I Just Paid Off My Student Loans: Here's What I Learned

 

        I did it y’all!!!😁 After eight years and three months, I am officially done with ALL of my student loans. There was a time that I honestly did not think this would happen or at least not until I was in my 40’s. The Department of Education reports that the typical repayment period for borrowers with between $20,000 and $40,000 in federal student loans is 20 years. Yea, that’s pretty crappy. But with the exorbitant costs of higher education in the United States and the belief that the only way to succeed or get ahead in life is with a college degree a lot of young people and their families are stuck between a rock and a hard place. Often turning to loans to help cover the expense. Today, roughly 70% of American students end up taking out loans to go to college with the average graduate leaving school with around $30,000 in debt. 

        Now let me be clear, if I were to do it all over again, I would still choose to go to college. I believe my experiences there was a real eye-opener and necessary for my development into adulthood. Meeting, interacting, and engaging with people from all different backgrounds and walks of life helped me realize that there is a world out there that is so much bigger than what I knew. But there are a few things I wish I would have done during my time in school to help put me in a better place financially when all was said and done.

 

Things I Wish I Would Have Done While Still in School    

• Only Borrowed What I Truly Needed - This sounds like a no-brainer but if you don’t calculate your actual needs for tuition and fees and take into consideration any scholarships and/or grants you may have been awarded, it’s very easy to overestimate your projected costs, thus over-borrowing for your loan. Also, changes happen so you need to be mindful and adapt. For example, if you determine that you need to borrow $5,000 per semester but in your second semester you receive a scholarship for $2,000, you now would only need to borrow $3,000 for that term. However, if you are not mindful of this and make the necessary changes your debt for the year would be $10,000 instead of $8,000.
  

• Not Treat Student Loan Refund Checks as Free Money - When you sign-up for a student loan, any portion of the loan remaining after total costs (ie., tuition, fees, etc.) is refunded back to the borrower in the form of a check. To most college kids, me included, it was a nice little ‘payday’ at the beginning of the semester. Oh man, was I wrong. Student loan refunds are not “free” money. This money is a part of your loan and just like the rest of the loan is accruing interest. So what should you do? According to LendKey you can and should return your student loan refund check to the Department of Education. This would lower your overall loan debt by deducting the excess amount financial aid package, thus removing your responsibility to repay it post graduation. 
  

• Continuously Apply for Scholarships and Grants - I have to admit I dropped the ball on this one, especially during graduate school. And apparently, I’m not alone. According to a Forbes article, there's nearly $3 billion in grants and scholarships left on the table every year. Please, if you are thinking about going to school or are currently in school, take applying for scholarships and grants seriously! You could be giving yourself a great financial boost in the future by lowering your out-of-pocket costs for school. If you’re looking for scholarships and/or grants check out this website.
  

• Made Pre-payments on my Student Loans - This is something I never thought to do or even knew that I could. If I had, I probably would have seriously considered doing so. The only drawback to making pre-payments is that they do not count as a qualifying payment for any loan forgiveness program. So if your plan is to get a job that participates in a loan forgiveness program, you may not want to make prepayments.
  

 

Things I Learned While Paying Back the Loan

• Don’t Treat Your Student Loan Like Another Bill - It’s easy to fall into a habit of looking at your student loan as another bill. As long as you make the minimum payment on-time, your good. I mean essentially...yes, but you will spend so much more money in interest if you approach your loans in this manner. By paying a little extra to your loan, you will ultimately pay less over the course of the loan. However, I do not suggest you do this if you are on a loan forgiveness program. If you are on a forgiveness program, pay the minimum on-time for the specified amount of time until you have reached your qualifying amount of payments. This brings me to my next point.

• Sign-up for Repayment Plans Sooner Rather Than Later - The Public Service Loan Forgiveness Program went into effect in 2007. The program forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. Even though I started working after undergrad in late 2007 and was eligible for the PSLF program, I didn’t genuinely look into the program until 2017. By that time my undergrad loans had been paid-off but I was still looking for a way to deal with my graduate student loan. 

• Note: In order to benefit from the PSLF program you have to be on an income-driven repayment plan for any of the payments to count as qualifying. I did not know this and the loan rep that signed me up did not inform me of this so a year later during recertification I learned that none of my payments counted. *SMH* So to try to correct this the new rep changed my repayment plan from standard to income-driven. This would have been fine except my income at this point was a lot higher meaning my required payments were pretty high too. The amount they wanted me to pay would have translated me into paying off the loan in about 3 years! Meaning I would have never made it to the 120 qualifying payments meaning none of my loan would have ever been forgiven. Maybe things would have been different if I signed-up for the program earlier or not, now I’ll never know.

If you are interested in learning more about Student Loan Forgiveness plans check this article from NerdWallet.

• Be Active in your Repayment Plan - Whether you decide to sign-up for a loan forgiveness program or just pay-off your student loan in full, remember it is your debt and you are responsible for it, so make sure you are active in the process. Keep up with your payments, make sure required documents are submitted, stay informed of any policy changes that may affect your current plan and be sure to re-evaluate when needed and change the plan if need be.
  

        I can’t change my past or the mistakes I made, but hopefully I can help someone who is about to go to school, currently in school, just graduated or paying back their loans to be more mindful and aware of the importance the decisions you make now can either be a great benefit to your financial future or a hindrance that you will have to work hard to correct. 

 

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