take it personally… Nothing other people do is because of you. It is because of themselves.”
― Miguel Ruiz, The Four Agreements: A Practical Guide to Personal Freedom

You’ve probably noticed that if you bring up your student loan debt, people start to get visibly uncomfortable. If you start to get specific about your student loan debt some people will get nasty. Pretty soon you’ll hear things like “I bet you didn’t spend all that money on your education.” “My generation worked to pay for school, today’s kids don’t want to work.”

You know what these thoughts represent? The uncomfortable reality that college is more expensive now than ever.

The American Dream is built on the idea that any individual can have a picturesque life if they are willing to work for it. The American dream is built on meritocracy. My generation is invalidating meritocracy because of one unshakable reality, student loan debt.

The historic school of thought that you can “work to pay for college” doesn’t apply for many. Here’s the data driven statistic that stops that myth dead.

Today a student at a four year public institution has to work 51 hours per week at minimum wage to afford tuition and fees plus room and board. In 1980 a student had to work 22 hours per week at minimum wage to afford the same thing.

Sources 1,2,3

That’s an increase of 29 hours each week!

My assumption is that many of the folks saying their generation “had the work ethic to pay for school” have worked 40 hours a week for the duration of their careers. Yet if previous generations believe today’s students should “work to pay for school” then they’re mandating an additional 11 hours per week above the standard 40 hour work week and expecting students to put in those extra hours on top of a full-time schedule of classes.

Objectively, the student loan burden just doesn’t add up to an issue of work ethic, and that makes people uncomfortable. I mean shit, if America can’t blame the work ethic of a generation for suffocating student loan debt there might be a problem to deal with. If America accepts these statistics, we have to own the fact that we’re bankrupting future generations trying to obtain the American Dream through education.

Rather than face the problem head on, America pulls out more tools in the accusatory arsenal to shift blame.

“Well I’m sure you didn’t use all that money to pay for college.” becomes a handy weapon. Perhaps the spring break a borrower took at the age of 20 explains why they can’t buy a house at 30. If America can shame borrowers enough that will silence the problem.

But alas, the pesky facts won’t be silenced.

“The average annual price tag for tuition and fees plus room and board at a public four year institution is over $17,000 yet students annually borrowed an average of $7,000 to pay for that expense.”

Sources 4,5

That means students are finding ways to come up with over $10,000 a year for higher education. This statistic doesn’t line up with wasted money on spring break and lavish spending as the source of our problem.

So what is it then that gives America such disdain for borrowers? It surely isn’t reality and objective data. If Americans based their comments on data we’d be saying things like “Today’s graduates are expected to pay more for college while making less money.” or “Despite limiting spending to only tuition and books plus room and board, today’s graduates will need to come up with $76,000 to pay for a four year degree at a public university.”

Higher education is one way to secure the American dream. Federal funding, like student loans, makes access to college widespread and less dependent on a family’s earnings. But the cost is upsetting Americans, because student loans have become an unshakable burden for some graduates and are impeding the way to the American dream through education.

There’s something about the promise of a college graduate. All across America twenty-somethings full of hope, ambition, ideas, and skills are heading into the world to change it. It’s inspiring! One of them could change life as we know it! They could cure cancer, they could genetically engineer a bacteria to metabolize plastic and eliminate plastic pollution, graduates’ possibilities are endless and it’s so refreshing.

The promise of America’s future is so reassuring because that means the mistakes of the past don’t have to persist indefinitely. We can right our wrongs.

This is where student loan debt comes in and produces fear. Instead of seeing bright-eyed, ambitious, problem-solving graduates with the world at their fingertips, America sees twenty-somethings unable to afford rent and moving in with their parents. America sees ambition being trampled as borrowers make decisions based on their debt that don’t line up with the traditional American dream. How can the future be better when it’s innovators are preoccupied with basic financial needs?

Who wants to buy a house while struggling to pay off a mortgage worth of student loans?

Who can create a better future while paying for the past?

Enter the American consciousness, gnawing away at historical beliefs that the dream can be attained through education. The headlines tell America that young people are financially worse off than previous generations. But how can that be? The same system that’s crushing today’s borrowers empowered our parents.

So America presumes the problem lies with borrowers today. America presumes the student loan debt problem is brought about by wrongdoing of the generation feeling stuck. America presumes that the lack of ambition is the cause of the student loan debt problem rather than the symptom.

And so the attacks begin, to relentlessly protect America’s worldview and belief that the American dream can truly be obtained by anyone who works for it. If millions of borrowers think they’re going to disrupt the American dream with a whiny ass lack of work ethic, think again.

America will viciously defend the view that our country fosters the success of unlikely heroes rather than breeding underdogs in the first place.

I’m a borrower who took out $118,000 in federal student loans to obtain my Pharm.D. Because of interest, I ended up with $132,000 of student loan debt. I share this story all the time and oh, how I know the comments people make. Despite working two jobs and volunteering, earning competitive scholarships, and working now in service to the health of my fellow Americans, any mention of my debt paints me as an incompetent burden on society. My six-figure debt and I are a barnacle on America’s ship disfiguring the facade and resisting progress.

But here’s the thing. Every borrower I know is so much more than debt. We give our time and money back to our communities, we work in life-saving, innovative, future-building, commerce-generating, problem-solving professions that keep our country thriving. And the majority of us are relentlessly working to solve our own damn student loan debt problem however we can.

So what do I say to a fearful America uncomfortable with our $1.4 trillion in student loan debt?

“You can believe what you want about my generation. You can call us lazy, entitled, slacktivists, whatever derogatory terms you want.

 

But my generation isn’t stopping.

 

We will find a way out of this. We will build our way out, we will upset the order of higher education and replace it with a system that enables achievement of dreams through education.

 

We will do this with your help, but if you fail to help us we will find a way to do it without you.

 

Our generation isn’t the enemy of yours, we refuse to pit ourselves against you. Together we will build the future America and we have boundless potential to build it into a country that powers dreams for us all.”

 

References

1. NCES table 330.10 Tuition and Fees + Room and Board at four year public institutions 1979-1980 & 2015-2016 https://nces.ed.gov/programs/digest/d16/tables/dt16_330.10.asp?current=yes
2. Minimum wage information US Department of Labor https://www.dol.gov/whd/minwage/chart.htm
3. Bureau of Labor Statistics CPI Inflation Calculator https://www.bls.gov/data/inflation_calculator.htm
3. NCES table 330.10 Tuition & Fees + Room and Board at four year public institutions 2012-2013 https://nces.ed.gov/programs/digest/d13/tables/dt13_330.10.asp
4. https://nces.ed.gov/pubs2013/2013165.pdf U.S. Department of Education, National Center for Education Statistics, 2011–12 National Postsecondary Student Aid Study (NPSAS:12).

How I’m Tackling My Own Student Loan Debt

How I’m Tackling My Own Student Loan Debt

by | Apr 2, 2018 | #Millenniallife, Mindset, Money Matters

This post is for anyone wanting to see how I approach solving my own student loan debt. I’ll share my specific monthly payment goal and how I pay that amount each month. I’ll also share my first quarter progress. Estimated read time ~9 minutes.

 

My Student Loan Debt Goals

 

At the peak of my student loan debt right after I finished residency in 2014 I owed $132,000 in federal Direct Loans. After paying 6.8% interest on those loans for a couple years I discovered refinancing and it changed everything.

January 1st 2018 I owed $64,672.61 in student loans.

I knew the end was near and I could get out of debt before 2019 was over if I set an aggressive goal and stuck to it. So my student loan repayment goal for 2018 is to pay $3,000 per month on my student loans.

 

How I pay $3,000 a month on my student loans.

 

Let me make something explicitly clear. My education and student loan debt earned me a job that pays well. That means I can comfortably afford to repay my student loans aggressively.

 

There’s nothing magic about what I repay, and this post isn’t going to share  BS ideas about making money appear from nowhere to eliminate your debt. I’m privileged to be paid six figures a year and I’m privileged to be able to tackle my student loans aggressively without sacrificing actual needs.

 

This post shares my personal experience repaying my debt. Your experience may look totally different and that’s OK.

 

I spend my money intentionally.

 

When I first became a pharmacist I wanted to stop pinching pennies and living like a poor college student because I wasn’t anymore. I was making six figures and dammit I wanted a taste of that standard of living. I wanted to buy clothes that actually looked good not just ones that were on sale, I wanted to buy organic food and fuel my body because health is wealth, I wanted to adventure and see new things because life is short, and I wanted to buy myself, my family, my friends dinner out without being wracked with guilt. So I did.

When I was staring in the face of six long years of student loan repayment I couldn’t stand the thought of sacrificing these things when I could actually afford them now.

So, I half-assed my financial sacrifices.

To be fair I didn’t live like a queen but if I wanted something I got it. I was worn out from denying myself through six years of college plus a year of residency while working two part-time jobs. I earned good money and I wanted to spend it.

 

Now that the end was in sight though I wanted to speed up my repayment. So I made paying $3,000 toward student loans my first priority (bills and investments already accounted for) and my wants came later. It was hard to say no to myself at first. I would want to try some new makeup or pick up a few little things on a whim.

 

I started waiting until my next bi-monthly paycheck. To see if I still wanted this “stuff”. I discovered that most of the “stuff” I wanted was a fleeting interest and that when I really did want something I could buy it. This is the delayed-gratification mindset that got me through college in the first place.

 

I put all my surprise extra money toward student loans.

 

Specifically I’m talking about my tax return. Putting 100% of my tax return toward my student loans was a tough thing for me to do. Ever since I started working at age 14 and I’ve filed my taxes my tax refund has been my money to do whatever I want with.

 

I’ve always viewed tax returns as fun bonus money. I remember using my first tax return to buy an iPod Nano with a massive 1 G of storage space!

 

This year I put all $1,400 of my tax refund toward my student loans.

At first it was kind of depressing because I really wanted to revamp my professional wardrobe. But then I reminded myself that using this tax return to pay down my student loan debt gets me two weeks closer to freedom.

 

I save up for big spends.

 

I got used to my pharmacist cash flow and not really having to save for somewhat larger spending like a vacation. I would just not pay an extra $1500 on my student loans that month and boom vacation funded. But the problem was, I did that a few times a year and was slowing my repayment down.

 

My 3 month emergency fund is topped off and now anything over that amount is mine to spend. I’m saving that money for travel, a wardrobe revamp, or something else that comes up. Since January I’ve put just over $1,000 in there.

 

The mindset that helps me pay my loans aggressively AF.

 

This year is the first year the end of my student loans is in sight. I have 18 months left of repayment at this rate. I can truly believe and feel that these small sacrifices are only temporary. I don’t know about you but for me sacrificing my present standard of living to pay student loan debt is hard.

 

When I pay my student loan debt it feels like I’m investing in my past rather than my future.

 

I’m already reaping the benefits of a higher salary in work I enjoy because of my education. I already sacrificed to study and worked to pay for college years ago. Now it’s tough to keep paying for it after the fact.

 

I seem to find myself stuck in a counterfactual mind-game. Thinking Oh imagine if I had this $10,000 to invest and save and spend. But without the student loans I wouldn’t be making six figures. So it’s an endless cycle of wanting my cake and eating it too.

 

Now I can see how being rid of this debt makes my future self free. My future self is working 0.8 instead of full-time. She doesn’t have to do all her blogging on weekends and evenings and all the space between her full-time job. She still has money to invest and save and spend. That version of me is almost here. So for now I’ll say No thanks to piddly stuff and bring on my #debtfreedream!

 

How did I actually stack up on my $9,000 goal?

 

My goal was to pay $3,000 a month on my student loans so I should’ve paid $9,000 in the first quarter of 2018. Because of my tax return and a little extra contribution on my part

 

I paid $10,545 in the first quarter of 2018 and exceeded my goal.

 

I still have $54,702.65 left to go but that freedom is coming.

 

What are your student loan debt goals? I would love to hear them, we’re all in this repayment boat together so let’s inform, inspire, and encourage one another. Please share your goals in the comments below or on the Repayable Facebook Page so I can cheer you on!

 

A Borrower’s Guide to Repaying Student Loans and Investing

A Borrower’s Guide to Repaying Student Loans and Investing

by | Feb 5, 2018 | #Millenniallife, Money Matters

Read this if you can’t seem to get a straight answer out of anyone when it comes to tackling your student loan debt and investing. Estimated read time 7 min.

What’s the dilemma?

Everyone knows they’re supposed to invest and save for their future. Over time investments provide a rate of return that compounds on itself year after year and will continue to grow even if you stop making contributions. Investing makes your money work for you.

The best investment strategy involves having enough money invested that you can live the lifestyle you want off the compounding interest indefinitely. Yep that’s right, you can invest enough money that you can withdraw money each month without actually losing anything from your originally invested amount.

Indefinite compounding interest sounds awesome and all but what are borrowers to do when we have mountains of student loan debt holding us back from financial freedom?

How can we pay for our current existence without robbing our future?

Let’s focus on retirement.

We probably can’t all agree on the degree to which you’ve got to “live your life now” or “save for a rainy day” . However I think many of us can agree that we don’t want to be forced to work forever because we can’t afford to stop working. To prevent that difficult future, we’re going to focus on investing for retirement.There are two general types of retirement accounts.

Employer sponsored accounts, 401(k) and 403(b)  are accounts where your contributions are matched by an employer. The contributions of the employer often take time to fully “vest”. That means if you were to leave your employer you would leave some or all of the employer contributions behind depending on the vesting strategy.

IRA’s are accounts that don’t have an employer match. IRA’s also have significantly lower contribution limits, $5,500 a year if you’re under 50.

Don’t leave money on the table.

The most straightforward approach to saving for retirement while repaying your student loans is to pick a strategy that gives you the most free money. That means if you have access to an employer-sponsored retirement plan you should contribute enough to get the maximum match.

For my 401(k) that means I contribute 5% of my income to get a 4% match from my employer. If I contribute anything less than that I’m leaving money on the table and if I contribute more I’m relying only on the market rate of return to see growth.

Know your goals.

Ok so you contribute enough to get the max match from your employer but you still have extra money after these contributions are made. Now what? Should you apply that income to paying down your debt more quickly to save interest or should you invest that money in retirement?

Common wisdom says this If your student loan interest rate is below the rate of return of the market (6-7%) invest the extra money instead of putting it toward student loan debt. I think common wisdom is wrong. Next week’s post is going to take a deep dive into how you can actually calculate the impact this choice has on your net worth. There’s also going to be a worksheet you can plug your own financial information into so you can objectively end your personal debate once and for all!

Knowing your goals is more about deciding what you want for your finances. Does your student loan debt give you a sense of fear or restriction? Does it keep you in a job you hate? If it does then perhaps for quality of life you’re better off eliminating that debt as quickly as possible.

Some folks aren’t stressed out by their debt and want to start putting their money to work as quickly as possible. If that’s you then perhaps you are better served by investing your extra income and taking a longer approach to student loan repayment.

Strategies for either approach.

If you want to get out of debt quickly. You should contribute enough to your 401(k) or 403(b) to get the full match from your employer and then put all extra income toward your student loan debt. Once you’re out of student loan debt, shift your mindset and contribute the same amount toward your retirement accounts.

If you want to maximize your investing. You should contribute all your extra money to your retirement accounts. Depending on your income level and the type of accounts you have you may want to max out the 401(k) before contributing to the IRA or the reverse may be true. Either way make sure to get the full amount of your employer match.

Once you’ve maxed out retirement account contributions. That’s $33,500 annually for most borrowers. You’ll need to find additional options for investing such as a brokerage account. There are many options but one company I like is Ellevest which strives to close the gender investing gap. Yes we not only make less than men but we also earn less from investing in our lifetimes too! Ellevest is a robo-advisor that matches you with a portfolio that suits your financial goals and can re-balance your portfolio when needed. They also send alerts when you’re off track to achieve your goal and advice with how to get back on track.

What do you think?

What’s your approach to repaying your student loans and investing? Do you want to pay off quickly and minimally invest or do you want to maximally invest and take your time to repay your loans? Let me know in the comments below or on the Repayable Facebook Page!

 

Is Student Loan Forgiveness a Safe Choice?

Is Student Loan Forgiveness a Safe Choice?

by | Jan 29, 2018 | #Millenniallife, Loan Forgiveness

If you’re considering student loan forgiveness but the dubious PSLF news has you wondering if any forgiveness option is safe you’ll want to read this. Estimated read time 5 min.

PROSPER wants to eliminate time-based loan forgiveness for new borrowers, I haven’t heard of anyone who’s actually received PSLF, what is the deal with loan forgiveness? Is loan forgiveness for real or is the government going to pull the rug out from under borrowers? The proposals in the PROSPER Act and the news around PSLF might have you wondering if you’re on safe ground and if loan forgiveness is a secure option for getting rid of your student loan debt. Let’s take a look at the information we know about loan forgiveness.

 

PSLF and income-driven loan forgiveness

Public Service Loan Forgiveness (PSLF): Forgives remaining balance of student loans after a borrower makes 120 payments on a qualifying income-driven repayment plan while working for a qualifying employer. The loan amount forgiven is tax free.

Income-driven Loan Forgiveness: Forgives the remaining balance of student loans after a borrower makes payments on an income-driven plan for 20-25 years (depending on when loans originated). The loan amount forgiven is taxable.

 

Borrowers who qualify for these programs

PSLF: Borrowers employed in specific public-service jobs.

Income-driven Loan Forgiveness: Any borrower who makes payments on their income driven repayment plan for 20-25 years.

 

Estimated costs

PSLF: $23.7 billion dollars over the next decade.

Income-driven Loan Forgiveness: $74 billion over the next decade.

 

Security of Plans Based on Cost

PSLF: is an incredibly high cost plan that doesn’t cap the loan amount forgiven and covers a broad range of borrowers. The proposed PROSPER Act eliminates this plan for future borrowers. If you haven’t yet borrowed and are considering PSLF as a way to make your debt affordable look somewhere else. It’s unlikely this plan will survive in the long term. If you’re currently working toward PSLF you should be able to get loan forgiveness through PSLF.

Income-driven Loan Forgiveness: is another high cost loan forgiveness option. This option helps borrowers with the most need making it a plan that is better targeted than PSLF. However time-based loan forgiveness is also set to be eliminated for new borrowers under the PROSPER Act to be replaced with a plan that protects borrowers from negative amortization so they would pay no more than they would have under a 10 year standard repayment plan. Because this type of forgiveness is better targeted and allows the government to collect more of the original debt it’s more likely that this will survive in some form for future borrowers. If you’re a current borrower you will likely get loan forgiveness under this model.

 

So what’s a borrower to do?

Unfortunately the security of loan forgiveness options depend greatly on the desires of Congress. If you want to exert the control you have then you must talk to your representative and state senators. Tell them what your life looks like with loan forgiveness and tell them what it looks like without it. Borrowers have demonstrated they’re ready to speak up as evidenced by the fact that the student loan interest deduction and graduate school tuition waiver remained intact in the tax plan.

Find and contact your representative here.

Find and contact your senators here.

Borrowers counting on loan forgiveness need to continue to keep their loan in good standing by making payments on time each month. If you’re counting on PSLF, start submitting your certification of employment now and keep doing it annually.

Do you feel uncertain about loan forgiveness? Let me know in the comments below or on the Repayable Facebook Page.

 

Additional Resources

PSLF Budget Estimates

Income Driven Repayment Plan Budget Estimates