How I Paid Off $67,000 in Student Loan Debt and My Plan for the Remaining $65,000
Today’s post is all about how I paid off $67,000 of my student loans over three years and how I plan to repay the remaining $65,000 in two years.
This post is for you if you want to see where I went wrong and how I sped up my repayment trajectory. Estimated read time ~8 min.
We’re going to get right into the meat of my repayment. If you want my origin story, get to know me.
The peak of my student loan debt was in July 2014 after I finished pharmacy residency and I owed $132,000 in federal student loans. That was an increase from when I graduated the year before despite the fact that I had paid over $6,000. Then and there I decided my strategy would be to get out of student loan debt as fast as possible.
So with the full-time salary of a real pharmacist I changed my payment plan to the 10 year standard repayment plan and went to town making as many extra payments as a I could. I kept up this strategy until March of 2016 when I filed my taxes.
I had paid nearly $14,000 in interest and couldn’t get the student loan interest deduction because I was over the individual income limit of $80,000.
I will never forget that feeling. I was so angry, I wouldn’t be above that income level without my student loan debt. I could never have gone to college, let alone obtain a high cost professional degree without that debt. It felt like I was being punished for using education to increase my socioeconomic status. If my family was wealthier I wouldn’t have as much debt and wouldn’t be paying this much interest on my loans.
Because I lifted myself into another tax bracket through education and borrowing money to obtain that education, I was being taxed twice.
First my $14,000 in interest was going to the federal government because these were federal loans. Second the federal government had already collected their 28% from the income I used to pay for that interest. The federal government was double-dipping and now they refused to allow me to get a measly $625 (the amount returned if you deduct the max of $2,500 in interest) of it back?! Fuck that.
This injustice I felt started to weigh on me and nag at me. I just couldn’t let it go. Something is wrong with the way we treat student loan borrowers in this country and it hit home. I couldn’t believe I was stuck paying 6.8% interest on these damn loans when I could get an auto loan for 2.54%. Our system was backwards. I was never going to make any progress on my debt this way.
Even though I had paid over $30,000 that year I saw my debt decrease by only $16,000.
How could I get ahead? I saw myself falling behind peers with lower amounts of student loans that they had been able to repay in 1-2 years. They were maxing out their 401K and IRA contributions while I was only contributing enough to my 401K to get the full employer match.
And then I saw, plain as day, the meaning of the rich get richer. I saw my fate laid out before me. I lifted myself comfortably into the middle class but that was exactly where I would stay. I had always wanted to be free from my student loan debt but now I felt suffocated.
Somehow this education that created so much opportunity started slamming doors shut in my financial future and I couldn’t stop it.
But then it hit me. I wasn’t going to just sit around complaining and mourning the loss of financial opportunities. I was going to find a better way.
About that time I went to coffee with a friend who is a generation or two ahead of me and works in banking. She told me there had to be a market offering better interest rates for borrowers like me who were high income high debt because the federal interest rates were terrible. I told her I thought all those companies were a scam and had huge fees. She shook her head and said she was really surprised there wasn’t a market for it.
After this conversation I decided I needed to do my due diligence and happened to hear advertisements for two student loan refinancing companies Earnest and SoFi on a couple of podcasts I listen to. Armed with these company names and referral links I checked them out and found that Earnest offered me a variable rate of 3.36% which was a full percentage point lower than SoFi’s variable rate and lower than either fixed rate.
OMG, my mind was blown. Turned out there were no fees to refinance, their customer service was great, and I was going to halve my interest rate!
So in June of 2016 I refinanced my remaining $99,000 of student loans.
I do want to caution anyone reading this that refinancing isn’t right for every borrower so you should check out these posts (Is Refinancing Right for You?, Choose the Benefits You Need, Avoid These Refinancing Mistakes) to make sure refinancing is right for you.
Then this year in 2017 my variable interest rate had crept up to 4.1% and I wanted to see what other rates were out there. This time, armed with many companies I started comparing rates. Turned out there were three competitive companies. Earnest, ELFI, and CommonBond. SoFi was unfortunately still 1% higher so I didn’t bother submitting a formal application to them.
All three companies approved my application and sent their offers. ELFI had the lowest rate. I sent my truth in lending document (TIL) to Earnest and they matched the rate. As of August 1, 2017 I have a 3.37% fixed interest rate and I’ll stay here until my loan is repaid.
I have $64,800 remaining of my original $132,000 in student loan debt and I can taste freedom!
I’m half way there in dollars but it won’t take me three years to repay the second half. I won’t be wasting $14,000 a year in interest ever again. Because I’m so close and can glimpse my #debtfreedream I’m going to tighten my spending and pick up the pace. I’m not going to skip extra payments for things like travel, Christmas shopping, etc. I’m going to plan ahead and save intentionally for those things.
I’ll be paying $3,000 a month toward my student loans every month until they’re completely gone.
What’s your story? I would love to hear it. Repayable is here to share the burden of student loan debt and find strategies to eliminate it for you and future borrowers. I’m no longer willing to accept that student loan debt is just going to keep getting worse. Are you?
Leave me a comment below, on the Repayable Facebook Page, on Instagram, or send me an email jeni@repayable.org . Cheers to kicking ass in 2018!
*All links to refinancing companies are referral links. That means typically we both get paid something if you refinance your loan using that link. This is one way I fund Repayable.
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