I confess: I didn’t give my student loans much thought until I was finished with graduate school. Oh, I knew there was debt involved, but I was blissfully unaware of how much I was really racking up through tuition, living expenses, and interest. By the time it registered on my financial radar screen, I had been accruing debt for nearly six years.
When I finally took in how much I owed — about $30,000 — I was overwhelmed. Even though that figure is pretty standard for student loan borrowers in general (and it’s certainly below average for someone with both a bachelor’s and a master’s degree), my first salary was only a few thousand dollars above that. I couldn’t even begin to imagine how I’d pay all of that debt back. It was like someone put bricks in my backpack that I didn’t know if I’d ever be able to take out. Would I ever feel what it was like to walk through life weightless again?
I’ll admit, my husband and I still feel paralyzed by the amount of our student loan debt at times. Some days, we’ve been tempted to just run from the numbers. Other days, we’ve tried to barrel through the repayment process without asking for any help or guidance.
Over seven years of repayment, I’ve learned that taking on (and getting rid of) student loans can be anything but straightforward. Here are a few things I wish I’d known when I started repaying my student loans:
1. It’s Not All Your Fault: Student loans can bring a lot of emotional baggage along for the ride: Did I waste money on my education? Could I have spent less? What if I had gone to a cheaper school? And let’s not forget the commentary from many well-meaning folks in older generations: “I worked part-time and I came out of school debt free; couldn’t you just do that, too?” Remember: You can’t change the past. The best thing you can do right now is to form a solid repayment plan, not feel overwhelmed by guilt or regret.
Tip: You may need to address this emotional weight before you start making a concrete plan. That’s ok. Give yourself a few minutes to write out or share your frustrations with your partner; let all of your feelings — rational and irrational — have their day in the sun. Then take a breath and let them go.
2. Federal and Private Loans are Not the Same: Federal loans (from the government) and private loans (from a private entity like a bank) are not created equal. Federal loans come with a range of repayment and assistance programs, and they can also be discharged after your death. For private loans, that’s generally not the case.
3. Consolidation Isn’t Always the Answer: While there are benefits of having just one payment to one loan servicer, make sure you do your research. You can only consolidate your debt once — and if you have both federal and private student loans, they have to be consolidated into a private loan, meaning that you lose all of the benefits of federal loans.
4. The Government is Here to Help: I’ve been impressed by the wealth of resources the government offers to help those repaying federal student loan debt, including four income-driven payment programs, deferment or forbearance opportunities, and a variety of forgiveness, cancellation, and discharge programs. If you are a teacher or you work in public service at a governmental or non-profit organization, there may be added opportunities for you.
Tip: Doing this research on your own can be pretty overwhelming. Use Federal Student Aid’s Repayment Estimator to evaluate your options, or contact LSS of MN Financial Counseling for free student loan debt counseling.
5. Interest Adds Up Faster Than You Think: I am shocked at what percentage of my payments over the past seven years went toward interest versus how much actually went towards paying down the principal (the actual amount borrowed) on my loan. That’s why the two best things I’ve done is begin paying on my loans before the grace period ended (so I could get a head start on repayment before my bill was actually due), and create a repayment plan using the debt snowball method (since paying a little extra each month helped me to slowly chip away at the principal).
Tip: Ready to start tackling that interest? Use this debt snowball calculator to see how any extra money you’re able to put toward your debt will affect your payoff date.
6. Student Loan Repayment Shouldn’t be Your First Financial Priority: The biggest lesson I wish I would have learned sooner? That student loan debt elimination should be a priority, but certainly not your only one. Creating a realistic and sustainable budget, establishing a short-term emergency fund, and beginning to build up retirement savings are way more important long-term. I now know that dividing up “extra” money in my budget by percentage allows me to work toward all of these big goals at once. It may take a year or two longer to repay my debt, but I have absolutely no regrets.
Tip: Give yourself some breathing space for a little bit of fun in your budget. My husband and I choose to spend some of our money on travel even as we are repaying debt because we know it will make our marriage stronger.
What do you wish you’d known about student loan repayment? Share below!
Update September 2019: I just came across this great resource to help you choose student loans based on options and requirements. A lot of in-depth research to bring you the best of the best - check it out!