I borrowed $81,000 for my Bachelor’s and Master’s degrees. With interest, that number was closer to $100,000.
As if taking out that amount of student loans for two performing arts degrees wasn’t a big enough blunder, I made quite a few other student loan mistakes, too. When it comes to student loan management, here’s where I went wrong.
1. Not having a clue about interest
For my undergraduate degree, I borrowed $18,000. When I graduated, my student loan balance climbed to $23,000. I couldn’t believe it.
I didn’t even realize interest was accruing on some of my student loans while I was in school. Even worse, I didn’t have a clue about how interest actually worked.
I only really understood how interest worked after borrowing a lot more money to go to graduate school.
Upon graduation, my interest rates were an average of 7 percent on my $58,000 balance. At its highest, I was paying over $300 per month in interest and figured out pretty quickly that my payments were barely making a dent in the principal balance.
If you’re a student loan borrower, it’s important to know your interest rates. More importantly, it’s crucial to know how much you’re paying in interest each year. Not sure? Use the calculator below.
Student Loan Payment Calculator
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For successful student loan management, it’s key to understand how interest works and how much you’re really paying. It could be a lot more than you think!
2. Borrowing too much to go to a private school
NYU was the dream school that I thought I’d never get into, so when my acceptance letter came, I was shocked. I was also terrified — how was I going to pay for it?
At the time, tuition was $52,000 for my one-year accelerated program. That was significantly more than my $38,000 annual salary at the time.
After thinking about it, I decided to take on a lot more student loan debt. I worked three jobs in school but still ended up borrowing $58,000 to pay for tuition and food.
I don’t necessarily regret going to back to school, but I don’t think I’d do it again. Paying more than your annual salary for tuition is just bad news.
I thought I’d easily be able to secure a $50,000/year job post-graduation, but boy, was I wrong. I struggled even more after graduation, and for the first few years paying back my student loans was really tough.
3. Believing student loans were the “good debt”
Even though I’ve always been averse to debt (I didn’t get my first credit card until a few years ago), I jumped at the chance to take on more student loan debt to attend my dream school. After all, student loans were the “good debt” in my mind. They were an investment in my future.
I now realize that my misguided belief really held me back in some ways. First, I borrowed too much. Secondly, it delayed my repayment because I didn’t make it a priority.
There’s no such thing as good debt. Sure, some debt is worse than others, but at the end of the day, you owe someone else money and are getting charged interest.
4. Making minimum payments
When I graduated with my B.A. and my grace period came to a close, I started to make minimum payments as I continued my search for a career job. A few months later, I was hired as a program coordinator at an arts nonprofit.
The pay, while not great, was a step up from what I was making. I even got three raises in three years. Even though I started making more money, I still made only the minimum payments on my debt.
I could have afforded more, but I chose not to put more toward my debt. Unfortunately, this student loan management strategy was one of the biggest mistakes I made.
I ended up quitting my job to move to New York City and take on even more debt. After getting my Master’s degree, I was (ironically) the most broke I’ve ever been. I was actually paying more toward my student loans on a smaller salary!
I regret not paying more when I could have afforded it. If you can pay more than the minimum, do so. You’ll lower your interest and be debt-free that much sooner.
5. Not making interest payments while in school
I worked various part-time jobs when I was in school getting my B.A. and M.A. When I was pursuing my undergraduate degree, I was living with my parents and my expenses were fairly low.
Even though I was working, I wasted my money on overpriced lattes, concerts, and new piercings. I could have at least made interest-only payments while I was in school, but it never even crossed my mind.
When I returned to school for a Master’s degree, I worked the whole time, but, again, never made one payment toward interest. I would have paid less over the life of my loan if I had put a portion of my paycheck toward my debts while I was in school.
Managing student loans is hard, and you may be making mistakes you don’t even realize right now. Learn from my missteps and avoid these common student loan pitfalls.
Though I managed to overcome my student loan mistakes and successfully paid them off, I would do things a little differently if I had the chance.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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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 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% 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 email@example.com, 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
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
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.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 5.87%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|