I Have MAJOR Student Debt
If you are here to read up on all the latest finance tips and learn exactly how to pay off your student loans in a super easy way, you are in the wrong place. I am no financial guru. Leave that to Dave Ramsey or any financial advisor. Let’s be real, I’m in the same boat as probably a lot of you. I have MAJOR student debt and often times, it is really scary. So here is my disclaimer: This post is not intended to give you any financial advice. This post is to simply share my experience and my personal thoughts on student loan repayment.
I have roughly $240,000 of student debt. Pause. Let that sink in. How did it happen? Well.. while at Yale, I REALLY racked it up. I used loans to pay for two Master degrees and also used the government funding to… pay my rent, expenses, and anything else absolutely necessary. When I enrolled in the dual PA/MPH program, I was checking the boxes, filling out the FASFA forms, and accepting everything I was given. I received no scholarships or significant financial aid from the school. I was thinking in the moment and didn’t have much regard or even knowledge on how deep a hole I was digging. And now here I am, accruing $42 a day in interest alone.
In 2018, the average debt of a physician assistant graduate is $116,733 (1) and the median debt of a medical school graduate is $200,000 (2). First things first, take the emotion out of student loans, accept it, and make a plan. I used to feel debilitated and defeated by the thought of the insurmountable number I carry with me. But I realized, there are people with more debt than me and there are people with less debt than me. It is all relative. There is no sense in comparing your debt to anyone else’s, as it will not help pay your loans off any faster. Everyone has different situations and different experiences. Oh, and please don’t listen to those who say, “You did this to yourself. You signed up for this.” Nooo.. really, I didn’t know that???
So you graduate and you know that first bill is headed your way (after your 6 month grace period, of course). With federal loans, you can enroll in different kinds of repayment plans. They are all listed here. Each plan varies in the total amount due each month and the time frame of repayment. Always remember: the longer you take to pay off your loans, the more interest accrue. I don’t think I paid my first payment a day before that 6 month grace period was over and hindsight is 20/20. I was racking up MAJOR interest. If you can manage that standard repayment plan and say ‘see ya’ to those loans in 10 years, DO IT. A lot of repayment plans are based on your income, which is super helpful when starting your career, possibly at a lower salary. On those plans, such as REPAYE, PAYE, IBR, ICR, your loans will be forgiven after 20 - 25 years. With that being said, you may be taxed on the outstanding balance, which could lead to a hefty bill. The website has a calculator that can help you decide what plan is best for you.
There is a lot of buzz around the Public Service Loan Forgiveness program. If you work full time for a qualifying employer (like the government or a non profit), make 120 consecutive payments (10 years), have direct loans, AND be enrolled in an income-driven repayment plan (like the ones stated above), your loans will be completely forgiven. YES, bye bye. It sounds amazing because a lot of hospitals are non-profit. Now, onto the drama. I will not go into it all the details, because you can explore it yourself BUT after checking the latest statistics, 99% (quite literally) of people are being denied following their 120 consecutive payments. As of September 2019, out of those 136,473 applications, only 1561 were approved and just 1139 lucky people were granted student loan forgiveness (3). That is less than 1%. If you are banking on PSLF to forgive your loans, just take caution!
So what am I personally doing? I am TRYING to pay them as aggressively as I can. I am currently on an income-based repayment program and paying more than my minimum each month. When you start to see your principal decrease, even by just a FEW dollars difference, it can feel really good. I try to read to gain more knowledge, listen to financial podcasts, and ask the advice on others that have gotten out of debt themselves. It does makes me laugh when I read how a married couple with over 500k of school debt paid off their loans in JUST 3 years; then come to find out they did that buy living in a tent and eating sardines for dinner every night (sarcasm, but you get the point). For me, it’s important to remain realistic. It is important to me to keep my sanity and continue to live my life without restricting myself too much because of student debt. But let me be clear, I don’t live a crazy lifestyle. I do not travel much (yet, fingers crossed) and I keep superfluous purchases to a bare minimum (actually pretty non-existent).
Here are my major tips/what I do:
Pay more than the minimum. Every month. At every chance you get. Once your principal starts decreasing, so will your interest, and you can start chipping away at it.
Apply all bonuses, tax refunds, and raises to your debt. This one kind of stinks and personally, it’s the hardest, because we all want to #treatyourself. But read the next point….
Make some sacrifices, but not all. Ramit Sethi (one of my favorites) teaches “spend extravagantly on the things you love, and cut costs mercilessly on the things you don’t.” I will buy a $600 round-trip ticket to the East Coast to see family and friends in a heartbeat, but I pass on a $600 pair of shoes, concert tickets, or weekend trips.
Refinance as soon as you can. Get your interest rate down! When you refinance a lender pays off your existing loans with a new one, at a lower interest rate. Some popular lenders are: Citizens Bank, SoFi, Earnest, Laurel Road, etc. Don’t worry, you’ll start getting mail from these companies. To qualify, you will need good credit, a history of on time payments, and a decent income to debt ratio. This all sounds wonderful to me, but it does come with the loss of some benefits. Federal student loans provide longer deferments and forbearances, whereas these private lenders aren’t AS protective of you (aka you better pay your bill and it better be on time). You want to do your research before choosing a lender because they all have their different benefits. A 2020 goal of mine is to refinance my loans.
I think that’s plenty for today. Fear not, I’m in the thick of it too and I have a LONG. way. to. go. A few of my favorite resources were sprinkled through this post, but I’ll leave a few more here!
So Money Podcast with Farnoosh Torabi - podcast
The White Coat Investor - website
The White Coat Investor: A Doctor’s Guide to Personal Finance and Investing (highly recommend + quick read)
The Total Money Makeover by Dave Ramsey (Over 5000 reviews, it’s a classic. Purchased it this past January and a staple on my bookshelf)
Skimm Money - website (strong supporter of TheSkimm and love the stories they share)
Originally Posted February 12, 2020