Too often, loan repayment success stories are shrugged off. Even when we can appreciate how someone paid off thousands in debt, we might forget to ask: What was it like when you made that last payment?
Welcome to The Moment, a recurring series that aims to rehash memories from ex-borrowers for the benefit of current borrowers. Our hope is that hearing these tales just might push you closer to your final payment, too.
“I got my first bill, and I was like, ‘Oh no. What is this?'” Emily remembers. “I honestly thought it was a mistake. I went back and asked myself, ‘Did I do this? Did I take out loans and have no memory of it?'”
Scrambling to pay back forgotten student loans
It happens more often than you might think. About 28% of first-year students who took out federal loans reported having no federal debt, according to a Brookings Institution analysis from 2014.
Before and during her college career at Penn State University, Emily earned academic scholarships and worked jobs on and off campus. She even wound up graduating a semester early.
However, Emily also filled out federal financial aid forms. When she received her financial aid award letters, she saw she was eligible for Unsubsidized Stafford Loans. She took out those loans without realizing she had to pay them back.
“[I] filled out the forms for whether or not you’re eligible for aid — not realizing it’s a loan — and [the school] was like, ‘OK. This is what you’re eligible for,'” Emily explains. “I was like, ‘OK. Good. This is what the government says I get to have.’ And then they sent the bill later.”
Thankfully, she borrowed only about $10,000 with an average student loan interest rate of about 4.55% at the time. Emily received her first bill from her servicer, American Education Services (AES), after graduation.
“When the bill came after my [grace] period, I was like, ‘What?’ I was caught off guard,” Emily recalls.
She was already deep in credit card debt, too. She would wind up about $15,000 behind on her card payments, thanks in part to a post-college trip with friends.
“I wasn’t anticipating having a student loan payment on top of that,” she says.
Using the debt avalanche method to attack debt
When Emily got her first job in corporate finance in 2010, she “fell into the trap” of spending what she earned.
“I hated being behind on the bills and not knowing how I was going to make credit card payments,” she says.
Six months into 2010, she got her head above water. Her debt avalanche plan was simple: Start working on credit card payments first since they have higher interest rates.
By 2012, she and her new husband set out to become debt-free when they merged finances.
As for her relatively smaller student loan debt, Emily never missed a payment once she became aware it. Paying the minimum amount for four straight years was one of a few ways to reduce the interest rates on both her loans.
Emily’s last student loan payment
On Oct. 26, 2017, Emily was flying from Philadelphia to Dallas for a finance conference when she learned she could put a stop to her student loan payments for good.
“I was just working on mapping out our household monthly budget for 2018,” she says of her moment. “When I looked at all of our monthly expenses, I realized it would be much more satisfying to me to pay off my student loan and car immediately … and not have those monthly payments hanging over our heads anymore.”
Emily sent $196.27 to AES, closing out a student loan debt that had cropped up years before without warning.
“It felt amazing to pay it off midflight,” she says. “When I landed, I knew the only debt I carried was my mortgage.”
Here’s a screenshot of Emily’s student loan details once she made her last student loan payment.
Emily’s advice: Become an informed borrower
Now a personal finance coach, Emily says she was embarrassed when she realized she had taken out not one but two student loans without realizing it.
If you’re an undergraduate, the moral of her story is a simple one: The next time you apply for federal financial aid, understand what you’re getting into. If you borrow, pay attention to the required federal loan entrance counseling. Then educate yourself on the basics of student loan repayment and get to know your servicer.
If you’re already out of school, Emily’s advice is to first get out of your own way.
“I was hard on myself after realizing what I had done,” she says. “Have mercy on yourself. There is a way out, but you can’t see if you’re just criticizing yourself for the decision you already made.”
For borrowers in repayment, Emily also stresses that it’s wise to give your money a purpose. When she struggled with credit card debt, for example, she put a greater portion of her income toward minimizing her debt, not increasing it.
Since Emily and her husband are now aiming to pay off their mortgage by 2020, she says discipline and planning are once again crucial.
No matter the type of debt you’re attacking, Emily says, you need to put a plan in motion ASAP.
“People stay in a debt cycle because they spend money without thinking,” she explains. “Your debt will get paid off but not if you don’t do anything about it.”
If you’re nearing or recently made your last student loan payment, we want to hear about it. Your story might inspire someone to follow in your footsteps. Write to email@example.com.
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1 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 2.47% APR (with Auto Pay) to 6.97% 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 Month/Day/Year, 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 08/21/18. 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.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
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.
3 Important Disclosures for SoFi.
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 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.57% – 6.97%1||Undergrad & Graduate|
|2.47% – 6.99%3||Undergrad & Graduate|
|2.68% – 8.77%4||Undergrad & Graduate|
|3.24% – 6.66%2||Undergrad & Graduate|
|2.61% – 7.35%5||Undergrad & Graduate|
|3.01% – 9.75%6||Undergrad & Graduate|