A Student Loan Expert Takes Her Own Advice

When you spend your days dispensing advice about student loans, you learn a thing or two about navigating the system.

In the 10 years it took me to repay $40,000 in federal student loans and interest, I never found any secret tricks. But I did find ways to make the system work.

At times I made no payments, and I reduced payments at others. The only extra payment I made was the most satisfying one at the very end.

My credit never took a ding, and I never used any Hail Mary tactics. I never boomeranged back home, no one left me money and no one I dated wanted to make payments for me.

What I did do was use the system — a complex, frustrating system that I spend every day writing about — to stay on track. Here's what I learned.

Get ready before the bill arrives

When I got my bachelor’s from SUNY Purchase College in Purchase, New York, in 2010, the typical debt load among graduates was $25,250, according to The Institute for College Access and Success. I left school owing $23,156 at an interest rate of 6.8%, an interest rate that hasn’t been topped since.

When I got my first bill, my salary as a local news reporter was not enough to afford $266 payments and still make rent.

I called my servicer and switched to a graduated repayment plan, which gradually increases your payment amount over 10 years.

Better repayment options are available now. The federal student aid Loan Simulator can show you what to expect with each.

Pause payments if you need to

In 2013, I was laid off by the local news outlet I worked for. The next day, I applied for an unemployment deferment to temporarily pause my payments.

In the six months after I was laid off, I left New York for San Diego, landed a job and was able to end the deferment. When repayment restarted, $724 in interest was added to my debt.

Right now, federal loan borrowers have an interest-free forbearance until Sept. 30, due to the coronavirus pandemic. But any time you experience a significant change in income, a deferment or forbearance can help you ride out the financial difficulty.

Consider income-driven repayment

I was six years in when I realized my graduated loan payment was on schedule to increase to an unaffordable amount.

Switching to an income-driven repayment plan set my payments at 10% of my discretionary income and extended my loan term by 20 years. My loans were consolidated, and I had a new $242 payment that I could afford.

Since I recertified each year, my payments grew with my salary. For many borrowers, this is the best plan to start on. Higher payments that were still affordable helped me knock down my loan principal faster.

Prioritize other financial goals

I never made an extra payment until the last big one. Doing so can help you pay off your debt even faster, but it wasn’t my priority.

There’s a hierarchy we recommend when it comes to managing your finances. Student loans, which are relatively low interest, rarely top that list. It’s better to pay off high-interest debt and build savings instead.

I signed up for an employer-sponsored retirement plan and gradually increased the percentage I contributed. I also saved about three months of expenses in an emergency fund.

I wasn’t willing to sacrifice everything. That included my bad habit of moving each year, including three long-distance moves. I also wasn’t willing to forgo a vacation to Italy, participating in four weddings or getting an auto loan.

My credit card took a hit with every event, so I prioritized paying that off instead of making extra student loan payments.

What I'm doing now that I'm rid of my debt

Paying off your student loans is anticlimactic. This past February, I received my tax refund and added some savings to pay off the last $4,692 I owed. I called my servicer to make the final payment.

After the representative congratulated me, I did a happy dance and that was it. In total I paid off $43,151.

I hope to celebrate with a vacation, but until then I’m settling for other ways to mark the victory. First up is padding my emergency fund.

But I also plan to feed my music-nerd desires with a new electric bass and speakers. Even consumer finance writers don’t make entirely responsible choices all the time.