Significant student loan debt has a way of stopping you in your tracks. Even if you’re willing to face the problem, you might feel unable.
But here’s something to get you moving: If in your mind you expect your repayment to go well, it’s more likely to end well in reality.
According to widely-respected psychologist Albert Bandura’s thinking, one way to recharge your approach to repayment is to first change your expectations.
Outcome expectations: Understand the steps of your student loan repayment
Licensed psychologist Erika Martinez says she avoids using too much “psychobabble” jargon with clients who are stressed about student loans and credit card debt. Still, she finds herself turning to these decades-old theories, even if not mentioning them by name.
“I apply theories like Bandura’s to the client’s current circumstances, so they can see its relevance,” Martinez said.
Bandura’s writing on outcome expectations says that, to take action, you must believe it will lead to your desired outcome.
First, let’s look at how actions and outcomes interact. There are many examples of actions to take in the context of your loan repayment, depending on your end goal…
|Desired outcome||Possible action|
|Get out of default||Undertake loan rehabilitation|
|Escape an unhelpful servicer||Take out a Direct Consolidation Loan|
|Receive student loan forgiveness||See if your employer makes you eligible for Public Service Loan Forgiveness|
|Reduce monthly payment||Switch to income-driven repayment|
|Pause monthly payment||Apply for deferment or forbearance|
|Pay less interest||Improve your credit score to qualify for student loan refinancing|
|Repay the debt as fast as possible||Create a line-item budget to cut expenses and maximize payments|
Keep in mind that the connections between actions and outcomes aren’t always obvious. Did you know, for example, that you could escape an unhelpful servicer by borrowing a Direct Consolidation Loan? Consolidating or grouping your loans comes with many benefits, and the ability to switch to one of nine federal servicers is one of them.
Before making a loan decision, you’ll want to understand every way that action and the outcome interact. Otherwise, there could be consequences. For example, consolidating your loans also resets the clock you’ve made toward achieving programs like Public Service Loan Forgiveness — something to be aware of before you consolidate, not after.
Self-efficacy expectations: Adjust your attitude and take action
Bandura’s thoughts on self-efficacy expectations include an attitude adjustment. Before building a budget, for example, you must believe you’re capable of making a useful one. That confidence spurs you to take action and actually build the budget.
Without the knowledge and self-assuredness to act, you’re left with inertia, stuck in the mud. In other words, no budget, at least not right now.
In practice, Martinez said some of her clients are most often mired by their relationship with money. That leads to their uncertainty, inhibits corrective behaviors and leaves them in a stand-still slump.
“Self-efficacy is mostly relevant to clients that are struggling to pay back loans and feel like there’s no end in sight or that the loans are keeping them from other life goals like buying a home or starting a family,” Martinez said.
“It also helps to understand how clients perceive and interact with money, because those beliefs affect financial self-efficacy too.”
Here are Martinez’s thoughts on some of the strategies she uses to help inspire her clients:
- Destigmatizing debt by talking about it: “Once talking about it didn’t feel so scary anymore, they felt they could talk to others — like financial professionals — about it, [who] in turn could then offer advice about debt reduction [and] repayment strategies.”
- Acquiring techniques for good decision-making: “The next time [clients] felt triggered [to spend on impulse], they used the coping technique [and] felt good about themselves for being able to … stick to their financial goals.”
- Monitoring and encourage debt repayment: “I would … speak with their financial advisors to understand the repayment plan, get copies of budgets, and I would use that to help the client stay accountable and on track with their goals.”
“All of those are wins we’d process in therapy, and [they] helped clients feel more financial self-efficacy,” Martinez said. “This brings these clients a lot of hope to a situation they saw as hopeless.”
Another belief-building strategy: reading a repayment success story. By looking at examples of others who managed to pay off their debt, many borrowers can believe, “Hey, I can do that too!”
Changing expectations could help end your student loan debt
Inaction is arguably the single greatest killer of borrowers’ potential progress with student loan repayment. Perhaps a feeling of inaction set in as you left school with significant debt. Maybe you didn’t fully understand your options and lacked the belief that you could manage repayment.
As Bandura wrote, “It is difficult to achieve much while fighting self-doubt.”
Instead, by spending time to first understand your repayment options and build confidence in your ability to execute them, you’ll be much more ready to take action.
Bandura also theorized that self-efficacy has a snowball effect. The more you work to solve your student loan debt, the more likely you’ll keep at it — until your debt has disappeared for good.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for SoFi.
2 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 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.54% APR (with Auto Pay) to 7.27% 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 March 18, 2019, 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 0318/2019. 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 firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 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.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
4 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.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.5% effective February 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.54% – 7.12%3||Undergrad & Graduate|
|2.54% – 7.27%1||Undergrad & Graduate|
|2.67% – 8.96%4||Undergrad & Graduate|
|3.23% – 6.65%2||Undergrad & Graduate|
|2.69% – 7.43%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|