Student Loans: Some inspiration and my own approach

There’s probably no bigger debt most of my generation is carrying than student loan debt. (Unless that particular millenial also bought a house.) Below, I want to show you how I approached my $65,000 student loans and how you can so something like it, even if my exact strategy isn’t doable for you.

How to approach student loans even if you’re not making much money

Believe me, I know student loans can feel overwhelming. But using the actual balance from one of my loans, my largest, I’m going to show you how you can get a hold of them.

If you’re struggling with repayment

First of all, CALL YOUR BANK. You are far from the first person to have trouble with their loans. Banks may be able to extend your payment plan, which will lengthen the timeline for paying the loans while dropping your payments. I did that msyelf when I was struggling with part-time work. I couldn’t afford my payments, so I called Navient and they exended me. It just about cut my payment in half and I could breath again. That said, Navient is not actually going to be getting paid over 60 years. I have sped up the timelien considerably. If your loans are private, you might be able to refinance them at at any bank offering refinancing for a lower interest rate and/or payment. If you have federal loans, you might be able to consolidate them within the same bank. I actually consolidated my private loans and federal loans. That lowered my payment and interest rate on both types.

Once you have some breathing room

Once you’re on a payment plan you can live with, we want to try to get the upper hand again. If you can save $10 a month or more, you can speed up your repayment. I’m going to show you how using one of my actual loans. My “big loan” – the highest balance one – is currently (May 2019) $14,997.68 with a 6.8% interest rate. Navient expects me to pay it off November 20th, 2042. I’ll be 57 at that point. (Note, I’m on an extended repayment plan.) Below I’m going to show you how long it will take to pay the loan off at several points – starting from the minimum payment, as well as how much I would pay in interst, and how much I would save for each extra payment amount.

LoanInterest
Rate
Minimum
Payment
Extra
Payment
Time to
Pay off
Total
Interest
Interest
Saved
$14997.686.8%$105.86$0~24 years$15,544$0
$14997.686.8%$105.86$1019 y 7mo$12,187$3,357
$14997.686.8%$105.86$20~16y 7mo$10,183$5,361
$14997.686.8%$105.86$50~11y 7mo$6,798$8,746
$14997.686.8%$105.86$100~7y 10mo$4,336$11,208
$14997.686.8%$105.86$2504 years$2,075$13,469
$14997.686.8%$105.86$5002y 4mo$1,356$14,188
$14997.686.8%$105.86$10001y 2mo$482$15,062

If I only make minimums on that loan, I’m paying more in interest than the loan is even for!! (This is why say even if it’s only $10, pay more on your loan and direct it to the principle, not advancing the next payment date.) It’s actually about 25% paid off already – I told you it was my biggest loan! But seriously, even if you only have a spare $10, you’d save more than $3000 in interest sending that to loan, not to mention paying it off a little over 4 YEARS faster. The other thing is that there is definitely a diminishing return in this chart. From $100 on, we’re already doing pretty well, and we’re saving less and less interest compared to next lowest payment. That said, I am so sick of giving Navient my money that I’m going to try to restore my $500 extra payment on it when I start working again. If not $500, as close as I can get.

If you’re not making much money, loans can be overwhelming. But look above again. 4 years and $3000 saved for an extra$10/month. Almost 7.5 years and a bit over $5000 saved for an extra $20 a month. That is real time and real money left in your pocket instead of the banks.

Paying off loans, even when you’re being aggressive, is a marathon rather than a sprint. I’ve been paying that loan above for a decade already. It’s been getting minimum payments while I paid off lower hanging fruit. I’ve got one more loan worth a little more than half of the one I showed you above. I’ll be paying that one off first. Much faster than Navient expects. So look at these numbers and find some hope there. Even $10 a month makes a real difference, and the more you can find, the better. But dont’ drive yourself crazy.

Note: I used a calculator at NerdWallet.com to run those numbers for you. Nerd Wallet also mentions some other ways to pay your loans: windfall payements (like inheritance or lottery winnings), tax returns (one big extra payment a year), or rolling a raise into your payment (as in, making an extra $100 a month, send it to the loans to speed up repayment rather than using it to further the dreaded lifestyle creep.). I also want to credit Ramit Sethi for pointing out how effective speeding up repayment is even with a tiny extra payment per month. I wouldn’t have thought to include $10 and $20 extra payemnts without his focus on them.

My Approach

Well, as I shared above, my student loans totaled about $65,000 at their highest. I didn’t incur much debt from my undegrad, about $20k. The rest came from a very stupid decision to try to go to grad school in New York for Media Studies. I only stayed one year before I decided the program wasn’t for me, but that added another $45k to my debt load. If I could go back and smack 20 year-old me upside the head for even thinking this, I would.

Well, I had paid a few thousand on my finial $20k during my year as a teacher, before NJ redid school budgets during the recession and my school laid off ever first year teacher they hired and half the special ed department to get in line with the funding shortfall. I bounced around working for Apple and tutoring for a few years, but it was all part time, and it got to the point where I couldn’t pay my bills. I had already talked to my bank, Navient, and they ahd extended my repayment, which lowered my bills, but I was still not able to pay my bills after about 2 years of part-time work. My savings were gone. My husband didn’t have full time work at all during these years. He was tutoring part time. So at best, between the two of use, we were pulling one (low) persons’ salary. By 2011, 3.5 years after graduating college, it was time to do something drastic.

My drastic move: I enlisted in the Coast Guard in 2011. I was active duty for 7 years, and just left at the end of 2018. I chose the CG because I didn’t want to serve in combat zone, wanted to stay in the US, and liked the Coast Guard’s missions. I went enlisted becuase even with a bacehlors degree (you need a degree to apply for officer) it was a lower bar to clear to get hired. And i NEEDED a full time job.

Now, it’s not a publicized fact, but the CG actually pays pretty darn well. (They are also the smallest and most selective of the 5 branches of the military, and I’m telling you this becaus I KNOW my exact circumastances are special.) The CG does not have big bases full of housing for their memebers with giant chow halls. Because of that, CG members are paid a housing and food allowance in addition their basic pay. That way they can secure housing and buy food on their own. Those allowances are NOT taxable income.

I lived mainly on my basic pay. I rented below what I got paid for housing, and I shopped pretty cheap for food. (I’d flirted with vegetarianism before, but actually went veg in the CG. You would not believe how expensive meat is in some parts of the country!) By focusing on my fixed costs like this, I was able to free up $500/month, and after I paid off my credit cards and car (which took about 1.5 years), I turned my focus on student loans. The total extra I paid varied from $500 to $1000 a month depending on my duty station, how much housing allowace I got, and how far below I could rent and not hate the place.

When I left the Coast Guard in 2018, my total number of loans at Navient had shrunk from 8 to 2, and from a balance of $65000 to a balalnce of $21000. (I tend to think of it as my car payment now. Not in the least becaus car loans have 5 year pay-off terms.) I’ve been living on savings this year, (that I saved for this purpose in my last years in the CG) wanting to just focus on taking care of myself. My time in the CG was very stressful, and full of sleep deprivation. It took me about 7 months before I lost the chronic exhaustion finally lifted, but I’m finally feeling human again. I’m paying minimums on my loans for now. I’m gearing up my job search and once I’m working again, I’ll set up extra payments again. I don’t know for how much yet, but it will be fore as much as I can manage without hating life.