Public Service Loan Forgiveness (PSLF) is one of the fastest and most complete student loan forgiveness plans offered to federal student loan borrowers. PSLF is also one of the most convoluted loan forgiveness programs. So if you’re considering PSLF you’ll want to stay tuned for the 5 steps you need to take to get PSLF.
Estimated read time ~ 5 minutes. Estimated watch time at 1.5x ~ 4 minutes.
Step 1: Determine if you’re working for an eligible employer.
Employers that are eligible include goverment or tribal organizations and 501(c)3 non-profits. To find a list of PSLF eligible employers check out this link. To be eligible for PSLF you’ll need to be employed full-time as defined by your employer or 30 hours per week, whichever is higher.
Step 2: Determine if you’ve made any eligible payments toward PSLF.
To qualify for PSLF you need to make 120 eligible payments. To know if payments you’ve made are eligible or not you need to know which type of loans you have and what repayment plan you’re in.
Do you have Direct Loans, FFEL loans, or a mix of both?
Which repayment plan are you current on?
FFEL loans aren’t eligible for PSLF. The eligible repayment plans for PSLF are Income-Based Repayment (IBR), Revised Pay as You Earn (REPAYE), Pay as you earn (PAYE), or Income-Contingent Repayment (ICR). The 10 year standard repayment plan is also technically eligible for PSLF but after 120 payments under this plan there isn’t any remaining loan balance to be forgiven.
Step 3: Choose your course of action.
If you haven’t been making eligible payments, either because you have FFEL loans that aren’t eligible, or because you weren’t in the right repayment plan, you’ll need to make some changes.
If you have a significant amount of FFEL loans, you’ll need to apply for a Direct Consolidation Loan to make them eligible for PSLF. Only Direct Loans are eligible for PSLF. Consolidating your student loans restarts the clock on 120 payments for PSLF so be sure this is the best choice for you.
Once you have all Direct Loans, it’s time to enroll in an eligible repayment plan. If you’re a new borrower after Oct 1, 200y the Pay as You Earn (PAYE) plan is generally the most affordable option. If you borrowed before that date the Revised Pay as You Earn (REPAYE) or Income-Based Repayment (IBR) plan may be best, it’s a good idea to compare them using the studentaid.gov calculator. If you’re a parent with a Parent PLUS loan, Income-Contingent Repayment (ICR) is the only repayment plan option that’s eligible for PSLF.
Step 4: Complete and submit the employment certification form.
This form allows you to double check that you’re in eligible employment for PSLF and will speed up the process for loan forgiveness once you’ve made 120 qualifying payments. This step isn’t required but is strongly recommended to make sure your forgiveness goes smoothly after you’ve spent 10 years making eligible payments.
Step 5: Stay on track.
Ever year you’ll need to resubmit your income information to remain on an eligible income-riven repayment plan. Failing to do so means you’ll waste money making ineligible payments or paying a higher monthly payment.
You’ll also want to check your progress with FedLoan Servicing to make sure you’re both recording the same number of eligible payments made toward PSLF and to identify any problems early. Any time you change employers you’ll want to submit the employment certification form. Finally, you’ll need to keep your student loans in good standing by making your payments on time each month.
Are you considering PSLF? Let me know on the Repayable Facebook Page or drop me an email jeni@repayable.org. For bite-sized student loan tips and motivation follow me @therepayable on Instagram.
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!
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.
My daughter is a Jr in High School. When should we start researching and applying for grants/scholarships and typically how long does it take to receive acceptance or denial responses for scholarship applications? I’d like to plan ahead if I know she won’t qualify for a particular grant/scholarship.
Your daughter will graduate high school in spring 2020 and plans to start college in the fall of 2020.
You can start researching scholarships now. Some scholarships may be accepting applications for Fall of 2020.
Grants are offered by the individual college. Once your daughter fills out the Free Application for Federal Student Aid (FAFSA), which will be available for her to do as early as July 1 2019, the schools she applies to/attends will use that information to determine her eligibility for grants and what her total financial aid package would look like. Financial aid can also include student loans, which have to paid back, and work study.
The time frame for finding out if your daughter received a scholarship will vary by individual scholarship. There’s no standard in terms of when you will find out.
You will find out if your daughter received grant money after the FAFSA is submitted and your daughter has applied to individual schools, the colleges time frame for awarding financial aid will vary by institution.
Well we’re half way through 2018 which means it’s a handy time to check in with your student loan repayment goals. Read or watch this if you want to see how things are going for me and check out my tips for making extra student loan payments.
Estimated read time ~5 minutes estimated watch time at 1.5x speed ~ 2.5 minutes.
It’s all about your individual student loan repayment goal.
Everyone is going to have a different student loan repayment goal that makes sense for them. There is no “one size fits all” dollar amount that is right for every borrower. You’ve got to pay what is reasonable for your student loan amount, your income, and the rest of your financial goals.
The best repayment goal is $3,000 each month toward my student loans. I’ve refinanced and my required monthly payment is $1,345 each month so that means I pay at least an extra $1,645 a month on my student loans. Paying $3,000 each month is aggressive enough that I can pay my debt back quickly but still leaves me enough room in my monthly budget to spend on the experiences and things that matter most to me.
Track your repayment progress.
It’s easy to set a goal and then not check in with it until the end of the calendar year. But by then if you’re not on track it’s too late to make any changes. So I check in with my repayment progress quarterly (every three months) to be sure I’m on track and celebrate any extra success I may have had.
In the 2nd Quarter of 2018 I paid $9,840 on my student loans.
My goal was to pay $9,000 ($3,000/month X 3 months) so I was able to pay a little bit extra during the second quarter.
Use extra income for your student loans.
It seems obvious that you would want to use your extra income to pay down your student loan debt but it can be harder to practice than you might think.
The money I used this quarter to pay extra came from some consulting work I do on the side. It can be tough to convince myself to apply a percentage of that to my student loans because I hustle on top of my 40 hour work week to earn that money so sometimes I want to treat myself with it.
What has helped me to use this extra income for my student loans is to remind myself that paying even a few hundred extra means less time I’m beholden to student loan debt. Even shaving a month or two off of that debt buys me a freedom that I can’t find when I buy things or even when I travel.
Keep the big picture in view.
One thing that’s been very rewarding for me is to track my progress over the entire year.
In 2018 I’ve paid $20,385 toward my student loans. I feel great about that number. I started with almost $65,000 in January and now I have just over $45,000 left to pay off.
Each payment gets me a little bit closer to my #debtfreedream.
What are your student loan repayment goals? I would love to hear them and cheer you on toward success. Let me know in the comments below or on the Repayable Facebook Page.
If you’ve defaulted on your student loans there are two major ways to get out of default and put your student loans back in good standing. Read this if you want to know whether consolidation or rehabilitation is best for you. Estimated read time ~ 5 min. Estimated watch time at 1.5x speed ~3 min.
It can be tough not to feel discouraged when your student loans are in default. Fortunately there are two main options, rehabilitation and consolidation, available to get your student loans out of default. The third option is to pay your student loans off in full but this isn’t really an option because if a borrower could pay the loans off in full it’s unlikely they would have defaulted in the first place.
Let’s talk about the difference between student loan rehabilitation and consolidation for getting your defaulted student loans back in good standing.
Rehabilitation
What it is:Student loan rehabilitation is set up with your student loan holder. To rehabilitate your student loan you will set up a monthly payment with your loan servicer. You’ll need to make nine payments within 20 days of their due dates during 10 consecutive months and then your defaulted loan will be back in good standing.
Advantages:The biggest advantage of rehabilitating your student loan is that the record of default will be removed from your credit history. Your late payments that were reported before you went into default will remain on your credit history, but the default itself will be removed.
How to do it:You’ll need to contact your student loan holder to get the process started. If you don’t know who your loan holder is you can log in to your Federal Student Aid Account to find out. Next you will provide your loan holder information about your income and they will determine a monthly payment that’s 15% of discretionary monthly income.
If that payment isn’t affordable you can ask the loan holder to calculate a reasonable alternative monthly payment. To do that you’ll need to provide documentation of monthly income and expenses. You’ll also need to fill out the Loan Information Income and Expense Document.
Consolidation
What it is:Student loan consolidation is set up with your student loan holder. To consolidate your student loan you will apply for a Direct Consolidation Loan and agree to repay it under an income-driven repayment plan. Borrowers can’t consolidate student loans that are being collected through wage garnishment unless the wage garnishment order is lifted.
Advantages:The biggest advantage of consolidating your student loan is that your loan will quickly be out of default, rather than taking nine months like rehabilitation. Unfortunately your default will still show up on your credit history.
How to do it:You’ll need to apply for a Direct Consolidation Loan. That application will require information about your income and you will need to enter an income-driven monthly repayment plan.
Problems?
If you’ve tried these steps and are feeling stuck you can contact the Department of Education’s Default Resolution Group at 1-800-621-3115.
Student loan default can be super frustrating to manage. If you want to know where to get started to get out of default, this post is for you. Estimated read time ~ 5 minutes, estimated watch time at 1.5x ~ 3 minutes.
Student loans enter default when a borrower hasn’t made the minimum monthly payments for 270 days.
Step 1: Find out who holds your student loans
When your student loans are in default your federal student loan servicer still owns your loans. However they may have turned over the responsibility for collecting payment to a collections company. Typically the longer your student loans have been in default the more likely it is you’ll have to work directly with a collections company.
The best place to look at who holds your loans currently is the National Student Loan Data System (NSLDS). Typically the company name is listed as a hyperlink that you can click to find contact information.
Step 2: Contact your loan servicer or the collection agency.
When you find out who to contact, contact them. The first step in getting out of default is to get in touch with whoever is going to determine your repayment plan and get started.
Step 3: Provide necessary information and fill out necessary paperwork.
In order to set up your new repayment plan the company you’re working with is going to need a lot of information. This information includes sensitive stuff like income information. So you want to make sure the company you’re dealing with is legitimate. There are a lot of scammers preying on the desperation of borrowers with defaulted student loans.
You can always make sure you’re working with someone legitimate by contacting the Default Resolution Group at the Dept of Ed.
Step 4: Be persistent and keep at it! You can do it!
Collections companies are often difficult to work with. Keep your head up and don’t be discouraged. It takes time to get into student loan default and it takes time to get back out. Keep working at it until you have a repayment strategy you can afford.
Next week I’ll talk about whether you should consolidate or rehabilitate your student loan default and discuss the pro’s and con’s of each.
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 have twins that have two more years of college. I’m thinking of taking out a home equity loan. Is this the best way to pay for their college or should I look at Direct student loans?
Deciding which loan type, private or federal, works best to pay for your children’s education comes down to two main thoughts. The first is interest, ideally you would pick the loan option with the lowest fixed interest rate. The second concern is benefits, if you qualify for and are interested in Public Service Loan Forgiveness (PSLF) you would want to consider a federal student loan.
Let’s talk through both choices.
Direct Parent PLUS Loans:
A Parent PLUS loan is the federal student loan option you have available as a parent. Parent PLUS loans will remain in your name until they’re repaid. Your twins won’t be able to consolidate this loan with any of their own federal student loans to transfer ownership. You would take out separate parent PLUS loans for each child.
The benefit of a Parent PLUS loan is that you can be eligible for certain federal student loan benefits like income-driven repayment plans and loan forgiveness. However, Parent PLUS interest rates are pretty high (in 2017-2018 interest rates were 7%).
Private Loans:
If you’re able to secure a home equity loan or an alternative line of credit for a lower fixed interest rate than the Parent PLUS loans this might be a better choice. The main thing to ensure is that you are able to afford the monthly payments on any private line of credit you obtain. There are no repayment benefits and no forgiveness options for these private lines of credit, which is just fine as long as you can afford payments.
A few general things to consider about borrowing to pay for your children’s education:
– If your children can get Direct subsidized loans for their undergraduate degree, those typically have a lower interest rate and don’t accrue interest while they’re enrolled in courses.
– It’s important to consider the ability to borrower for any future children. If you borrow for the twins will you be able to borrow for other children in your family?
– Does borrowing for college education impact your ability to manage your own debt (mortgage, credit card, auto, etc)? Does borrowing impact your ability to save for retirement?
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.
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.
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.
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