This report was originally published Sept. 11, 2017
Sharing your financial struggles with others may actually benefit you in the long run. With student debt in particular, you might learn from how others tackled their student loan burdens and be able to better manage your own as a result
Student Loan Hero reached out to five student loan borrowers who shared the challenges they’ve faced as a result of their debt, as well as the steps they’ve taken to reclaim their financial lives through refinancing, looking for other sources of income or tracking spending.
Learn from these student loan stories about how borrowers can overcome some common obstacles:
1. Take advantage of refinancing (when appropriate)
2. Keep other expenses low while tackling debt
3. Prepare for potential tax implications
4. Focus on ROI to avoid delaying life ‘milestones’
5. Don’t ignore the potential impact to your mental health
Monique Prince is a social worker who took out $60,000 in federal loans for her master’s degree. After graduating, she couldn’t afford her monthly payments, so she got on an Income-Based Repayment (IBR) plan.
“[This] was helpful because it allowed me to make much lower monthly payments,” says Prince.
But she didn’t realize how much interest was adding up each day until her balance got out of hand. The payment did not cover the interest accruing and Prince’s balance ended up over $80,000.”
Unfortunately, Prince’s payments are too low for her to make a significant dent in her debt — but she has a plan to make the loans more manageable.
What to do
Through refinancing, Prince might be able to snag a lower interest rate, as well as ease the burden of monthly payments. Now, she shares the lessons she learned with her friends and clients.
That said, refinancing isn’t for everyone. If you refinance your federal student loans, you turn them private and lose access to certain government benefits, like income-driven repayment, so make sure to consider the pros and cons first.
Prince also encourages students and families to use tax-advantaged savings accounts so they can take out the least amount of student debt possible.
“[If] your child intends to go to college, open a 529 account to pay for it,” she says. “Let your money grow and compound.”
When you’re paying student loans every month, you might not have much money left over for other expenses. Nicole Firebaugh learned this lesson after graduating from Southern Illinois University in 2015.
Firebaugh was eager to buy a car following graduation, but she had to be patient. “The biggest impact the loans have had on me is my ability to make major purchases,” she explains. “It took me…years after starting to pay loans to feel comfortable enough to buy a new (used) car.
Even with that, Firebaugh’s budget for a car was super tight. She had to consider her student loan payments along with car and insurance payments when looking.
What to do
Now, Firebaugh carefully tracks her budget and makes extra student loan payments when she can. She maps out her finances each week and breaks down payments she needs to make each month into four so she can essentially make smaller payments each week.
She advises other students to minimize the amount they take out in student loans and to avoid spending student loan money on non-school expenses.
By tracking her spending and making extra payments on her student debt, Nicole is moving toward financial freedom.
J.R. Duren, a personal finance writer, racked up more than $120,000 in student loans. To ease his monthly payments, Duren got on an IBR plan. After 25 years of on-time repayment, any remaining balance on his student loans will be forgiven.
But Duren won’t be totally free of his debt. “Right now, my biggest struggle is figuring out how to pay for the taxes I’ll be responsible for when my IBR comes to an end,” says Duren.
When the government forgives your loans, it often treats the balance as taxable income. IBR offers loan forgiveness, but you could still get hit with a huge tax bill.
What to do
Just because your student loan payments are low under an income-driven repayment plan like IBR doesn’t mean you shouldn’t try to economize and find extra money where you can.
Duren says a solution he should have pursued would have been working during college and grad school. The additional funds could have been earmarked for the tax bill on the forgiven loan balance — or could even have been used to avoid borrowing so much in the first place.
Even if you feel you can manage your monthly student loan payments, consider a side-hustle to ease your finances.
Chris Henjum is the co-founder of Esqyr, a public benefit corporation that provides affordable test prep. Like many other borrowers, Henjum had to put off certain milestones due to student debt.
“My student debt delayed significant things in my life: marriage, children, and feeling even close to financially stable,” Henjum says.
According to a 2017 Student Loan Hero survey, 35% of Americans with student loans have delayed a marriage talk with their partner because of their debt. From the same survey, 1 in 4 students have put off moving in with their partner, and 46% of student loan borrowers have delayed starting a family because of their loans.
What to do
For now, Henjum chips away at his student loans slowly but steadily. And he encourages future students to consider their return on investment (ROI) when choosing a college.
By prioritizing the ROI of a school — and your college major — you could make back the money you borrow to pay for it.
Dave Barr is no stranger to the financial challenges of student loan debt, but he says one of his biggest struggles is the emotional toll.
“The emotional side of student debt is something that really isn’t talked about,” says Barr. “We are more comfortable talking about horrific things we see or watch on TV, but not about these giant obstacles that are causing stress in our lives? And if we are struggling and falling behind, we feel even worse about it.”
What to do
Barr wants to break that taboo and has blogged about the emotional toll of student loans to raise awareness about how it is okay to be stressed about it.
Sharing and talking about your experiences could make dealing with the stress of student loans a little easier.
The bottom line: You’re not alone in the student loan struggle
The financial burden of student loan debt not only results in a tremendous emotional toll, but it also leads people to put off big purchases and delay life milestones. If we can share our struggles and solutions with one another, it might make everyone’s burdens a little lighter.
Need help with your student loan debt? Check out our list of resources for student loan help.
Christina Majaski and Brianna McGurran contributed to this report.
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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of October 1, 2020.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of September 9, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 10/15/2020 student loan refinancing rates range from 1.98% APR to 8.55% Variable APR with AutoPay and 2.99% APR to 8.77% Fixed APR with AutoPay.