Cue the orchestra, break out the party balloons and start the celebration: You finally paid off student loans in their entirety.
Now that you’ve checked a massive goal off of your adult “to do” list, you may be wondering what comes next. There are many ways to move forward after loans have been paid, from paying down other forms of high interest debt to tackling your 401(k). Here are some of those possible next steps.
I paid off my student loans
When Rachel Gerner, 34, and her husband Matt, 35, were married in September 2013, they had over $30,000 in undergraduate student loans dating back to 2007 with fairly high interest rates (4% and 6%). Together, the couple had a combined salary of approximately $40,000 from their jobs at the University of Arkansas in Fayetteville.
Matt, who is a chemistry instructor, and Rachel, who works in the information technology (IT) department, managed to pay off their loans by working side gigs in the evenings and on weekends. This included tutoring high school students, teaching English as a second language online, and finding other jobs via Upwork. Rachel also sold her plasma for a few months and Matt picked up a second teaching job for one year.
“We doubled down on the debt because we knew if we worked intensely hard for a season, we could have the satisfaction of being debt-free,” Rachel said.
The Gerners’ student loans were finally paid off in full in 2015, after eight years of diligently paying them back.
“We spent two years tackling our student loans [together] with a combination of side hustles and frugal living,” Rachel said. “We were also very self-disciplined and kept a budget so, at a glance, we could know how much in our accounts.”
5 next steps after you’ve paid off student loans
“So, I paid off my student loans; now what?” you may ask yourself. It’s natural to feel adrift once a goal is met, so here’s a short list of suggestions of what you to do once you’ve paid off your student loans:
This is definitely something you want to prioritize after you finish paying off student debt. You’ve just accomplished something significant, so what better time to treat yourself (within reason)?
The reasons to make sure you take time to celebrate are two-fold:
- Celebrating allows you to relax and regroup before attacking your next big financial goal.
- Rewarding yourself has been proven to improve your self-control. That means you’re less likely to get back into debt if you take the opportunity to treat yourself.
Whether it’s going on a vacation, upgrading your home decor, or even buying a new pair of shoes, be sure to take the time to savor this success. For example, the Gerners celebrated with a week-long trip to Belize when they paid off their loans.
“It was amazing and a place we had always wanted to visit,” Rachel said.
Many college graduates carry credit card debt in addition to student loans. If you have other high-interest debt after paying off your student loans, it’s best to use your payoff momentum to tackle it before focusing your attention on other major goals.
You should especially focus on high-interest debt like credit cards, as these typically have much higher interest rates than the ones that come with student loans.
The Gerners didn’t have any other high-interest debt other than their student loans. They acknowledged that it would have been difficult to pay them off if they had been saddled with credit card debt.
During your debt payoff journey, you may have been contributing every spare penny to paying off student loans. Keeping your eyes on the prize is likely how you were able to meet your goal in the first place.
Now that you’ve paid off your student loans, it’s time to start thinking about the future. Setting up an emergency fund is a good first step. Experts recommend saving three to six months’ worth of living expenses in the event of true emergencies such as unexpected medical expenses, costly home repairs, or a job loss.
This will keep you out of the debt cycle — you don’t want to have to rely on credit cards or personal loans in the event of an emergency, especially after working so diligently to become student loan debt-free.
By funneling your student loan payment amount into a savings or money market account each month, you could save up a sizable emergency fund in no time, which will increase both your net worth and peace of mind.
“We didn’t have any debt other than student loans, so after we paid off the school loans completely, we shifted the extra money into our ‘dream fund’ for personal goals, investing it in laddered CDs, stocks, and bonds,” Rachel said.
If you’ve been putting retirement contributions on hold to pay off debt, now is the time to play catch-up.
Once you’ve paid off student loans, other debts and built an emergency fund, consider automating contributions to your 401(k) or IRA. Remember: The more you contribute to your retirement now, the more time your money has to grow.
“For the last three years, we’ve flooded our retirement accounts, contributing 30 to 40% of our income into our 403(b) accounts and contributing toward HSA accounts,” Rachel said.
Now is the time to begin thinking about other major milestones, such as buying a home. Your debt-to-income ratio is now low, or lower, thanks to being debt-free, which will make it easier to qualify for loans such as a mortgage.
Of course, homeownership isn’t for everyone. “We are not homeowners,” Rachel said. “We’ve done the calculations of what it would cost to buy a home in our area, even with a 50% down payment, we would get a greater (return on investment) on renting and investing what we would otherwise need to pay for the home.”
The couple has, in their opinion, an ideal rental situation (with their rent costing less than 8% of their combined income), which allows them to enjoy the flexibility to travel internationally, search for job opportunities, and pay close attention to their investments, rather than owning a home.
What else did you dream of doing while student loan debt held you back? Now might be the perfect time to plan that wedding, start a family or travel the world.
Just remember, take a moment to savor and celebrate before diving back in. Your financial goals will always be there waiting for you, and, best of all, after paying off so much debt, you now have more money to make your financial dreams come true.
Maya Dollarhide contributed to this report.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 6.65%1||Undergrad & Graduate|
|1.99% – 7.10%2||Undergrad & Graduate|
|2.99% – 6.44%3||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 6.43%4||Undergrad & Graduate|
|3.18% – 6.07%5||Undergrad & Graduate|
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1 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 June 23, 2020. Information and rates are subject to change without notice.
2 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
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 May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
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 3.19% APR (with Auto Pay) to 6.43% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.43% 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 June 15, 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 6/15/2020. 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 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 0.19% effective June 10, 2020.