Whether you’re the kind of person who likes to make resolutions starting the first of the year or not, now is a good time to re-evaluate your student loan repayment strategy. It’s easy to pick a strategy and let it sit on autopilot. Today’s post is going to cover the basic student loan repayment options and help you evaluate your current strategy.
Estimated read time ~ 6 minutes. Estimated watch time at 1.5x ~4 minutes.
Evaluate Your Repayment Strategy
There are three things to consider when assessing if your repayment strategy is right for you.
How affordable is your current strategy?
Are your monthly payments easy to make, sometimes easy sometimes a stretch, or difficult to afford?
Does your current strategy match your student loan goals?
Are you wanting to pursue loan forgiveness, pay off your loans as quickly as possible, or pay as little as possible each month?
How do you feel about your current strategy?
Do you feel indifferent, empowered, or stressed out about your current strategy?
If your current strategy isn’t affordable for you and is stressing you out, it’s obvious it’s time to make a change. But if your payments are easy to make and you’re feeling indifferent it’s just as important to make a change.
Repayment Plans
The right repayment plan is the very first step to assess. You have the most control over your repayment plan choice when you have federal student loans. All of the repayment plan choices discussed below are for federal student loans. You can choose from income-driven plans to make your monthly payment more affordable and as one part of making eligible payments toward PSLF or Income-driven loan forgiveness.
If your payments are unaffordable, an income-driven plan can lower your monthly payment. The downside of an income-driven plan is that the longer you take to repay your student loans, the more interest you’ll pay. Ultimately if you can’t afford your monthly payments, that may be a worthwhile tradeoff.
However if you can easily afford your monthly payments, it makes sense to be on an aggressive repayment strategy such as the 10-year standard repayment plan. Under that plan you’ll make a fixed monthly payment and repay the entire balance of your student loans after 10 years. You’ll pay the least amount of interest under this plan.
For some borrowers student loan forgiveness is a very appealing opportunity. Right now, the most talked about loan forgiveness option is Public Service Loan Forgiveness (PSLF). In general student loan forgiveness programs are very specific in their eligibility criteria and the three federal programs only forgive federal student loans.
Here’s a quick breakdown of the three major federal student loan forgiveness options.
First up is PSLF, this program is designed to forgive the remaining student loan balance for borrowers working in public service jobs or at non-profit, government, or tribal organizations after 120 eligible payments are made (10 years minimum).
Next is Teacher Loan Forgiveness, designed to forgive up to $17,500 for specific highly qualified teachers in low-income school districts after 5 years of teaching.
Lastly is income-driven loan forgiveness, an option available to potentially everyone with federal student loans. This option forgives the remaining balance of student loans after 20-25 years of income-driven monthly payments.
You can read more about the different loan forgiveness options here.
Student Loan Refinancing
Finally, an option that suits the repayers with private student loans, federal student loans, or a mix of both. Refinancing is the only option that can potentially lower a borrowers interest rate. Here are a few situations to keep in mind.
If you have federal student loans, refinancing your student loans makes them private loans and ineligible for federal loan forgiveness programs and federal student loan benefits forever. You can’t make refinanced student loans federal loans ever again.
If you have private student loans, refinancing doesn’t carry much risk. If you can get a lower interest rate on the student loans, especially if you can get a fixed interest rate that’s lower, you’ve got the green light. You won’t give up borrower protections because you didn’t really have many to start with.
If you have a mix of student loan types, you may want to consider refinancing only the private student loans and leaving the federal student loans as they are. It all depends on your unique situation.
After looking at your student loans do you need a new repayment strategy this year or are you on track smashing out your goals? Let me know in the comments below or on the Repayable Facebook Page.
If you’re counting on loan forgiveness under Public Service Loan Forgiveness (PSLF), you’ll want to read this. Less than 1% of the borrowers who applied for PSLF have actually received forgiveness. What exactly is going on? Why are so few borrowers being granted PSLF?
Estimated read time ~10 minutes, estimated watch time ~7.5 min at 1.5x speed.
Reviewing the Rate of Forgiveness
First let’s look at the borrowers who have applied for PSLF and the categories they were sorted into. While less than 1% actually received loan forgiveness, a little over 1% have been approved for forgiveness but haven’t yet had their loans discharged.
It’s surprising to me that in June of 2018 289 borrowers had been approved for forgiveness, but come Sept of 2018 still only 206 had actually received that forgiveness. While FedLoan Servicing is the one to approve applications, the Department of Education gives the final notice to FedLoan to discharge the student loan. That process can take some time. It’s likely these 83 borrowers are waiting for the Department of Education
Reminder: If you’ve submitted your PSLF application and are waiting for discharge you must continue to remain employed full-time for an eligible employer & continue making eligible monthly payments.
The good news for borrowers, is that although they’re required to continue making monthly payments, they will be refunded for any overpayment after the 120 eligible payments have been made.
Discussion of PSLF Denials
Denial isn’t necessarily the final word in a borrower’s pursuit of PSLF. I suspect a large number of PSLF denials represent a “not yet” scenario. This would happen if a borrower hadn’t made all of the 120 eligible payments yet. That borrower could qualify for student loan forgiveness very soon depending on how many payments short they were.
79% of applications were denied due to not meeting program requirements.
Some of these denials really are the heartbreaking type of denial. Some denials represent borrowers who didn’t have eligible student loans. Most often in this scenario the borrower had an older FFEL loan that isn’t eligible for PSLF and wasn’t consolidated to the eligible Direct Consolidation Loan. Those borrowers represent true denials, they would need to consolidate their debt to a Direct Consolidation Loan and make 120 payments all over again… assuming there’s anything left to be forgiven after 20 years of payments.
29% of applications were denied due to missing information.
Denials due to missing information could potentially be remedied very simply. It depends on what type of information is missing. It could be employment certification information. In this situation borrowers may be able to provide the new information fairly quickly and still move on to forgiveness.
Analyzing Average Forgiveness
The average dollar amount of student loan debt being forgiven is pretty high at nearly $58,000 per borrower. This information suggests that the early borrowers who have had success receiving student loan forgiveness under PSLF might have unique demographics.
This group could represent a small subset of borrowers with masters or professional degrees, think pharmacists or physicians, people who have high salaries but also have significant amounts of student loan debt. The numbers suggest that PSLF may not be doing a great job capturing lower income lower debt public servants such as teachers. These are speculations, and my take on the data provided. Unfortunately demographic information about profession isn’t available in the data series.
How PSLF Stacks Up To Other Federal Loan Forgiveness Programs
Teacher Loan Forgiveness offers student loan forgiveness of up to $17,500 for qualifying teachers in qualifying low-income schools.
In 2009, the first documented year of forgiveness, Teacher Loan Forgiveness provided forgiveness for 14,550 borrowers. In FY 2017 Teacher Loan Forgiveness provided forgiveness for 42,297 borrowers.
Unfortunately the Teacher Loan Forgiveness Report doesn’t provide data about the total number of applicants, so I’m unable to make any comparison about approval percentages.
The Borrower Defense to Repayment program offers a discharge of student loans for borrowers if a college or university misled them, or engaged in other misconduct in violation of certain state laws. In 2016 several for-profit colleges closed and the program became more widely utilized.
As of September 2018 47,942 (24%) borrower claims were approved under the Borrower Defense to Repayment program. Of those approvals just over 15,000 (31.3%) had received partial discharge.
The Problems With PSLF
Poor communication and expectation management.
When PSLF was first announced in October of 2007, it promised loan forgiveness for public servants after 10 years of payments. In reality it’s quite a bit more nuanced than that. Borrowers must have the right type of student loans (Direct Loans), be on the right repayment plan (an income-driven plan), be employed full-time for an eligible employer (non-profit, goverment, tribal), and make 120 eligible payments.
The Employer Certification Form was the first opportunity a borrower had to complete some type of form that would help them ensure eligible employment and track their eligible payment progress. That form wasn’t released until 2012, five years after the announcement of PSLF.
It seems the nuanced requirements of PSLF have been poorly communicated and many borrowers have been unaware of nuances that have compromised their PSLF eligiblity.
Too many rules.
One of the most devastating rules has been the eligibility of only Direct Loans for PSLF. Many borrowers have an older type of student loan called FFEL loans. These loans aren’t eligible for PSLF, unless they’re consolidated to a Direct Consolidation Loan. Ineligible loan types can simply be consolidated to make them eligible, but it’s another piece of information a borrower must know and follow through on.
Important Note: consolidating eligible Direct Loans you’ve already made payments on will restart the 120 payment clock. If you’ve got Direct Loans and have already made eligible payments, don’t consolidate or you have to start over.
The intricacy of being able to consolidate student loan debt to become eligible for PSLF while consolidation could set another borrower back is unnecessarily complex. I think all types of federal student loans (except Perkins, because they have favorable cancellation terms) should be eligible for PSLF. Consolidation is a step that trips up borrowers and adds extra paperwork and processing for the Department of Education and servicers, it should be eliminated.
What do you think? Are you freaking out about the poor loan forgiveness rate for PSLF? Let me know in the comments below or on the Repayable Facebook page.
In 2018 I finally crushed my student loan repayment goal. Everyone is going to have their own set of financial circumstances and their own student loan goals. Below I talk about what it took for me to meet my goal and pay almost $44,000 toward my student loan debt last year.
Estimated read time ~7 minutes, estimated watch time at 1.5x ~5 minutes.
Last week I shared my 2018 student loan repayment progress, you can check that post out here.
A Very Specific Repayment Goal
At the beginning of 2018 I was coming off a disappointing year of repayment. In 2017 I paid <$24,000 on my student loans and was really disappointed in myself. I set a very specific goal, that I would pay at least $3,000 a month, each month, toward my student loans for a total of $36,000 in 2018.
The End Was in Sight
2018 was the first year that I really felt like I could see the end of my student loan repayment path. With just about half of my original $132,000 balance remaining to start off the year I could visualize being debt free.
Imagining myself being free of the weight of my student loans gave me the motivation to make small sacrifices and stick to my repayment goal each month. For me, knowing that I wouldn’t have to sacrifice for much longer made it easier to pay extra now.
All Extra Money Toward Loans
I knew one of the things that would help me meet my goal and then some would be to put all my extra money toward my student loans. That meant every time I picked up an extra shift at work, or got an influx of extra money, I put it all toward my student loans.
Last year was the first time I put an entire tax return toward my student loans, and that sucked to be honest because I wanted to spend it on something fun. But I knew it was getting to my #debtfreedream just a little bit faster.
Sometimes I would have pretty small amounts of extra money to put toward my student loans, maybe only $100. In the past I used to think that money was too small to matter much, after all it’s less than 1/10th of my minimum monthly payment. This year, I decided all amounts of extra money helped.
Gave Up Some Things
Typically I take one big vacation with my fiance every year. Unfortunately 2018 was a year of PTO denial and we couldn’t get any time off together to take our planned trip. That meant we didn’t have a big vacation and I ended up putting the money I would’ve spent on that toward my student loans.
In 2017 I spent thousands of dollars removing a couple of trees and fencing in the yard for my dog. But in 2018 I didn’t have any big expenses like that. Our couch is getting worn out, I can’t get the dishwasher open, and I cracked the plastic housing of my car’s side mirror, but I’m pushing those expenses off until they’re really necessary so I can keep plugging away toward my goal.
Tracked my Progress
What gets measured gets done. It’s very simple, so this year I tracked my progress and celebrated milestones. I paid off $100,000 in principal this year and took the time to take notice of that fact and celebrate it. I also tracked my monthly & quarterly progress to make sure I was where I wanted to be.
Started a New Job
Another huge reason I overachieved my student loan repayment goal was the fact that I started a new job. In September I was offered a position at Tuition.io, a student loan repayment benefit company, in Silicon Valley.
I’m still a licensed pharmacist, working on-call at the hospital a few shifts here and there. But now my full-time job is to help employers solve their staffing concerns by solving student loan debt problem for their employees. It’s a pretty awesome thing to do. I work remotely from Wisconsin so my cost of living expenses didn’t skyrocket.
Starting a new job wouldn’t necessarily help me pay off my student loans faster. In my case it did because I hadn’t been able to use a significant amount of my PTO for about a year at the hospital. That meant I had banked 290 hours of PTO. When I dropped down to on-call status from full-time those hours were cashed out.
Even though that money was taxed way more than I could have guessed, it still left me over $9,000 to split between saving up for my wedding and paying extra on my student loans. The PTO cash also really helped me prevent the situation where funding my wedding ate into my ability to pay down my student loans. Because with that lump sum and a little extra savings I’ve funded my half of the wedding, assuming I can stick to my budget!
My new employer is a student loan repayment benefit company. That means they contribute $100 a month directly toward my student loans. So while I’ve only gotten three months of that benefit, every little bit helps!
Those are all the things that really worked in my favor in 2018 to help me really tackle my student loan debt. I feel very grateful about all of it, and most of all very grateful that I’m almost done paying back my student loan debt.
I love hearing from my fellow repayers. So I want to know, what helped you reach your student loan repayment goals in 2018? Leave me a comment below or on the Repayable Facebook Page. See you next week!
Happy New Year everyone! Thank you all so much for stopping by to read the blog, commenting on my YouTube videos, and messaging me with your student loan questions. Repaying student loan debt is a long journey and it’s better with awesome folks like you along for the trip.
In today’s post I give a review of my student loan debt progress compared to the goal I set for myself. This is the first year, in all my years of repaying my student loans, that I crushed my repayment goal completely. Estimated read time ~5 minutes, estimated watch time at 1.5x ~4 minutes.
My 2018 Student Loan Debt Goal
Let’s refresh by talking about what I set out to accomplish with student loan repayment in 2018.
My goal was to pay $3,000 per month toward my student loans for a total of $36,000 for the year.
It was an ambitious goal but within reach.
I want to be clear, the specific number of this goal is right for me but might not be right for you. Don’t judge yourself or your student loan repayment goals against mine. Each person has different competing financial needs and income. The number only matters in context to my personal goal. My repayment goal doesn’t determine the value of your repayment goal.
The Start of 2018
At the beginning of 2018 I reflected on my 2017 progress and I was pretty disappointed. I hadn’t been nearly as aggressive as I had hoped. Looking back at my 2017 progress was a good reality check for me. In 2017 I put $23,600 toward my student loans. Not the worst, but really not very good either.
I started 2018 with a total student loan balance of $64,672.61 or about half of my original $132,000 balance.
2018 Student Loan Repayment Progress
2018 was a very successful year for my student loan repayment.
I paid $43,925 toward my student loans and my student loan balance as of Jan 1 2019 is $22,341.69
Ahhh!!! I’m almost out of student loan debt you guys!
2019 Student Loan Repayment Goal
2019 is going to be the year I pay off my student loans completely. One of the biggest things that’s helped me pay so much extra this year is that I can see how close I am to being out of debt. I’ve decided I want to be out of student loan debt before I turn 30.
To make that happen I’m going to pay at least $3,500 each month toward my student loans. That should mean I’ve repayed my student loans completely in July of 2019! Just 7 more months of student loan debt.
2019 is going to be a bit more challenging for me financially because I have a major competing financial interest, I’m getting married in October. My fiance and I are splitting the cost of the wedding and I already have my half saved, assuming I can stick to my budget. I don’t have anything saved for the honeymoon but I’m hoping I can use what I had been paying on my student loans every month to come up with the funds for my half of a really nice trip!
How was your 2018?
I love hearing from other borrowers working to repay their student loans. I’d love it if you could share how repayment went for you in 2018 and what your goal is for 2019. Leave me a comment below or on the Repayable Facebook Page or drop me a message, I’m jeni@repayable.org. Here’s to a 2019 that brings you closer to your #debtfreedream
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