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Ask Paco: “I’m Drowning in Student Loans.”

Paco de Leon's Finance Advice

Every month, finance guru Paco de Leon offers words of wisdom from the world of coin. In today’s installment, she’s sharing tips for paying off student loans…

Q. Help! I am drowning in student loan debt. For the last few years, I’ve just been able to pay off the minimum amount each month, which means that I’ve basically only paid the interest. What can I do? — Simone

A: I have lots of thoughts on this. So many people have mortgaged their futures in the hopes of being able to get paid well and pay it off, but there are definite ups and downs because this is the economic system we are living in. Income-based repayment plans are flawed because interest can accrue and the balance that you owe can compound over time. It’s messed up. Then there’s the whole debt forgiveness thing, but I wouldn’t hang my hat on that as a plan for getting out of debt.

I hear you. And I’m sorry.

So, here are a few options:

1. Enlist the help of a professional.
There are advisors who specialize in helping you restructure your student loan debt. I would look for a fee-based financial planner who will give you an initial consult for free. Even if it’s only 15 minutes, it’s good to feel them out to make sure you’re on the same page. You might be able to hire them to specifically help you come up with a payback, payoff or restructuring plan. Make sure they educate you on the implications of your options. The biggest thing to worry about when it comes to student loans is figuring out what you don’t know. It’s the unknown unknowns that have put people in bad positions. A good advisor will educate you on everything you don’t know that you didn’t even know that you didn’t know.

2. Consider refinancing.
You have to take a look at your specific loan terms to understand if there are penalties for refinancing or paying off your loan before the term ends. Then you can look into refinancing with third-party lenders like SoFi. But you’ll need to be an attractive borrower (in other words, you’ll need to have a good credit score). Another best-case scenario is you refinance with a friend, family member or rich grandma who can afford to refinance your debt. Just make sure your relationship won’t be impacted by bringing this into the equation. I say it’s a best-case because it’s probably going to be below-market interest, you don’t need to have stellar credit and the lender may be somewhat flexible.

3. Pay what you can and hope for the best.
There’s an orthodontist I know who owes A MILLION DOLLARS in student loans because they compounded. And he just pays what he can and probably slowly dies inside. You are not alone. (While you’re paying what you can, it can be helpful to live beneath your means. Here are some tips for how to do so.)

4. Make a sh*t ton of money and get out of debt.
You can work really hard, get really lucky, or some combination of the two. You can get a great job, work your ass off and figure out how to maximize your earnings. You can also consider taking on a temporary second job or starting a side hustle and using that extra income to attack your debt with extra payments. Starting a side hustle might be easy if you already have people asking to give you money for a thing you do, like branding or making pot holders or being awesome at something you’re awesome at. If the side hustle isn’t organically falling into place, take a step back, assess your skills and talents and research if there are people who are willing to pay you for said skills and talents.

5. Break the law and become a fugitive.
Kidding! I’m not really condoning running out on your debt. But there are folks who have gotten the eff outta Dodge and skipped out on their student loans and are living a fugitive dream life outside of the U.S. To be clear, though, you should not do this. Seriously, this is not my advice.


Paco de Leon is a musician who happens to be killer at finance. Her experience includes business consulting, business management, financial planning, wealth management and even some time at a giant bank. Her experiences led her to found The Hell Yeah Group, a financial firm focused on inspiring creatives to be engaged with their finances and giving them the tools and support to stop freaking out about it.

Thank you so much, Paco! Do you have a pressing money question? Please let us know in the comments below…

P.S. The best $2 lunch and an easy way to save money.

(Photo courtesy of Paco; illustrated background by Alessandra Olanow.)

  1. Kirby says...

    Hahahahahahha I literally did number 5. Left the US with absolutely no plans to ever go back with the state of the economy. After living various places overseas I have fully seen the advantage to a socialist economy. Just made me LOL to see it on the list.

  2. EL says...

    I have to say I’m pretty disappointed with the advice here (and I typically really appreciate Paco’s advice). Student debt is a huge issue for this generation and I know everyone has a different situation that might make it more or less difficult for them. Different salaries and cost of living have a huge impact on the ability to get ride of student debt. However, I think actual advice for how to pay it off would be much more beneficial.

    Personally, my husband and I used pieces of Dave Ramsey’s Snowball method (not all – for example we kept paying into 401K) and have paid off over $50,000 in combined car, credit card and student loan debt in 2 years with about the same left to go. We got a good budgeting program, eliminated the things we didn’t really need, and listed out all of our debt. We started with the smallest one and put all of our extra money towards it. Then the next one. The idea is that like a snowball you get motivation by seeing results and it makes it mentally easier to keep going. We’ve had to pause along the way but can actually see the light and know that we will be able to do it. My husband just assumed he would be paying off his student loans for the rest of his life and was amazed to see that it really could be possible to do it in under 5 years.

    It might not be the method for everyone, but for us it was the kick in the butt we needed to get down to business. I got really in deep, reading everything I could and staring at spreadsheets and budgets for hours.

    I follow Alyssa on Instagram and she’s a really amazing financial coach who can help you figure this all out!
    https://www.lifecoachalyssa.com/about/

  3. Jamie says...

    I had to really get down in the weeds. Cut cut cut everything. No restaurants, no shopping, no vacations. No new clothing or shoes. My purse was falling apart and I was embarrassed to bring it to work. I didn’t even shop at a thrift store. I lived with roommates and paid much much more toward loans than rent. Work work work so much that it’s easy to save money because I had no time. It cost me more than just time. Time away from friends and family hurts. But then after 2 years of living this way… freedom. And that was worth it. Keep your chin up. It’s only for a while.

  4. Natasha says...

    Poor American students!! I’m sure no one in Europe would get higher education if the costs of studying would be so high. I also can not understand which kid (at 18) is so responsible to take out loans for his unpredictable future??

  5. I have relatively low student loans (a little less than $32k) but I have been chronically underemployed since graduating – right now I’m working a full-time job that pays $9.50 an hour (“plus tips”) because it was the first place that offered me a job after a summer of being laid off and am working as a personal assistant basically whenever I have time free. It could be worse, but it’s definitely tough! My credit is stuck on the high side of “okay” because I’ve never had an actual credit card, and I need to replace my twenty-year-old car soon – other than putting my head down and just working 60 hours a week for the next couple years, what can I even do!

  6. Kate says...

    Love that “pay what you can and hope for the best” is included as a valid option!!! I did this with my undergrad loans before going back to law school, and it’s what I’ll be doing with my law school debt too. I will not be having children, and owning a house or car are not goals I have. The future is uncertain for everyone my age with regard to retirement. I consider a monthly loan payment to just be a fee for having the education and career I want. I might never pay it off and that’s ok too. It isn’t necessarily “bad” in every circumstance to have debt – it’s just reality, and you can make it work and live a happy, full life depending on your circumstances.

  7. Dana says...

    I know this is asking for a lot, since I’m sure Paco is busy with work and life, but sometimes I wish she’d pop into the comments. It’d be nice to have more interaction with her in that way and a nice way to get a little more of her financial wisdom. xo

  8. Alexandra says...

    My husband has struggled with super high interest rates since he graduated, i’m talking 10%+ which is terrible. We found that with new services like Sofi or Earnest he could apply to refinance them and combine them into one. He applied for YEARS, i told him to not give up and continue to apply to different places at different times and out of the blue one day Earnest gave him an amazing rate of 4%!! It is a very stressful and depressing situation with these loans and just having a lower interest so he can finally tackle more of the actual loan was such a relief. My biggest advice is work on your credit being nearly perfect and apply for refinancing the rates. Don’t give up!!!

  9. Erin says...

    Reading this post makes me so, so grateful to the scientist who mentored my undergraduate thesis project. I was applying for grad school all over the country. When I told him that two programs had offered me generous financial aid, he said it was time to rule out all the others. I had my heart set on a different, expensive program that would have required a huge pile of student loans, and he said, Nope, don’t do it. It was a short conversation — 10 minutes, maybe? — but I followed his advice and got out of grad school without any debt.

  10. Brittney says...

    245 comments and I don’t know if this has been mentioned but…

    The company I work for really heard employees when they were saying “Thanks for that IRA but I can’t even think about retirement with this massive heap of student debt.” So, in addition to the IRA, one of our company sponsored benefits is $200 a month toward student loan repayment through Gradifi (gradifi.com). I setup Gradifi for us and a key part of us implementing it was all of us saying “this is what I really need”.
    Our company does a lot of work in the workforce development world and I’d encourage employers to think about offering your employees benefits that matter and resonate with them and will ultimately help you retain great talent. I might be able to make more money on the open market but I work at a place that really cares about what I need to be happy and is helping me make progress toward my financial goals.

  11. Bethany says...

    This post was published a few days ago so I may be speaking into the void at this point, but I’m trusting that this comment will help the right people. Some city governments partner with organizations like United Way to offer free financial counseling to anyone that needs it, regardless of income. I was at rock bottom financially a few years ago – severely underpaid, way behind on loan payments, utilities were getting shut off and I could barely make rent – when I found the Financial Empowerment Center in my city, Nashville, TN. I made an appointment and sat down with a counselor and went over my income, expenses, and loans. She helped me consolidate my federal debt and fill out the income-based repayment plan documents for one of my private loans. She helped me face the reality of my credit score and explained it all to me, and gave me tips on how to improve it. Most importantly, she helped me see that I wasn’t crazy or irresponsible, I was just underpaid and needed a better job. That gave me the hope I needed to renew my job search efforts and commit to a realistic budget. It’s been three years since that first visit and I’m in a wildly better financial position. It’s not that my student loans are easy to deal with — I still owe $80K — but I’m not awake at 3AM worrying about bills and whether I’ll ever be able to afford a house or kids.

    Hear this, friends: THE STUDENT LOAN SYSTEM IS DESIGNED TO CONFUSE AND SCARE US. It’s a deliberately f**ked up system because the ones in charge don’t understand or care about us. There’s not an easy fix or an escape hatch for this. We just have to find our own ways to do our best and survive. You’re not alone, there are people out there who can help. Stay hopeful and determined. <3

    • Ali says...

      Thank you so much for this, Bethany.

    • mindi says...

      Thank you, Bethany. I do sometimes feel like I’m alone; people don’t want to talk about student loan debt (or money at all for that matter), and I feel whiny when I do: “It’s a choice you made” has been a phrase thrown at me so many times. I’ve tried some of the above suggestions – and let’s be honest – I’d love to make a sh*t ton of money! But until this country decides it value educators and librarians, I’m kind of up a creek.

      I am also in debt for a bit more than $80k (up from the $60k I initially borrowed, even with grants, for grad school). I never thought about looking for low or no-cost options for financial planning, and just figured that I was on my own. I tried calling my loan servicer, but I got terrible advice from them a few years back that stung: one man told me I could only use income-based repayment for three years, so I was forced to defer my loans (I was working three jobs, and still barely making ends meet). I paid what I could at the time, but it didn’t really do anything. The next year I received a letter about income-based repayment, and called again – this time, I was connected with someone who actually knew what they were talking about.

      Thank you for your encouragement. <3

  12. Rachel says...

    I love this series but didn’t find this information to be very helpful – in fact it was a little confusing. I’m sure it’s mentioned in the comments but I’ll reiterate that you probably shouldn’t refinance your federal loans since there are more protections and repayment options. I refinanced my private loans through LendKey (SoFi would send me pre-approval letters then I would get denied because I didn’t have a long enough credit history) – I’ve found the company to have very great terms and the customer service is great. It only takes a few minutes to talk to a real person.

    I had a great credit score even right out of college because I started making payments on my private loans starting my sophomore year. Even with my credit score, I was denied refinancing for a couple of years because I didn’t have a long enough credit history, which doesn’t make sense to me because how can you expect a 22 year old to have a long credit history… Anyways I had to wait a couple more years and last year (3 years out of school) I was able to refinance.

    It’s easy to feel like you’re alone when you’re young and straddled with debt but know that so many people are dealing with this. I’ve found it really helpful to be open about my debt with my friends and my boyfriend, since most of them are dealing with the same thing. The Death, Sex and Money podcast has a few great episodes about student loan debt where you here from different listeners.

    • Actually, it’s important not to take for granted that federal loans shouldn’t be refinanced. Yes, there are options, but in many cases, there are also horrible and unfair interest rates that make no sense. My massive loans increased in my 20s because I could never touch the principle. Finding a private company who uses data and analytics to get the lowest possible interest rate each month has completely changed my loan life. First, I FINALLY got past interest in my payments, and finally saw the original loan number decrease (by $30k!) instead of grow. Finally. I cannot tell you what a relief this was, for a hardworking person with no familial help for my undergraduate and master’s degrees who only saw the balance number grow, year after year. Perhaps most importantly, it changed my mental health around my loans. Before the private refinance, I had a surge of deep anger and helplessness each month when I paid the loan. After the change, the anger disappeared, because I saw progress and knew I’d be saving $250k in interest payments over the course of 20 years. It seems like a miracle that my loans will now be gone in 5-6 years. Yes, the burden still sucks and yes, sometimes I question the blanket sign on the line advice I was given by trusted mentors. But I have a plan to get out and I’ll be ok. :)

      If anyone wants a free $200 code from the company I use now, I’ve got one!

      xo

    • S says...

      Lauren Maxwell — what company do you use now? I have federal loans for law school with about a 7% interest rate…. I owe more now than I did when I graduated. ;(

  13. If you really want to make a dent in the loans, you need to reconfigure how you pay. A finance-savvy friend of mine taught me the key, which rests in the daily accrual interest rate, and it allowed me to pay mine off so much faster:

    MAKE HALF-PAYMENTS. Example: You’ve been paying $400 on the 15th of every month. For the new payment plan: Month 1, pay $400 on the 1st, then $200 on the 15th. After that, pay $200 on the 1st, then $200 on the 15th every month. (This means you pay 1.5x your normal amount that first month, so you’ll need to save up, but after that you’re paying the same total monthly you always did — just broken down into two payments.) You will always be a half payment ahead, and the half payments after that will cut your interest way way down because it accrues daily. If you can pay If you can pay even more over your minimum, you’ll do even better. So, so worth it. Just don’t miss a payment.

    I actually received a table breaking down my payments over time both before-and-after I started doing this. I looked at a 6 month period before I started doing it, and 69% of my money went to the principal balance, while 31% went towards interest. Then in the 6 months after I started making these half payments, 82% went towards the principal and 18% towards interest. Like magic, the total I owed dropped faster and faster. It still took time, of course, but much less than it would have if I’d continued with traditional monthly payments.

    • dana says...

      Most loans give you a interest discount (0.25%) when you let them automatically take the money out of your account each month, but you have to let them take at least the minimum payment.

      Does anyone know what would be better– to make more frequent payments, like Katie does, or to get the interest discount for auto payments? What would save more in the long run? How do you even go about figuring this out?

  14. Christina says...

    This is a topic I’ve been thinking about a lot since I have a senior in high school! Thankfully, he is giving a lot of thought to the financial side of school. Sometimes I feel bad that his choices will be limited because we don’t have much saved for college, but we also want him to leave college with as little debt as possible.

    • A says...

      I’m 32 years old with a toddler and another baby on the way, and my husband and I talk pretty frequently about the importance of teaching our kids NOT to take on debt for higher education. They’ll be going to public institutions and/or scrounging for scholarships, etc! That’s what my husband did, and he has a job that pays as well as mine, without any of the debt that I took on when I attended private institutions. When I took on my debt for my Masters Degree at age 22, I did not have a full understanding of what I was getting into, and I don’t want my kids to feel the stress (and hopelessness!) that I feel around this issue. I wish I had had mentors/family who would have offered me the advice that I plan to give my kids.

  15. Emma says...

    A question I have that is not related to student loans (though I have plenty of them!): should I increase my credit line? I don’t need more credit on my credit cards, but I’m always offered the chance to increase my credit line. My accountant friend said that I should increase my credit line regardless of whether I will ever use this credit, because it will improve my credit score. Is that how it works? Additionally, I wrote credit cards above, but I only have one credit card. Should I get another credit card even though I don’t need another? She also told me this would improve my credit.

    • Andrea says...

      Yes, increasing your credit line will improve your debt to income ratio, which will positively impact your credit score. I’d only do it if you know you have the discipline not to USE the available credit, though. Related, opening a bunch of credit cards to increase your debt to income ratio may negatively affect your score, because the bureaus take number of new accounts into consideration (it looks like you’re getting ready to rack up a lot of debt, even if you aren’t).

  16. Anna says...

    LOL become a fugitive! Seriously laughing

  17. Jessica Rutland says...

    One way to avoid student loan debt (especially in grad school) is to get a full-time job at the school you want to go to before starting classes. I know quite a few people who did this and it while it took them longer to get through grad school they did so and paid little or no money at all. I actually worked at the university my husband went to for his Master’s (I’m a librarian) and it was totally free for him. I just had to pay taxes on the tuition I earned for him like it was my income. Parents can do the same thing for their children. There are so many jobs in academia, so don’t think you need to be a professor! You can work in security, maintenance, finance, advising, facilities, IT, the list goes on, all at a college or university.

    • Anna says...

      While I absolutely love this idea, it only works at very few universities. I work for a large, R1 State school and we do not offer tuition assistance for dependents except in cases of great need.

  18. Kathleen Souder says...

    perhaps someone else has mentioned this already…

    … but I spent about 5 years not realizing that my many different loans + many different interest rates were aggregated and my monthly payment was split across them all. I assumed they all had the same interest rate.

    Once I figured that out, I hammered the loans with the highest interest rates first: those 5+6% ones were paid down ASAP while doing the minimum payment on the rest that were around 2 or 3% interest.

    Then, once those were out of the way we kept paying the minimum, and felt better about diversifying any money leftover into retirement plans and anything else that had returns higher than the 3% interest.

    • kate says...

      I started taking the same approach once I too realized that each loan’s interest rate was different, and it has made a HUGE impact!

  19. Kim says...

    Let’s see — I’m 32 and still owe about $50K in student loans. I’ve been paying them off for 10 years. I just took over a student PLUS loan my parents have been paying for 14 years. The original loan amount was $30K. They (now I) still owe $15K. After 14 years.

    Our system is broken. We should not punish young people and saddle them with this much debt.

    • LP says...

      Most of their conditions preclude people who didn’t go to school in Maine.

  20. Stasha says...

    Is there anyone out there who did not get a four year degree and is happy with their current occupation? Have you thought about going to school later in adulthood? If you did this, any tips for dealing with the cost? I got an associates and stopped there for fear of living under a mountain of debt! I was in a professional job and owned a house by the end of my twenties, but always wonder what it would be like to have gone the other route. If you are someone who ended up pursuing a degree later in life, what made it worth it to you?

    • Mindy T says...

      I worked for a university and got my graduate degree at seriously reduced tuition fees. I got my undergraduate in state when it was cheap. Another suggestion, go work for Starbucks and get your education for free online at Arizona State University. Other big universities also offer free classes that are pretty amazing and I think could go on a resume.

    • Kate says...

      Hi stasha, I work at a university with adult students who are coming back to finish a degree later. It can be a great way to go because as you said, you’ve got a job and more solid career goals which can give you a much stronger connection to the classes you might take. Financially you can often be better off too because often, employers offer tuition benefits to help pay for classes. There’s also a lot of scholarships available for adult students too. It’s never too late and the years will pass no matter what, so if it’s something you want to do, go for it!

    • rebecca says...

      Me! I left school before four years because I didn’t want to take out more debt and was making six figures as a software developer by the end of my 20’s. I left the startup scene and took a job at a university with tuition support (although that wasn’t why I made that change) and just finished my degree at 31 (and will probably start an MS this spring). My interests changed a lot through my 20’s and taking the “slow road” allowed me to craft an undergraduate degree that really reflects my skills and interests. While not having a degree didn’t impact me in my 20’s, I feel like now I’m seeking more leadership roles where it might be important. A lot of people in my field drop out of college, but towards the end of my 20’s I started to realize that the people who did that and also had the jobs I wanted were almost invariably white men. It’s unfair, but I think women are more often required to prove our expertise with credentials.

    • Anna says...

      My husband (who is 48) didn’t finish college (he started at a state school), left to work at a radio station, and eventually started his own bike shop. He made NO money for a long time, but now the business is doing pretty decent, and he loves what he does. I mean, he has days when he’d rather be riding his bike than fixing other people’s bikes, but he’s happy. And we don’t have to pay for daycare because our kids go to the bike shop til they start school. We are going to encourage them to work/take a gap year/get scholarships and NOT accrue student debt, because my debt has been really detrimental to our family’s well-being.

  21. Patricia Perez says...

    I love this column! I recently heard that between repaying loans and investing on your 401(k) (or other retirement plan?), we should be thinking about using the extra income to invest on the 401(k) instead of getting ahead on loans. The reasoning was that loan interests now are relatively low whereas the interest you can accrue over the 30+ years on a 401(k) are relatively high. Therefore, loans can wait, but money now on 401(k) means A LOT more money later when you retire. Thoughts? As a law student with 150K+ of loans right now, I firmly believe I’m going to be living like a student for the foreseeable future (even with a cushy job) because I don’t want to dedicate my life to solely repaying my loans!

    • Nancy says...

      Yes, I’ve heard this argument as well. Also, using extra income to invest in other things (e.g. real estate) may end up having a higher payoff.

  22. GD says...

    If you can find it, a job where you travel made all the difference for me – I got very lucky and ended up with a job where I traveled internationally, but domestically is great too. There are lots of companies that want young professionals to travel for them, and opportunity is there for new job seekers since those 10 years into their career often try to travel less (family!).

    Sure, being on the road 40% of the time can be tough, but the combination of per diems, hotel points, credit card cash back (find a card with high cash back for travel) and airline miles (paid for my trips home to MT to see my family!) really made things go much faster and allowed me to still do some leisure travel. But those per diems were the kicker – I would bring my own food for the most part (which, I had to work a ton and didn’t usually have time to go out anyway) and thus pocket the money I received each day. When my reimbursements came through, I paid off my credit card from the trip (again, credit card cash back!) and then automatically dumped the rest of it onto my loans.

    The other thing non-work-travel-related (bc not everyone can travel for work, I know!) was that I figured out a minimum balance I was comfortable with in my checking account. Each month on the same date, right after paying off my credit card bills, whatever I had left above my minimum went straight to the loans – thus some months I could put an extra $12 to my loans, other months an extra $500. This method helped me because of how great it felt to see how much extra I was putting on my loans each month – a sort of gloomy game that made putting ALL your money into loans a little more motivating!

  23. One helpful thing we did to help with my husband’s grad school loans was apply for a Sallie Mae credit card. We put everything we could on it and got something like 3-5% back each month, then put the entire amount towards the loan. Since we are able to clear our balance each month, it was free money and added hundreds to his payment every month. Feels so good to see that number falling quickly! Hoping to wave goodbye to the full amount later this year.

  24. Lindsey says...

    One option is to move! My husband and I both work in construction. He took we took an assignment in rural Wyoming for two years. We were able to pay off our debt by living a low cost area that also compensated well because it was hard to get people to move there and work the 80 hour weeks. Overall it wasn’t the best two years but we enjoyed the simpler life and were able to transition to city living debt free – our rent for a studio apartment now is twice what we paid for a 3 bedroom house. So for any newer grads, look at the midwest – it’s a fun way to see a new part of the country and save money!

  25. bridget says...

    I have thought about becoming a fugitive more than a few times! I went to law school when my youngest of 4 went to kindergarten. I don’t regret it, but I do wish my student loan debt was not what it is. I’ll be paying it off forever and will never retire…

  26. Cooper says...

    I really appreciate this column! The line about “mortgaging your future” is so true. It’s tricky because student loans are really diverse – my husband has a variety of loans from different servicers, some federal, some private – so what makes sense for some types (refinancing) doesn’t for other types.

    We initially signed up for income-based repayment for his federal loans because it sounds like such a good deal, but after taking a closer look, I realized we weren’t even paying the full amount of monthly interest, meaning the loans were ballooning. By only paying about $150 more per month, we switched back to the default ten-year plan and so will pay them back.

    We’re taking the “pay what you can and hope for the best” approach, and it’s working pretty well. We live below our means, have built up a robust emergency fund, and each month, in addition to making the minimum payments, I put any extra money toward the loan with the highest interest rate. Different loans with the same servicer can have extremely different interest rates, and sometimes it’s tough to figure out how to apply an extra payment just to an individual loan, but it’s worth it to pay off those high interest rate ones first!

    It’s so tough to find that balance between still letting ourselves spend money to do the things we love versus throwing all of our discretionary income at the loans. The biggest impact its had is preventing us from buying a house – we live in a pretty affordable real estate market and literally all of our friends own homes but we’ve done the math and renting a cheap apartment makes the most sense for us.

    • anothermomma says...

      that would maybe pay for 2 classes at a community college now ($450 for 1 class at a local tech school for me this year!)

    • Chloe says...

      Another Tar Heel here… UNC is really amazing for low-income families! If your family is within 200% of the poverty line, as mine was during the thick of the recession, the Carolina Covenant is a promise to the student that you will graduate debt free. This was one of the greatest blessings ever, and one of the main reasons I was able to buy a house in a large city in my 20s. More schools are offering these kinds of benefits for low-income individuals.

      My little sister is at Carolina now, but my family no longer qualifies for financial aid despite continued financial problems … I’m trying to pay it forward by loaning her whatever I can so that she doesn’t have to fight that uphill battle against compounding interest.

  27. hillary says...

    what about enrolling in public service student loan forgiveness programs?

    • Anne says...

      Hardly anyone gets this. The number of people who actually receive it is dismal, and the number of applicants is through the roof.

    • L says...

      According to the latest US Department of Education statistics, 29,000 borrowers have applied for forgiveness through the program and only 96 have received payment. NINETY SIX!! I chose a career path explicitly to qualify and remained in it to unload my federal loans. Just hit my 10 year and had my application for relief rejected. It is shameful that the US DOE is burying us under bureaucracy and trying to undermine what could be an incredible program for a more diverse non-profit workforce.

    • nora says...

      thanks for that article! i am about two years away (fingers crossed) and freak out every once in a while.

  28. Meghan says...

    I recently paid off $80K in five years. In that time I lived in rather expensive cities (Chicago and Boston). Besides the snowball plan, I put almost all discretionary income to my loans. You have to reframe what you think of as discretionary income. Besides tax refunds, bonuses, birthday gifts (checking my privilege here) etc. I got creative with my spending habits. If I ordered something online, then ended up returning it, I would put the credit back into my loans. (If I could afford the cost of that shirt, I could definitely afford that much to my loans). I love to donate gently used clothes, but I started consigning instead and using that money toward loans. Most large companies offer incentives through health plans nowadays (ie get a physical, get $$ of your premium). I took those lump sums and put them toward my loan payments. My aggressive plan wouldn’t have been possible without having a well-paying job, but these small tricks helped shorten the payment cycle!

  29. Katie says...

    Love these posts, Paco! I only wish they were more frequent!

    • gfy says...

      me too. would love her advice in a weekly column!

  30. Anna says...

    I am loving all the success stories here, but I can’t be the only one who is sitting here in my 30s, having had my loans in forbearance for years now, working my butt off and budgeting aggressively and living incredibly frugally and still literally unable to free up money to put toward them. Anyone else here in this boat with me?

    I paid dutifully for the first seven years out of school, got an extremely generous loan from family to knock out my worst private loans (9% interest, thanks a bundle, Sallie Mae), and then… had a kid. And another kid. I guess one could argue that I would have been wiser to put off kids until my finances were in a better place, but I deeply resent the idea that because I went to college just as the predatory lending crisis hit its stride I should tailor my life’s path to the quagmire of debt I accrued (even with living off of beans and rice all through college, with a million roommates, always working as well as studying… etc etc).

    Neither I nor my spouse work in high earning fields. We are both college educated and have both worked full time or more than full time since graduating. We currently pay our bills (including daycare) and manage to sock a tiny bit of savings away most months and that is… it. There is no extra money. Each time I jump through the hoops of putting my loans back into forbearance I walk around for weeks with a heavy ball of guilt and despair in the pit of my stomach. It’s beyond shitty.

    I waffled about commenting but I am putting this here for anyone else who’s in it with me. You are not alone in this.

    • Ro says...

      SAMESIES.

      Mostly I’ve just accepted that I’ll probably die without my loans paid off. It’s like a tax I pay for being poor and educated.

    • Stephanie says...

      Hi, Anna. I’m so sorry you’re in this situation. I know that’s got to be overwhelming. And you’re right, there’s no reason to feel guilty for having kids while in debt. :)

      I wanted to offer an idea that may or may not help. What if, instead of putting away money into your savings account each month you sent that money to pay off your loans–no matter how tiny the amount? As long as you have some cash set aside for emergencies ($1,000 should do the trick), you should be able to put all other savings toward your debt.

      And I know it might feel crazy not to save for the future, but if you’re able to find a way to pay off your loans (and I know it won’t be easy!), you’d have so much more to put toward savings for the rest of your life!

      Hoping you’re able to find a solution soon. <3

    • C says...

      Hi Anna,
      Same boat. I’m working two jobs and still can’t seem to get ahead. Wages are very low in the place where I live and yet because it’s a resort town the cost of living is extremely high. I went through a pretty world rocking breakup a few years ago which left me with tons of credit card debt (I had paid for a wedding that didn’t end up happening and had to move multiple times which led to a few months of unemployment). Everything has snowballed and left me in a pretty dire financial situation. The stress is crippling and I cry pretty much daily about this. You’re not alone. Thanks for sharing your story. Hopeful that things will improve for both of us :)

    • Victoria says...

      For anyone struggling with student loans, I cannot recommend the series that the WNYC program Death, Sex, & Money did called “Out Student Loan Secrets.” Here’s how they pitch it: “There are 44 million Americans who have student loan debt. But when we asked our listeners to share their stories about their student loans, what we heard over and over again is how alone you feel.”

      Here’s the link for the four-part series: https://www.wnycstudios.org/shows/deathsexmoney/projects/death-sex-money-our-student-loan-secrets.

      I paid off my student loans in September and, while I’m relieved, I don’t want another person — especially a fellow Cup of Jo reader — to think for a second that they’re alone in this mess.

    • Oh, Anna! I feel your pain. I’m 40, my husband is 50 and we’re still paying off our student loans. Ugh. I often lament my choice of college (private art school…oy vey! what was I thinking!). But I never ever ever regret starting a family, even though we dive into the red every month.

    • Victoria says...

      Whoops. I meant “cannot recommend enough the series that the WNYC program Death, Sex, & Money did called “Out Student Loan Secrets.”

  31. Bekah says...

    Ugh, student loans! I was fortunate to be able to fund my undergrad/grad degrees with academic and tribal scholarships so thankfully I didn’t have to take out loans. My husband is a pharmacist who had about $150,000 in loans from pharmacy school. We paid that off in six years, basically by living well within our means. He still drives a 15 year old car, while his colleagues drive new cars worth $35,000+. We bought a house and mortgaged about half the amount the bank told us we qualified for based on income and credit. We made financial choices that our friends and family weren’t making so we could pour everything we had into paying off loans. We could afford to drive brand new cars or build a bigger house, but the process really taught us what we can quite happily live without. Now, my husband has been accepted to med school (he’s an overachiever, ha!) and we’ll live even tighter so that we can avoid loans with this degreee. It’s almost impossible for undergrad students to fund school without loans, and on top of that students are often not properly educated on the interest rates they’re agreeing to, etc. Students are presented with a financial aid package in the form of an offer, but a good portion don’t fully understand how long these loans will follow them. On the other hand, it’s sometimes the only option to fund school. I think it’s kind of an ugly business disguised as aid to young adults. All that said, though – yes! It is possible to buckle down and pay down loans; it just takes some sacrifice in waiting for your dream home or car.

    • Blaire says...

      So proud to see someone who was able to take advantage of tribal scholarships doing so well in so many areas of life!! :)

    • Bekah says...

      Thank you, Blair! That’s so kind. I’m really thankful for my tribe (Cherokee Nation) and their investment into higher education!

      Also, I hope this comment didn’t come off as a big humblebrag (yikes) – just wanted to encourage others in making tough financial decisions! It can be done.

  32. Sarah Christine says...

    I LOVE these posts from Paco! We need to be talking more about money, and I love her fun conversational tone. I would love to have more Paco on the site too! Beauty Uniform, 5 Outfits, House tour, etc.

  33. Ali says...

    What if one has the means to pay off their student loan debt entirely? Through an inheritance specifically.
    Is it smart to completely pay off the debt at one time? Or should it be done in smaller increments to up my credit score?

    • J. says...

      Pay it off. You’re literally paying to keep the loan open (via interest), so the sooner you pay it off, the less you will pay overall.

    • Courtney says...

      The way I used to think about this was: it depends on the interest rate on your loans as compared to the return you would get from otherwise investing the inheritance money. If your student loan interest rate is low (e.g., if you refinanced), the returns on your inheritance money if invested wisely in the market can exceed what you’re paying in interest. But there is also peace of mind and other intangible factors that come from paying off debt, and those can be invaluable.

  34. Aileen says...

    I’ve been paying student loans since 2004. I have college and law school. It was an investment that did not work out as planned but I work hard, pay on-time and life goes on…
    I find the advice in 3-5 incredibly unhelpful – and almost harmful. I know it’s supposed to be funny. But a lot of us ARE dying on the inside. And a lot of us just make sure we have good life insurance policies as that may be all we get to leave to our kids. If the advice isn’t really meant to be helpful (just something to read) – then maybe have something positive like “Focus on what is good – family? the health of loved ones? having a job? having health insurance?” Not everyone has all (or any) of these but that’s what gets me through …I focus on what’s good and not entertaining unrealistic fantasies such as running away . I do not see why making a lot of money and hoping for the best are even on this list – what else is life with student loans?

    • MA says...

      Could not agree more!

    • megan says...

      thank you for articulating this, i too was disappointed by the minimizing tone given how distressing this reality is

    • Blandine says...

      I agree and that the advice about making more money was really tone-deaf.

    • Lauren says...

      I was thinking the same thing!! I finished reading the post disheartened. I have found far more helpful advice in the comments section…

  35. Leah says...

    I refinanced through Citizens bank and my payments went from $1,400 a month to around $400 a month. We also were able to drop the interest level from…I think it was around 7% to 4%. This has finally allowed me to save, and I am so lucky because my husband is helping me pay back my loans so we save money in the long run.

  36. Sisu Garcia says...

    I was fortunate enough that with my job at college (as an RA), my scholarships and my parents’ help I did not need to get any loans and whenever I read about this topic my anxiety skyrockets even though I am not going through it.

    I just want to say to everyone that is struggling with this: You can do it! It sucks, but you will get through it and you inspire me a lot a lot!

  37. Emily says...

    Frankly, Paco does not seem that knowledgeable about student loans. Refinancing federal loans can mean that you lose meaningful benefits. Federal loans also have a fixed payment period, even if they are not forgiven.

    I’m a regular reader, have been for years, and I find this financial advice to be really disappointing.
    Please talk to you loan servicer and do your research:
    https://www.consumerfinance.gov/ask-cfpb/category-student-loans/

    • Jeannie says...

      I actually just refinanced my student loans, so I think that is a relevant piece of advice for most people. Of course you have to look at your specific loan terms.

    • kaye says...

      agree a 100 percent–i am on PSLF and even if that does not work (although it is possible to triple check, make sure you are re-certifying each year as they say, etc.) for some reason, since you always HAVE to be on the income repayment plan, my loans will be gone in 20 years, having paid only ten percent of my income. As a proud public sector employee (who still believes that civics and civic responsibility will save us) I am really okay with the ten year or twenty year plan–yeah, this is such bad advice and seems kind of flip, if I am being honest.

      want to say again: do the work, the research and talk to your loan servicer.

      Also–dave ramsey can go jump in a lake–sure, you may have paid down your debt really fast, but you are elevating a man with a questionable (and that is being kind) and intolerant world-view. I would rather stay in debt, than be complicit in the sort of white evangelical movement that brought all of us–country included–to this breaking point.

      works cited: http://religion.blogs.cnn.com/2013/11/30/what-dave-ramsey-gets-wrong-about-poverty/comment-page-5/

    • Amy says...

      Thanks for this link! It did not occur to me to visit the consumer finance protection website re: student loans!

    • Jenny says...

      Agreed. Student loans are complex and require careful research and planning in order to determine the optimal solution for an individual. Refinancing may seem attractive on the surface, but if you work in certain professions (nursing, medical tech, early intervention services for the disabled, speech pathology, special education in certain low-income schools or educational service agencies, etc) you may be eligible for loan forgiveness or repayment assistance within your current loan structure. Refinancing may mean losing out on program benefits and consumer protections. Highly recommend checking out Adam S. Minsky’s blog at bostonstudentloanlawyer.com . He’s an attorney, author, and student loan expert. I heard him speak at a financial planning conference earlier this month and his session was hands down one of the best.

    • Noreen says...

      YES- law grad married to a law grad and we’ve done the WORK to make good choices to move toward retiring debt. The idea of a “Student loan” is NOT 1 size fits all, especially if you attended graduate school, have private loans, or took out specialty loans (like to take the Bar exam). Not all student debt is federal debt, which has its own rules.

      We’ve consolidated some. Paid some off in chunks. And some are such low interest (thanks to incentives offered by the lender….ALSO NOT MENTIONED!) that it doesn’t make sense to pay them off TOO fast.

      Also agree with poster below: Dave Ramsey can get lost. We would NEVER retire and would love free 401k money on the table if we followed his advice!

    • Erin says...

      Totally agree with this. I did a LOT of work before taking out federal loans prior to starting grad school to make sure it was a safe and responsible choice given my field of study and career plans. I continue to triple-check my PSLF eligibility every time there is a sensational blast of “PSLF is a hoax” headlines. It is really unfortunate that they can be so confusing and I hate that our system is set up the way it is, but I think general advice like this is dangerous! There is really no blanket advice that can be given when it comes to student loans.

  38. KS says...

    Your family CANNOT be held responsible for YOUR student loan debt. Not possible.

    But also, it was a joke.

    If someone flees the country because “a stranger on the internet told them to” then whose fault is that, really?

    • Noreen says...

      That’s not 100% true: it depends on the type of loan.

    • Lindsey says...

      It’s possible if they co-signed on the loan! When I took out loans for undergrad, they required a co-signer, since I had zero credit, and that had to be my parents. Even if I die, and money is still owed on those loans, my parents are responsible.

  39. Andrea says...

    I’m curious to know if third party lenders like SoFi offer better interest rates on loan consolidation than Sallie Mae or similar. When I consolidated my private loans with Sallie Mae in 2004 my interest rate was around 2%. Are the same consolidation rates not available these days? I would also exercise caution when considering a third party lender because they may not be as willing to work with you on deferment or forbearance as a traditional lender if you fall on hard times. When I was unemployed for nine months I was able to work something out with Sallie Mae, and I haven’t heard the same about Best Egg, etc.

    • SB says...

      You’re not going to get better rates than the early 2000s that’s for sure! But no, consolidation rates are higher now – around 4-5% last time I looked.

    • Sam says...

      Interest rates are much much higher now. Undergraduate federal rates are 5.05% and graduate loans are between 6 and 7%. (My consolidated undergrad in 2007 were 4.8% and current consolidated grad have been 7% since 2012.) Tuition for state universities here is over 20K per year and rising. Personally I didn’t refinance through SoFi for the reasons you list but I think it’s an OK option, and I don’t apply my personal experience to anyone younger than me because the financial picture got so much more devastating so quickly. People who graduated pre-recession like us faced a totally different reality.

    • Amber says...

      I think a lot of this has to do with when you were in school and what the interest rates were when you took out your loans versus when you are looking to refinance. I had several co-workers who had student loans around the time you mention whose interest rates were around 2%. They wouldn’t have benefited from a refi because rates didn’t really get any lower. But they could consolidate with Sallie Mae and only have to make a payment to one servicer for multiple loans. The interest rate when you consolidate is the weighted average for all loans (i.e. if you owed $10k at 2% and $10k at 4%, the consolidated rate would be 3%).

      With a refinance, the new lender sets an interest rate. For example, when I finished law school in 2009, the interest rates on my federal graduate student loans were 6.8%. (I can’t imagine what the rate for private student loans would have been!) When I refinanced with a third party lender a couple of years ago, my rate dropped to 4.74%, because that was the going interest rate with the company I chose.

      Concerning the loss of benefits, I was not losing anything I particularly worried about in terms of grace periods/default options/payment plans, but that’s certainly something to look into before you choose a provider. Unlike the guarantees for federal loans, the third party policies can differ, so it’s important to read the fine print.

  40. Tori says...

    I graduated college with zero loans because I was fortunate enough to have parents who started saving when I was born. We are currently doing the same for our kids.

    • Amy says...

      That is wonderful, but not realistic for many. We are also lucky to have extra money to put into 529s, but according to current projections, you would have to save $1000/month PER KID if you want to cover in full the anticipated cost of a private university. I’m sure it’s less for public, but still… wow.

    • b says...

      What an amazing opportunity to be able to share with another generation!

    • Liz says...

      For most parents, it’s not possible to also save for graduate school, which is increasingly necessary to get a good job in the creative/intellectual economy. Your comment assumes that people who have loans have parents who didn’t do the same. Do you also plan to save $200,000 per child for law school/medical school/MBA/PhD? If not, I wouldn’t be quite so quick to assume that people with loans had parents who didn’t start saving for their educations when they were born.

    • It’s wonderful your parents did this for you, but tuition has skyrocketed in the past 15 years and I find it doubtful that the vast majority of middle class parents will be able to pony up $150k for each kid by the time they are 18. But doesn’t hurt to try. I still think it’s a better idea to save the max for retirement and take care of all debt rather than save for higher ed. Federal loans usually have low interest rates and if you are in a good place with retirement by the time your kids go to school, you can help them pay off their loans early, giving them the gift of amazing credit scores at a young age. I really feel for people going to college right now.

  41. Suzy says...

    Hell, I don’t have any student loans but now I want break the law and become a fugitive.

  42. Jes says...

    My second job out of college was for the federal government and at that time (2003) they had had a little-known loan-repayment program. They matched my payments 1:1 up to a set annual amount. It was a TON of paperwork and I had to be on top of the HR department to get my money, but it made an enormous difference. They paid lump sums quarterly so I also had to be sure loan companies applied the amount toward principal (as in write a formal letter, make phone calls, etc bc they did it wrong every single time) but I was able to pay off a significant amount of debt, and getting that lump sum down meant the last bits of my loans were paid off more quickly. I was also very motivated to continue big payments even when my employer program ended. So my message here: 1 maybe your company will help in some way, even if it’s a few hundred dollars it is worth the paperwork 2 it is imperative to apply any extra payments toward principal. I am incredibly grateful to my 25 yo self that I prioritized getting rid of that debt.

  43. Rachael says...

    I feel like graduate programs are way better about offering funding than undergrad programs—both my husband and I were fortunate enough to finish all our degrees (MA for me, PhD for him) without any loans, but i couldn’t believe it when we got to Purdue for his PhD program and realized how much the undergrads were paying to finance the grad students (who only pay $1k/semester if they’ve got a TA or RA position). I was lucky enough to have a full scholarship for both undergrad and grad school, but my husband chose to go to a great in-state school with low tuition and that helped a ton! For our kids, we are going to emphasize to them that undergrad is not the time to shell out for a pricey name—save that for grad school when they’re working hard to recruit you!

    • Lis says...

      If you’re paying for a PhD you’re doing it wrong.

    • HH says...

      First, thank you for this post. I’m responding to Lis’s comment below. As someone who IS paying off loans for her (yet unfinished) PhD but who also received funding for much of her PhD, I find your comment rather insensitive. It overlooks the fact that even if you have funding during the school year, as I did, the summers are not typically funded. Summers were often the most expensive time of the year as that’s when I traveled for research or conferences, both of which are required if you seriously hope to receive a job in academia. The travel and research funding offered by my department/university never fully funded the travel or research. (I’m in the arts; I realize people in STEM programs may have much better funding just because of their program.)

      Initially, I put summer research travel and living expenses on a credit card that accrued airline miles (which helped me travel) because I didn’t want to take out loans. However, putting summers on a credit card was a huge mistake. To anyone else in this situation, please don’t make my mistake. Don’t put your summer research travels/living expenses on a credit card. Take out a lower interest rate student loan that will cover the cost of living in the summer and what you expect to need for research travel (beyond what your university offers) and put it into a savings account until the summer. It took me two years to realize that this was a better plan than using a credit card and getting stuck with a higher interest rate that I couldn’t pay off while in grad school anyway. If someone else has better advice, please share!

  44. m says...

    I paid off 35k (car + student loan) in about 2 years by doing the following:
    Dave Ramsey!! As other’s have said, not into his personal politics but loved the snowball method. I found it incredibly motivating.

    — Each year there’s typically 2 months that have a 3rd paycheck. I always put my third paycheck directly to my student loan principle. It was truly painless and usually made a dent in the loans.

    — Put any raises and my tax refund directly toward my student loans principle

    — Worked extra. Like, seriously extra. I worked all the time. Maybe not for everyone but I was motivated!

    • Lynn says...

      I’m pretty frugal and totally into savings/personal finance. But my fiancee came into the partnership with almost $40k in debt (credit card and car) PLUS child support. I got pretty freaked out, but then buckled down to figure out how to get it paid off. Here’s what we are doing:

      1. I found this snowball calculator to be really helpful: http://www.whatsthecost.com/snowball.aspx
      (there’s others, but I like this one best.) It helps us begin our conversation about his debt. Running different scenarios on this is how we started the plan, because it showed us that there was a manageable way to get out of this debt. Like, it WILL be paid off; how quickly is based on how much we’re willing to tighten our belts.

      2. My fiancee has also (as per my research/recommendation) gotten into contact with his CC companies to get a financial hardship break. That means they’ve lowered the interest rate and minimum payment. It helps with the snowballing, too, since it keeps one of his CC under control while he pays off the other.

      3. I’m basically paying for everything while he puts any extra money into his credit card payment. That means when he gets to the end of his paycheck cycle, he puts ALL extra cash in his checking account into his credit card payment. It amounts to one ‘regular’ payment every month (well above the minimum) and two ‘extra’ payments of varying amounts. THIS IS HELPING A LOT.

      4. This might seem extreme, buuuuut…. we’re not getting married until the debt is paid off. It’s purely a financial consideration, but with our combined incomes, he won’t get any financial hardship breaks. We’re committed as partners, regardless if we’ve signed a legal document. PLUS we’re both the “get hitched at city hall IF THAT” kind of people, so this doesn’t feel extreme or silly. I mean, what is ‘marriage’ but a legal and financial contract, so we might as well be smart about it.

    • Katie says...

      Congratulations! I also love Dave’s advice (and as you said, not his politics/religion, yikes) and think he’d be so proud of you for what you’ve accomplished! I’m not in any kind of real financial peril but I love listening to his podcast because there is something for everyone, and you should never get too comfortable in a financial situation. You’re an inspiration!

  45. Rachael says...

    It’s really sad that college in America puts students in so much debt that they are tied to jobs they may hate just to pay it off.
    In Australia, we aren’t charged interest, the total debt is just indexed each year to reflect CPI changes.
    We also don’t have to start paying it off until we reach an earning threshold which is currently $55,874, then it comes directly out of our pay so I don’t even see the payments. There’s literally no reason for us to work our butts off to pay it off earlier except a little extra cash. This means we have more freedom to move around and travel!
    There was also a loophole for years that (unfortunately) has now been stopped which was if you lived outside of Australia for more than 7 years your whole debt was wiped! Ha!

    • Bec says...

      What Rachael said! The decision to study at uni here is really not a financial one. Sure you have to worry about living expenses while studying but not tuition itself. It really helps with breaking the poverty cycle.

    • Carol says...

      Yes, I really feel for Americans with these crazy student debt situations! My 3 year undergrad degree in Australia only cost about $22,000 (this was about 10 years ago) and I’ve never once thought about the repayments seeing as it’s all taken care of through income tax. I also just did a masters degree in the UK and they have a similar system – there is a little bit of interest but not much (retail price index + 3%) and you also only pay once you earn over a certain amount. It just seems nuts to be straddling young people with such huge debt burdens, especially nowadays when a university degree doesn’t necessarily guarantee you a well-paying job. Sorry this comment isn’t helpful for those looking for tips! I guess my tip would be for future students to check your family heritage to see if you can get a passport for Australia or a European country and just do your degree in a more reasonable country ;)

    • Sarah says...

      Haha, is this why I’ve met so many Australians in Canada?!

      The earning threshold idea is so reasonable. In Canada you need to start paying off within X months of graduating (I think you get a six month grace period? It’s been a number of years for me luckily, so my info could be out of date). I was lucky to land a job right away but I often wondered what I would do if I hadn’t.

    • Janet says...

      The other thing about University in the UK is that fees are set at £9,000 a year regardless of whether you’re doing medicine or an arts subject.

      Some argue here that that’s still too high but it’s a far cry from the circa £60,000 a year I’ve heard of in the States!

      Repayments are also totally secure – when you’re on parental leave they stop, they’re pegged to your income etc. They’re more of a graduate tax really than a loan in that sense.

  46. Amanda says...

    A caution about refinancing: Federal loans come with protections like the ability to lower or pause your payments due to financial need. Most private loans don’t do that, and many private loans are predatory. It’s true that income based repayment ends up costing more in the long run, but for many people it’s a lifeline they need and I’d only give that up if your job situation is very secure for the life of your loans. You can always accelerate your loan payments, and drop to income based repayment only if you need it.

    Is cup of joe or Paco getting a kickback for shilling sofi? Because, honestly, the advice here isn’t that helpful and the way federal loans are framed seems extremely misleading.

    • Joanna Goddard says...

      Oh no kickback at all — this is her professsional advice. Thank you!

    • Susan says...

      I agree that your point about federal loans should be included. All my student loans are federal and there is no way I would ever refinance because having the option to switch to an income based payment plan if I ever were to need to is a huge safety net. When I quit a horrible job that I needed to get out of, I switched to income based for a while and only paid $25 a month while I was in between jobs. It was a lifesaver.

      That said, I don’t understand your last point. Paco never even mentioned federal loans, so how is she framing them in a misleading way? Federal loans now come with more protections against letting people borrow exorbitant sums and when I think of people drowning in student loan debt I often think of people who already have predatory private loans (although it definitely is possible to get into the same situation with federal loans, just a little less likely). For those people, Paco’s advice is spot on. But I agree, she should have mentioned that federal loans should be considered separately.

    • Kw says...

      Refinancing my (substantial, six-figure) student loans through SoFi made it possible to pay them off years faster than I otherwise would have, after several years of feeling like I was making no progress. I had a small amount of federal loan debt but most of my loans were private (which is typical for those of us with debt from professional school like med school or law school, where federal money isn’t enough to cover the full cost).
      I was able to get a very favorable interest rate (probably not as possible now) in exchange for an accelerated repayment schedule and painfully (but necessarily) large monthly payments.
      No kickbacks here, just my honest experience!

    • Amanda, not all private lenders are bad. My federal loans were ruining my wellbeing and financial life at over 100k with no family help. There are mold-busting companies like Earnest out there that have created MUCH SMARTER scenarios as options for us, mostly because federal loan interest rates can be so high. Yes, these companies do require solid income and credit scores. But I absolutely encourage everyone on this post reading about the perks of federal loans vs private to look into more creative options. What a relief it was for me to no longer feel the anger I used to experience from my federal monthly payment, after refinancing. Now my loan is disappearing instead of ballooning, and because I see progress, I feel relief instead of helplessness.

  47. Aimee says...

    You have to refinance asap, or else it’s very difficult to get out of debt. I didn’t know this for years, and then I refinanced with SOFI and paid off like 48k in three years.

  48. Nancy says...

    Could you explain why we shouldn’t “hang our hat” on the whole debt forgiveness thing?

    • Liz says...

      99% of applicants to date have been denied. See NYT for great coverage in the past two weeks – no doubt other outlets have reported as well if you don’t have access past the paywall.

    • SB says...

      Also loan forgiveness could be rolled back in the future, it is absolutely not a guarantee politically – as well as the stat about so few people receiving it in the first year that it was possible.

      I thought I was eligible the whole time but it turned out that, 6 years into repayments, I was actually only 4 years in. It is hard to meet all the requirements, and hard to even confirm that you meet all the requirements.

    • Nancy says...

      What about the non-PSLF debt forgiveness plans (e.g. the 25 yr IBR plan)?

  49. Emily says...

    I use SoFi! So far I really like it and I’ll pay off my loans in five years — I was previously on a 10-year plan. My interest rate was lowered by about 2 percent (though I’m painfully paying about rent’s worth toward them each month).

  50. Leanne says...

    One of the greatest gifts my parents gave me was forcing me to attend a state school. When I was 18 they showed me the difference in cost between a state school and out of state and it became an EASY decision. My degree might not have a flashy name on it but I always had a very reasonable payment. (It’s been paid off for a few years despite consistently working in very low wage fields.) I will never understand why more parents don’t have this conversation with their kids.

    We’ve applied the same idea to our mortgage. We realized the benefits of staying put in our starter house so we also have a starter sized mortgage.

    • OMG I couldn’t agree more to this comment. My parents had the exact same conversation with me!! In my case, we moved to Arizona from NJ and my the cost of state school there was much cheaper. I waited a year to gain residency and was able to graduate debt-free. I did take a loan for my “brand name” Master’s as I like to call it but I would never have done that if I had undergrad debt to worry about. My husband, on the other hand went to a very pricey private school and 12 years later we are STILL paying it off. That’s something else I wish people talked about. You might not mind getting loans but your future partner might not be thrilled about bearing the burden for years and years. The debt has kept us from being able to save and buy a home. I know it’s hard for 18-year-olds to think that far ahead but whenever I encounter a new grad I make sure to instill this life lesson!!

    • KS says...

      My state school is still $15k/year right now.
      I went to said state school and still have a crap ton of student loans because I wasn’t eligible for a lot of aid.

    • Caitlin says...

      I generally agree with this logic but just want to add that sometimes, state schools aren’t always cheaper. When I was comparing financial aid packages prior to acceptance, I actually received a much better package from the private university I ended up at, and would have way more in loans if I had attended Umass (and i’m from MA). And most of it was in a grant that I never had to pay back (that wasn’t merit-based). I couldn’t be happier with the education, network, friends, and experiences I gained going to the school I went to.

      Across the board obviously state schools are probably usually cheaper, but I do think it’s worth it to explore both private and public options, since private schools generally can have much larger endowments than public schools, so they have more money to give in financial aid (even if the tuition ends up being higher).

    • Chloe says...

      Some states are better than others to live in! My family moved when I was in high school, and a large part of the decision of where to go was based on the state school options. Florida and Georgia, for instance, both have provisions for free in-state tuition if you meet certain GPA requirements. I know not all families can pick up stakes and move, but I do think future student loans should factor into the “cost of leaving vs. cost of staying” equation.

  51. Julie Rosene says...

    I finally finished paying off my student loans this year, after 9 years of payments($200 per month). Some months I’d put an extra $30-50, and it adds up!
    And every single year, if I got a tax return, I put it on that loan. Some years I got back $2000-$3000. So that definitely helped.

    • Colleen says...

      Ooh, I like that.

    • Heather says...

      Agree with the approach of putting “unexpected money” toward your loan. Tax returns, FSA reimbursements, gifts – any time you have money coming in that’s in addition to your regular income (or that you’ve already accounted for in your budget, like taxes), put it into your loan. With two young kids in daycare, I found it nearly impossible to save money until I started a Dependent Care FSA. Now the money is taken (tax free) out of my paycheck before it even hits my bank account, and when the reimbursement check comes at the end of the year, I put it straight into savings. I realize this only works if you make enough money to cover your basic expenses minus the FSA contribution, but it works better for me than just hoping there’s money left over at the end of the month to put into savings.

    • Lynn says...

      This is solid advice, and, it just so happens, my approach to paying off any debts as well. The other thing I would add is, if possible, set up automatic payment plans. Generally, those also make it easy for you to add in additional payment towards the principal. When I started paying off my student loans, I was making much less than I am now but still added an extra $10/month to the principal. As my salary increased over the years, I just kept upping the extra amount that went into the principal. Not by anything crazy — just an additional $10 or $20 every year. I never noticed the difference in budget, and IT ADDS UP.
      I could go on (and on and on) about the virtue of passive savings. Automatic payment plans, pre-scheduled transfers and direct deposit have helped me grow my savings in such a bonkers way in the last few years. And the best part is, I don’t have to DO anything.

      All that said, it’s worth doing some math: if your loan has a low percentage rate (mine was like 3 percent), at a certain point, you might be better off investing that money. Consider: if I have an option to finance something at 0% (my computer, my car), I will obviously take that option and just make the minimum payments, then take any extra money over that period and invest it. The same principle applies with low-interest rate debts. Even with my mortgage, which has a 3.25% interest rate on a 15 year mortgage — pretty crazy low — I’m only paying in an additional $50/month into the principal. As much as I would love to pour all of my additional tax returns into the principal (and some would), I’m choosing to save that extra money to build up my 6-month cash reserve (so if an emergency happens, I’m not putting money on my credit card at 14% a month) and investing in my retirement savings, which will probably be growing at 7%. Ultimately, these will be a better payoff in the long run.

      TLDR: Pay extra into your principal every month! Even a small amount adds up!

    • Victoria says...

      Yes! I shared it elsewhere in this thread, too. Everybody here struggling with feeling alone about their student loan debt should give it a listen.

  52. please call your company first!! soon after college when i was paying the minimum most months and more whenever i could I discovered that all the payments were going to the interest and none of it was being used to reduce the total I owed – not good! Once I spoke at the loan company they told me I had to write a letter saying I wanted my payments to go to the original debt to lower my balance and this made a huge difference. after that i paid as much as possible each month – I tutored and did a lot of spending freezes. Paid off my loan 5 years ago and it was the best feeling ever.

    • Amanda says...

      Yes, this is critical and should have been mentioned in the article. Your loan company will have a default for how payments are allocated, but you can actually change that by calling them in many cases.

  53. Nina says...

    Also… consider voting for candidates who support free college education! It won’t help you but it might save others from this loan nightmare. Here in the UK all university education was free until about 2 years before I finished high school (great timing), and almost all undergraduate courses are still free in Germany – free higher education is not at all pie-in-the-sky. The politicians I support want a return to free university and college for everyone here, and the US could do it too.

    • elise says...

      yes, this!!!

    • Eric says...

      “Free”

      I am not sure that word means, what you think it means.

    • Stacy says...

      It is NOT FREE! I used to live in Sweden. Education is “free” along with healthcare and other social programs like (low cost) quality childcare. Americans think it’s utopia. The cost is extremely high taxes while also taking away the freedom of choice. One example: in America you can chose what you want to be educated in (even without perfect grades), you can chose how you want to pay for college while attending, and when your done how your going to pay for it. Sometimes a person wants to live the high life (umm…$400 sweatshirts) other times they can be extremely frugal for a better future. Of course I think it’s sad that education costs have sky rocketed here in the US but the answer to this is not voting in “free education.”

    • Cara says...

      Like Stacy says, “free” education is more complicated than most Americans perceive it to be, but it’s still WAY BETTER for society generally. I’m an American who has lived in Germany for almost 10 years, am married to a German, and will advise my sons to take advantage of free university in Germany (if it still exists when they are college age). That said, I do think that the level of education at American colleges tends to be slightly higher (overall. In Germany, it kind of depends most on what you study. Engineering is great, but liberal arts or business not so much). Also, there is sooo much more flexibility in America – it’s the typical capitalist structure. If you’re willing to pay for it, options are endless. In Germany and many other countries you have to be in a top percentage of students at a very very young age (sometimes like 9/10 yrs old!) to qualify to go to university. Late bloomers just lose out. And it’s very hard to switch career tracks- you can’t just go back to school and study something new. Soooo…. basically America saddles students with debt in exchange for offering them freedom and flexibility of choice in what they want to do in life. This was probably worth it at some point in our history, but the debt-to-freedom ratio is no pow so unbalanced that it’s not worth it for a lot of people.

  54. Jackie says...

    I joined the Marine Corps because I was so financially insecure after graduating from college with bleak job prospects and a big chunk of student loan debt. The decision could have been disastrous (and felt that way for a while), but it worked out in the end. I was able to get out of $50,000 of debt in three years because the military provides a lot of the cost of living. When I went to get my Masters I used the GI Bill and was actually paid a pretty penny to go to school. What a difference.

    • Katharine says...

      Good for you! And thank you for your service.

    • Kate says...

      This is amazing and I wish more people knew about this! I’m an AF wife and see SO many young people who enlist or go into the reserves, etc. to earn the privilege of being able to get college paid for. My husband is in grad school right now and they pay about 50% of his tuition.

  55. Olivia says...

    Can I just take a minute to complain about college in our country (ha)? In order to prevent this from happening to future generations, please tell the young people you know the “college experience” is a scam. It is NOT worth being tens (or hundreds) of thousands for dollars in debt before you even start your life so you can study (or party) at an average school (not that prestigious ones are any more “worth it”) for an unremarkable degree that does not directly translate to an income that makes it worth it. It’s terrifying so many people are in this boat.

    I knew I wanted to become a physician assistant, and grad school would be expensive no matter what. I lived at home, commuted to a state school, and owed less than $10,000 after graduating thanks to grants and scholarships. I also studied abroad. Living with family at that time was not pleasant or fun.

    Grad school cost me over $130,000 including housing – at 7.9% interest for some loans. My student loan payments (before I opted for a longer term option) were 25% of my net income for ten years – BUT, it was worth it due to the salary this degree translates to. That said – it still hurts A LOT, and affects my life a lot.

    Not preaching or bragging at all. Just saying, I would never ever recommend my children spend $20,000-40,000 a year for a bachelor’s degree, unless it would give them a direct line/link to a career which would allow them to pay it off. I feel like our society tells kids the opposite. It’s so so so abhorrent and awful to me that the government/society’s solution is just to reduce your payments based on your income!! No!!! Take out less debt.

    I could go on and on.

    • Colleen Sweeney says...

      I started college onlin at 29, and I now owe $42,000. I got a degree in something non-lucrative, but in something I was interested in. Paying that off is always on my mind, but I totally get what you’re saying.

  56. Janine says...

    I’d also add a #6 option. Get on the Dave Ramsey plan. It might not work for everybody, but I’m pretty convinced it can work for those that throw their hearts and souls into it. Here is my story- I took out 100k for graduate school and 10k for undergrad. I came out of school making 36k as an slp. I felt defeated for five or six years. I paid minimums and watched my loans balloon up to 120k. With some additional car debt I owed 145k. It seemed hopeless and I let it get the best of me for longer than I would have liked. A few personal events in life happened, a family member got terminally sick and I was unable to help financially or with my time bc I had to keep working 60 hours a week to pay my stupid student loans. I somehow stumbled across Dave Ramsey’s podcasts at this time and it just clicked for me. I got on his zero based budget, worked harder than I’ve ever worked, scrimped, got inventive, hustled, cried, and eventually 3.5 years later got out of debt!!! It was harder than I thought it would be, but at the same time better than I thought it would be. It gives you an amazing freedom to make rescissions about your life, where you live, what you do for work when you aren’t under student loans. I hope my story helps someone the way many other people’s stories helped me. Hugs!

    • Ariana says...

      You got out of almost 150k of debt in fewer than four years???! My husband has nearly 6 figures of student debt, too, and I am about to come out of law school with a similar amount, so unloading it in single digit years doesn’t seem possible!

    • E says...

      It kills me to go to have went to grad school to make around $40k as an SLP. I feel you and I’m glad this worked for you!

    • Robin says...

      I agree. I’m am as liberal as they come, but I am FULLY on board with Dave Ramsey’s snowball plan. My husband’s mother ran up a TON of debt in his name (unbelievable, right?), and Dave Ramsey’s plan has been a lifesaver. The best (fastest) way out of student loan debt is to throw as much money as you possibly can at it. Rip that bandaid off so that you can pay less of your hard-earned money on interest. You may have a couple of really difficult years (I’m living them right now!), but you can live debt FREE sooner, which will also allow you more time to build real wealth for the long-term. The silver lining to our situation is that we now know 1,000x more about finance than we ever wanted to, so we’ll probably end up with more in the end now that we’ve been through this!

    • CB says...

      I just want to second Dave Ramsey’s plan. It’s at least worth looking into if you’re feeling overwhelmed by student loan debt. Listening to his podcast gives me so much hope to be debt free and someday pay off my house, which I would never have imagined to be possible if I hadn’t come across his program.

    • Brielle says...

      Janine,
      I am also an SLP with graduate school student loan debt. I just left my $42k/year school salary to start a private practice and really tackle my $85/k graduate school loan. Your story is inspiring! There is light at the end of the tunnel.

  57. Rachel says...

    I’m currently struggling with student loan debt, and while I am living below my means and paying as much as I can, there isn’t an end in sight. I am looking to leave education to pursue an industry where I can make more money — but feeling super lost and discouraged having never worked in any other field. Anyone out there who made a switch from education to something else? I would be so sincerely grateful to chat with someone!!

    • Rachel says...

      My husband made the switch from within education–he was a teacher making $32k/year, and he went thru a one year school administration-specific masters program. He got a scholarship, and it was only one year, so we were able to cash flow the rest. Now makes six figures (5 years later). It was the best investment we ever made. Something to consider if making an industry switch is too big of a leap (or requires taking on even more student loans).

    • Meghan says...

      Not much to add, Rachel, except a lot of solidarity! I am very lucky not to have any student load debt (and now that I am a high school teacher, I truly, truly understand what an amazing gift and privilege that was) but am also looking to change careers (partly for the money thing – 18 year old me would be judging me harshly for wanting a job that pays more – but more for the “I need to get out of this before it affects my mental and emotional health any more” thing) and am also feeling lost and discouraged without a lot of experience in other fields. I’ve started researching and looking around, but so far, no hits, other than “go to grad school again,” but for what?? With what money?? So, sending hopeful vibes for us both!

    • Em says...

      I don’t have anything to add either, aside from SAME. The thought of transitioning, and not transitioning, is terrifying. I would love to hear some advice as well!

    • Georgia says...

      It’s pretty specific, but my husband went from working post doc jobs as a physicist to a data scientist. He applied to a free 6 week boot camp and got it, learned all this crazy stuff and landed a great job at a startup. This is a great option for STEM people with higher degrees. Good luck!

    • veronica says...

      This may sound crazy. You probably don’t have the time and because you’re broke and a teacher you may not feel like you have anything else to give. But have you considered volunteering to explore other fields?

      I was in art education for five years when I decided I had enough. I volunteered at a hospital once a week soon after and I discovered nursing was my new path. I’ll be a RN by next summer!

      I had never seriously considered the medical field prior to this. And maybe that’s not your thing either, but look into your community resources. Maybe you have a higher education center with scholarships for minorities entering non diverse fields. For example, women are considered minorities in plumbing and electrical maintenance. Unconventional, yes, but these fields pay well. And if you’re interested in something new, go for it! Look beyond what you know and ask yourself what will be rewarding for you in the long run. Best of luck on your journey.

    • Amy says...

      I started doing some educational consulting to supplement my income as an educator. It was a lot of work to focus on marketing and hustling (lots of networking), but I ran a summer PD for teachers and ended up making $5K from it for a week of work (plus all the prep) taken from my vacation.

    • Ro says...

      I left teaching public elementary school a few years ago for a sort of corporate training position. Within a year, my income was up 30%. It is sort of depressing. I miss teaching a lot, but the new gig is significantly easier. If I could go back and make this more reasonable salary, I would do it in a heartbeat. But the move is definitely possible and seamless.

    • Natalie says...

      Have you considered becoming a paralegal? I switched careers a few years ago-paralegal education programs and requirements vary from state to state but they aren’t (usually) expensive and you can earn your certificate in a short amount of time. My experience working in a law office is that it’s very hard to find good paralegals-if you are reliable and detail oriented you will do well. And, if you find a good firm and stick with them for a while you can definately make more than an educator. Just an idea! Good luck!

  58. A says...

    Please please please can we have more on thistopic? A big question is how do I balance life style creep versus living a reasonably good quality of life. How do people decide that? What works for them

    • Georgia says...

      I second this. My loan repayment is TWICE the cost of my rent for a one bedroom in Manhattan…I’ll let you do the math. It would be great to hear from women in diverse fields who have been successful in this arena- what did they do? How did they do it? Etc. I am a physician and have a huge amount of debt which I’ve been doing ok at managing, but I think my advice would only be useful to a small group of people. I’d love to hear how women in other careers are doing it.

    • SB says...

      The podcasts Afford Anything and So Money with Farnoosh both have eps on this! Of course I’m still suffering from lifestyle creep, but… less :)

    • Ashley says...

      I second this! More on lifestyle creep!

      Right now I’m going back to school for a degree in a medical field that will cost me probably $100,000. (I will make $65-$90K/year, depending on my specialty.) One way I’m justifying this degree is that I currently live on $30K a year… I’ll just have to stay in the same apartment, eat the same lentils, and drive the same car for 3-5 years of working before I really enjoy my salary. $100,000 doesn’t even feel real… Is this simplistic? (I haven’t thought about children yet…)

  59. There are also programs in different careers that pay off your student debt for you. My friend worked as a teacher in a low income neighborhood for three years and her student loans were forgiven- and they were private school $$$!

    • Wow. That’s a good deal! Probably an amazing experience for your friend too.

    • Emily says...

      Sounds similar to my friend – an elementary school teacher who found a program where she worked in special education for five years at the same school and her student loans were forgiven (also private school $$$!). She ended up loving her students and is still teaching special ed to this day.

  60. Rachael says...

    a few good pieces of advice that are missing here: 1) call your lender and try to negotiate a deal for a lump sum pay out (if you can afford it). Lenders may be willing to accept much less than the total pay off if it means that or nothing/you can’t afford your payments in the long term. 2.) another good refinance option is to do it through a bank while simultaneously opening a checking account there . First republic offers amazing rates this way and I’m sure there are other banks that do the same. Again, you probably have to have good credit and a decent job to do this because it often requires direct deposit of a certain amount each month (ie your paycheck).

  61. Denise says...

    I’m totally planning my “trip” abroad right now. Haha! In reality, I’ve been paying steadily and increasingly on my student loans for about 14 years including a couple refinances & consolidations. With diligence I’ll be done 6 or 7 years from now. That’s a long time but I know I’ll be able to do it.

  62. Ashley says...

    Something I don’t think is discussed nearly enough is the pressure to go to a four year university. College is not for everyone. Getting a $100,000 degree only to work in an unrelated field makes no sense! If trade schools and skilled labor training were given the same social status as colleges fewer people would be in debt and they could be making very good wages. Did you know diesel mechanics can make around $90/hour?! That’s $180k a year.

    I realize this is tangential to the conversation of student loans, but it’s a little discussed topic deserving of attention.

    • Andrea says...

      Unfortunately, “college is not for everyone” isn’t how rich people talk about their own kids. It’s generally a phrase meant for other people.

      I speak as the poor kid at a rich high school, college and graduate school. I now make 100k, but my mom cleaned houses as our income for five people. If I didn’t take on the college debt that took me decades to deal with, I would have similar opportunities as she did.

    • Julie says...

      I say this all the time. It’s like our generation was told in high school “college is the way to go” for everyone. The labor field is already in a shortage where I am – we’ll all be working off our college loans the next few years wondering if we could learn to be electricians.

    • Janet says...

      Yes yes yes yes.

      I have a 4-year degree without loans from a combination of FAFSA to cover living expenses and academic scholarship to cover tuition and books.
      My husband started working construction while he was waiting to get residency and 15 years later, earns over $200K/year without any college. The electricians, plumbers, pest control, masons, etc that he works will all also make over 6 figures and none have college degrees. Nearly all of them talk about how it’s harder and harder to find younger folks that want to apprentice/learn the trade.
      Skilled labor is something seriously lacking in this country.

    • Cynthia says...

      As a recently retired teacher, I tried to emphasize to my students that college is not for everyone. If you need college for your career, great, but look at other options. Guidance counselors push students toward college, because that’s all they know to do, and it makes a high school look good to say that a certain percentage of students are going to college, and they’ve been award this amount in scholarships. I am all for trade and technical schools. I also suggested to my students to go the local community college and then transfer to a four year school to finish your degree. It will save a bundle of money. When I graduated from college over 40 years ago, I had no debt, because my parents started taking out US Savings bonds when I was a baby. College costs were not out of reason then, either. I went to a private college and lived at home for what it would have cost to go to a state college and live on campus. The private offered my major, but the public one didn’t.

    • Elizabeth says...

      I agree with this! My husband is a tradesman in repair (he figured repair was more recession proof than building/construction because even in a recession people need things fixed) and he works a solid 40 hour week (and he does WORK while he’s at work…no surfin’ COJ like me…) and brings home 120K base with no college degree needed. Here’s the best part, though – the BENEFITS. He gets amazing retirement, 401K contributions, and a pension (that of course no one our age counts on but it’s there…). I am most thankful for our health insurance, though – my last emergency room visit cost me $1.57 out of pocket. I had never experienced that in America until I switched to his health insurance.

  63. Nicol says...

    I think it’s important to evaluate how to get the most of any extra money you have and not just blindly use to it pay off a particular debt. For example, if your student loan has a low interest rate, you might be able to get more for your money by investing it (Roth IRA, 401K, 403b, whole life insurance) than than what you save by paying off the loan sooner and paying less interest. (not sure if that makes any sense, but it does in my head.)

    • Ashley Krause says...

      Nicol, that makes perfect sense to me because that’s what I’m doing. I’m old enough so that when I graduated college, I consolidated loans with 2% interest, and then took on law school loans with a slightly higher rate. Occasionally I pay off more than the minimum monthly payment, but we’ve decided that our money is better used by paying off higher interest car loans, paying down our mortgage, maxing out our 401k or putting extra $ towards other investments that compound over time, rather than paying off such low interest loans. Time will tell if that was the right decision. Sometimes I’m frustrated I still have the loans – after all these years – but paying them off is less bang for our family buck!

    • Andrea says...

      I agree! I did the math a few years ago and it made no sense for me to pay of student loans early. And when I’m finally finished (2022!) I can just move that monthly payment into an IRA since I’ve gotten used to paying it over the past 15 years, ha.

  64. J says...

    Just want to put out there that my mom’s involved with a nonprofit, TSLA, that provides free student loan advice to borrowers. Their website is http://freestudentloanadvice.org

  65. Hi Paco,
    Quick question for you. My husband and I are saving for a home in NYC. Once we have a good down payment we will need to take out a mortgage (hello, $2 million two-bedroom apartments!). I have no idea what my credit score is. Is there a free and easy way to find this out? I’ve heard that checking your score can actually lower it…? Then, once I find out what it is, how do I go about improving it? Thanks so much! Love your column.

    • Colleen S says...

      Credit Karma. It’s free, and doesn’t hurt your credit. I sound like the commercials, but I use them.

    • Lauren S says...

      There are three credit bureaus, and by law they have to give you your credit score for free once / year. Some credit cards have started including your credit score as part of their online platform. (Discover was the first and what I use, but I think a few do it now). Checking with these methods will NOT hurt your score. There’s so much misunderstanding around credit scores, and they have such a significant impact on a person’s finances. It makes me so mad. It’s like playing a game and not knowing the rules – why aren’t they teaching this in high school?!

      Anyway, as far as increasing your score, pay off your credit cards ASAP (or at least always make the minimum payment until then). Always make at least the minimum payment on “good debt” like student loans and a mortgage.

      Do not listen to anyone who tells you having a credit card balance is good for your credit – it’s not. I’ve literally never had a balance that carried over to the next month, and my score is in the 800s. Not trying to rub it in your face, just convince you I have an idea of what I’m talking about.

      Lastly, there are these concepts of how much debt you could have but don’t (I forget the term) and debt to income ratio. In other words, making a lot of money helps but so does having a lot of credit cards open that are paid off and you don’t use. I probably have 12 FREE cards open at this point (I take advantage of rewards programs and store discounts, as long as there is no annual fee) and I’m only 29, but the catch is I know every single one has $0 balance. I don’t even have 11 of the cards handy to use them if I was tempted. A few sit in my drawer, and I’ve cut several up and thrown them out while keeping the account technically open. 99% of the time I use my Discover, which I’ve had since I was 18. It’s not the most efficient rewards program but I like applying cash back to my balance and their customer service is better than anyone else I’ve come in contact with. I’ve been burned by travel cards and feel I can get a better deal with less restrictions with a little research on the web. But I digress.

      I genuinely hope this helps. And PLEASE confirm everything I’ve said with your own research and do not ever blindly accept anyone’s advice – I’ve heard so many smart people say things about credit scores that are untrue with such conviction. It breaks my heart to see other smart people nodding along.

    • Nancey says...

      Credit Karma and another good one.. Credit Sesame, love them both, no credit checks and free! They give good updates and it’s easy to keep an eye on everything, and I mean everything!

    • Thanks so much, ladies!

  66. Kristin says...

    I’d be interested in Paco’s thoughts on student loan forgiveness programs! I’ve paid off all of my student loan debt (150k in 4 years! Yes!) but my husband unfortunately accumulated about that amount in the same time period. He’s now working as a resident physician and will likely continue to work in academic medicine for at least the next 10-15 years, which means he will be eligible for PSLF if that program still exists. Would you just pay the minimum for 10 years (extended repayment) in the hopes that PSLF works out, or bite the bullet and try to pay it off more quickly?

    • Siobhan says...

      Once he begins working, he can apply to determine eligibility. There are several criteria you must meet to qualify, including income. Depending on whether or not he qualifies may inform your decision to wait the 10 years with minimum payments vs. trying to pay off early. Personally, I applied and met all criteria EXCEPT income, which was less than 55k. Since I was not granted forgiveness, I employed many tips here and paid my loans off early. Good luck!

    • Jessica says...

      My sister is going through the loan forgiveness process right now. One thing to take into consideration is you have to pay taxes on the loan forgiveness amount. She was told to expect up to 50% in taxes of the forgiveness amount. She’s still walking through it all now, so it’s not all determined yet, but she is looking at having to refinance her house to pay all the taxes on that. Just something to consider/look into.

    • Siobhan, I’m so sorry about your denial — that must have been so frustrating. I’m a little concerned that you and Kristin may be talking about different things — as far as I am aware (as a PSLF participant), there is no income requirement to get forgiveness under *PSLF*.

      For Kristin’s benefit, this site lays out the requirements pretty clearly: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service It also has a link to the form you eventually have to submit.

      On a related noted — PSLF is a federal program that is in danger! Everyone should call their representatives (now and after the election) and ask them to support and protect the program.

    • Emily Bishop says...

      Please keep in mind that PSLF is funded out of the discretionary portion of the federal budget– meaning at any time a budget could be passed with no allocations for PSLF, or extremely limited, in which case the regulations would have to change.

      And also, you cannot be eligible for PSLF if you do standard repayment, and if you have two incomes and one is a physicians income, it is likely you will not qualify for any other type of repayment except standard.

    • Cooper says...

      If you’re hoping for PSLF, it’s a really good idea to recertify your employment at least once a year. The first time you certify your employment, loans will be automatically transferred to FedLoan servicer, and they will provide you a letter confirming that your employment qualifies and calculate how many qualifying payments you’ve made (out of 120) and how many you have left.

  67. MM says...

    I understand what this option is not available to everyone but this is how I was able to start to get out from 180k of law school loans (mostly at 8%. Still haunts me.)

    I reached out to my immediate family members. We had open and frank conversations about if they were even comfortable loaning me money, at what percentage interest, initial amounts, term length of the loan, additional amounts if I completed the full loan payment. Together, we drafted a concise contract and amortization schedule. Over the last 10 years, this has enabled me to pay off the loans chunk by chunk (10k here, 5k there) directly to those individuals at an interest rate at least lower than the 8%. I have 65k left to go. Before, I was not making a dent at all due to the interest. They say borrowing from family is a horrible idea but with open dialogue and planning that may not always be the case. I recognize not everyone is in this fortunate position. Only sharing because embarrassment and shame prevented me from reaching out to those I love sooner and I so wish I had.

  68. Meredith says...

    I really appreciate this attention to money. I got a PhD soon after graduating college, and was fortunate not to rack up more debt in grad school because I got the very good advice from a mentor not to even consider going to a program that wasn’t affordable (in my case, this meant not even applying to any program that wouldn’t provide funding). I realize this may be different based on what degree people are pursuing, may be more complicated for other people, is changing (10 years later) in its practicality, etc. But in my case, it was excellent advice, especially because we didn’t talk much about money in my family. Even so, I wish I had thought more about this and made some payments on my college debt while I was in grad school, even though I didn’t have to, because I could have afforded to (cheap cost of living, I was saving housing costs by having roommates, etc.). I now live in a much more expensive area of the country, and I would be in better financial position overall if I’d been paying off those loans earlier.
    I certainly don’t want to universalize my own experience. But I do think it’s important to take the long view, and to start talking and thinking and planning finances out early on.
    Thanks for the space to discuss these issues!

    • Eva says...

      Thanks for posting this! I graduated from undergrad and have since paid off about 60% of my undergrad loans in the past 2 years (granted I worked 3 jobs a semester in college to help pay for it). I am taking a break before PhD because I was worried about having undergrad debt hanging over my head. Gives me some motivation to continue with the long view and continue pursuing my passion/education at the same time. Thanks :)

  69. Rebecca says...

    A few moms in a local group mentioned trying to refinance with First Republic (bank based in San Fran). They have pretty awesomely low rates for refinancing and even repay your interest dollars if you pay back early. I feel like a fool for not refinancing earlier and paying the crazy interest rates. Live and learn!? Crazy world. I’m by no means working or promoting them from anything but personal what-do-i-do-with-these-loans perspective :).

    • Kristin says...

      I second the First Republic recommendation. It’s saved me so much money, time, and sanity having a lower interest rate and not having to make payments on 3-4 separate loans.

  70. Kaitlyn S. says...

    I still haven’t figured out how to hire the right financial planner. I know I need one, and I know some are fiduciaries and some aren’t, and I definitely want one who is, but….then what? How do I choose one? It seems like it’s so much more important than choosing who cuts my hair, or even who my doctor is! I don’t know those acronyms, and even though I know I want a fiduciary, I don’t know how to find them. Ugh. This is helpless.

    • Leanne says...

      Ditto!

    • Wendy Leonardo says...

      I would recommend asking people you respect, especially older folks or other professionals in your life.

    • Jenn says...

      I recommend JL Collins’ book The Simple Path to Wealth as an easy to read investing primer. Use extreme caution in hiring a financial advisor. Even a fiduciary can get it wrong and no one cares more about your money than you. For me and my money, the right approach is tons of reading and DIY. Good luck.

  71. I’ve been repaying my student loans for 14 long years. By January 2019 I will finally not owe a single penny! My husband and I are going out for drinks the day of the final payment to celebrate :)

    I was terrible when I graduated from college and let them fester for a year or so before refinancing. After that I paid the minimum amount due every month and more when possible (after receiving bonuses at work, etc). Automatic online payments really helped me as well so that when I was living on less than $30,000/ year in NYC I didn’t have a choice to default – that money was coming out of my account regardless.

    I am also really lucky that I got a good scholarship, my parents helped me out, and my grandfather paid for the final year of my five year college. My loan payments are not pleasant but I know friends that pay so much more than I do.

  72. JP says...

    Love this column! Agree that advice is not usually very universal or very helpful when it comes to student loans, though. I was uninformed and sheltered when I went to college and my parents told me that they had everything under control…fast forward a few years and my payments are $1,500 a month (!!!!). It is very unfortunate and partially my fault, but even my good paying job makes the payments feel endless and massive, not to mention defeating when I think of all of the other places my money could be going. When it comes to student debt, tips on how to manage financial stress in tough circumstances would be more useful in my opinion :)

    • debbie says...

      YES to tips on managing financial stress please!

  73. Liz says...

    This is great advice. I agree with the commenters who have suggested upping your monthly payments whenever and as soon as you have a little extra money you can put toward repayment. I am still repaying my law school loans, about 4 years later, and just recently I made peace with the fact that because I chose an expensive school, and have chosen to live in expensive cities (hello DC and SF), I am not going to be one of those people who pays off their loans right away and goes on to buy a 4 bedroom house in the suburbs the next month. I’m going to be the person who pays off my loans over 7 or 10 years and lives in a cool rental in the city, and you know what, I can still enjoy those years! I don’t have to live in the cheapest rental I can find, I don’t have to forgo vacations and weddings and date nights with my husband…I can take a little longer to pay off my loans, and maybe make a bit less money over the course of my life, in exchange for the gift of allowing myself to be happy in the present. We live in very different economic times than our parents, wages have not kept up with the skyrocketing cost of living and education, and as frustrating as that can be, I think in addition to Paco’s incredible advice, it really helps to find some zen about it all, too.

    PS – I also refinanced with First Republic and recommend you check them out along with SoFi!

    • Janna says...

      Yes! First Republic ftw. I also have a crazy amount of student loans and after trying to pay the fed loan rates and making no progress, I refinanced with them and in the last 4-5 months have already paid off $7000, versus no change in the balance in the last four years. First Republic’s rates were 2-3% lower than what I found with Sofi- but that might not be the same for everyone.

    • Madeline says...

      Love this perspective so much. I’m in my final year of my four year medical residency and have a mind-blowing amount of debt from medical school. I am hoping to have my loans forgiven in 6 years through PSLF. In the meantime, I am saving aggressively for retirement and have a healthy rainy day fund by living pretty frugally (cheap rental, cheap CoL city, don’t eat out much). But I also travel, get the occasional massage/pedicure, splurge on gifts for other people. Basically, I try not to let my debt ruin my life and try to find peace that I have a plan that seems to be working well.

    • Tori says...

      For those recommending First Republic, were your loans all federal or were some or all private loans? Most of mine are private loans and there seems to be no way out when it comes to them vs. federal.

    • Liz says...

      @Madeline, I hope PSLF works out! In the meantime, I’m so happy that you’re also allowing yourself to enjoy your life. My law school loans are pretty insane (I was so young when I started and just thought, well, lawyers make good money so what’s a few hundred thousand dollars), and I spent a long time being so, so upset with myself for not choosing a state school or perhaps not even going to law school at all. But law and medicine are fascinating fields, and I believe we’re both going to think we made the right choices, even if there was some financial pain in the process.

      @Janna – Yes! I had actually previously refinanced with SoFi shortly after law school, and then did it again with First Republic a year or two later because the interest rates available were SO much lower. But I know they are extremely picky about who they will refinance, they want pretty sure bets, and SoFi is probably still better than not doing it at all!

  74. Get into a cab accident and then sue the cab company. Not my initial strategy, but when a cab driver caused an accident that left me with 21 stitches in my head, I reached out to the cab company to try and get them to cover my medical bills. When they refused, I hired a lawyer, and we ended up suing for WAY more money than I thought I deserved considering I ended up being fine and my scar is barely visible, under my hair — but it was weirdly within just a hundred bucks of what I still owed on my loans. So I took the money, paid it off in one lump sum, took the extra hundred and took myself to dinner, and figured it was meant to be. Worth the terrifying accident to be out of debt now? Kind of!

    • Alyssa says...

      This is amazing. Right on!

    • Lily says...

      I’m glad you’re ok, Mary Kate, but your comment makes me really uncomfortable. Greedy litigiousness is really a huge problem in this country and contributes to skyrocketing costs across so many sectors, including universities themselves. Student loans wouldn’t be necessary if tuition rates weren’t hideously exorbitant.

    • Liz says...

      Lily – “greedy litigiousness” does not increase the cost of tuition, and is not a nationwide problem. Corporations would like you to think that it is, but it is not. People suffer and litigation is sometimes the only way to get a corporate entity to pay attention. Mary Kate did nothing wrong by hiring an attorney – the cab company could have simply reimbursed for medical bills but decided to roll the dice by refusing. They assumed she would drop it. She didn’t. Good for her. I highly recommend digging into some stories about Stella Leibeck, the woman who was burned by McDonald’s coffee and awarded a substantial settlement. She is kind of the perfect example of this idea of “greedy litigiousness”. She was ridiculed by the media and made a poster child of tort reform, but what McDonald’s did was callous and greedy. Stella was not greedy.

    • Kate says...

      1) I’m glad you are ok and 2) this comment is amazing. Don’t listen to Lily- this literally has NOTHING to do with the cost of student loans/tuition? I’m so confused.

    • Lily, I actually agree that greedy litigiousness is wrong, but that doesn’t apply to my case. All I wanted was reimbursement for my out-of-pocket medical bills, which were close to $500 — not that I was impoverished at the time, but that was a lot of money for a 25-year-old living in NYC on a starter salary. It was also the principle of it — I had asked the cab driver to slow down before we got into the accident, and he laughed at me then proceeded to run a red light and slam into the car in front of us. I thought there should be consequences for his reckless behavior. (There likely weren’t, according to the lawyer, but what you gonna do.) If they’d given me my $500 I would have walked away, but they didn’t, it took 2 years of going back and forth, so I finally hired a lawyer and took the first amount they offered. I thought it seemed high, but the lawyer takes 1/3 of the payout, plus as he put it “it’s your time as well as your money that you lost” (I was paid hourly at the time and had to miss a week of work for the accident, plus all the time I spent visiting doctors and calling the stupid cab company trying to get it settled.) So I counted my blessings and took the money. I don’t think I did anything wrong.

  75. Elizabeth says...

    My husband pretty much had a mental breakdown and has not worked very much over the last three years, so I’m pretty much the sole provider. His insurance/mental health care alone takes up close to half of my monthly salary; his credit card is in collections; my three credit cards (nothing fancy, just used them for bills I couldn’t afford and the interest snowballed) are maxed out and total $16,000; our student loans total at least $100k and all my payments go toward the interest; our credit score is in shambles.

    I don’t treat myself or splurge on anything but I’m drowning. I desperately want to get out of this, and to fix our credit score and save a little so we can get a loan to buy our house (long story short, my dad bought a beautiful fixer-upper with a big down payment and he and I restored it together; I pay the (small) mortgage as rent, and I need to buy it back from him to restore his nest egg. I put my blood, sweat, & tears into this house and I’m not giving it up). Anyone have any suggestions besides “divorce your husband and move in with your parents”?

    • Andrea says...

      That’s a terrible situation. Bravo to you for not falling apart.

      Have you applied for Medicaid for him and food stamps for the both of you? Freeing up cash here may help.

    • H says...

      I’m so, so sorry things have become this difficult for you. I’d definitely consider this a crisis financial situation.
      I don’t know if your income meets the requirements, but getting your husband covered under state disability would provide a huge amount of relief.
      Communicating with creditors is also important, especially if somethings already gone to collections. Negotiating new repayment terms, even if they are very small payments, can ‘close the tab’ mentally speaking, and over time get you back in better standing.
      Getting a roommate would help with temporarily boosting cash flow.
      Filing bankruptcy is also an option. Not an ideal or pretty one for sure, but, it exists as a category for a reason.

    • jd says...

      bankruptcy? i know the connotation is bad, but it would get credit cards of your back and shouldn’t touch your retirement accounts. not a financial professional, so i don’t know what this would do about the house. maybe you could work out an arrangement with your dad directly, rather than getting a loan. look into getting your husband on disability. i have relatives with mental health issues doing the same. having been in really tough financial positions myself, I know how overwhelming it can feel. good luck.

    • Ashley says...

      Elizabeth I am sorry for your struggles. I wish I had advice for you. I just wanted to say I think it’s awesome you’re taking care of your husband and thinking of your father’s future. All the best. ❤️

    • Elizabeth says...

      Andrea, thank you! It’s one of those situations where I make just enough that I don’t really qualify for help/what Medicaid offered wasn’t any better than the insurance my employer offers for spouses, but come to think of it, my husband filled out those applications, so there’s a good chance he simply didn’t do it right. I appreciate the support and already feel better after complaining :)

    • Stacy says...

      That sounds SO rough, and I’m so sorry. I highly recommend following Dave Ramsey’s 7 steps and using YNAB for ev-er-y-thing. It’s going to take full commitment from you both and foregoing so much, but if your goal is really to pay off the loans and buy the house, that has got to be your singular focus. (DR/YNAB may make you suffocate at first, but once you get into it and can see your steady progress, you’ll start to be able to breathe again.)

      https://undebt.it/ is also helpful for strategizing if you’re juggling multiple interest rates (credit card, student loan, etc.)

    • t says...

      I don’t have any advice because this is not my expertise but I do know a couple in a similar situation who legally divorced. The one spouse declared bankruptcy and other spouse was able to qualify for more affordable healthcare.

      I don’t know anything about the legality or ethical implications of doing that but I wanted to share a solution that worked for someone I know.

    • Marika says...

      Have you considered bankruptcy? It really might be a life saver for you. We did it a few years ago and it wiped the slate clean of all but our student loans.

    • Emily says...

      Gosh, I don’t know. That’s a rough situation. I have consolidated credit cards through Money Management International. Debt management companies can’t usually help with student loans, but that might at least help you tackle that $16k.

    • Irina says...

      Elizabeth – my husband and I are in a very similar situation. I would love to get in touch “offline” because I think we could really support each other and perhaps exchange some tips and wisdom. Feel free to email me at bobeobi at yahoo dot com if you’d like.

    • Emily says...

      I’m sorry you’re in this situation. My heart goes out to you.

      I was in a situation with a mortgage I couldn’t afford (bought in 2006), maxed out cards and a husband who left me with 2 small children. I consulted a lawyer and my best course of action was bankruptcy. I know that some (all?) student loans cannot be discharged in a bankruptcy, but I would consult a lawyer. My employer offers a program that includes free consultation with a lawyer.

      It is now 8 years post-bankruptcy and I’m so glad I did it.

      I hope that you can come up with a plan that gives you some peace!

    • Alex says...

      A divorce for financial reasons could be good; at least one of you could work on getting credit. There is no lawyer who can create the security legally of a marriage when it comes to some things, but it may be worth it for you two. You could complete power of attorney documents in case something happened to one of you, and the other needed to step in… you could tell no one you were divorced and proceed as husband and wife…

      I am sending you my best!

    • Liz says...

      To piggyback on Andrea’s comment, your husband may also want to apply for ssdi, as well as Medicaid. Also – damn, that’s hard, and it sounds like you are doing amazing. Warm thoughts to both of you.

    • ML says...

      I wanted to second the idea of bringing in a roommate. It sounds like that could work well for you in a large and beautifully restored house.

      My parents rented out the basement apartment of their suburban house a few years after all the kids left home. It helps with high property tax payments, and also helps a bit with empty nest :). My last year of college I lived in a home owned by an lovely senior lady who is a friend to this day. Beyond passive income, the community aspect can be really nice too if you find the right match of people.

      There is also a national network of nonprofit financial counselors: https://www.nfcc.org/

      This sounds like a tough situation and kudos to you for seeking a solution that does right by everyone. Wishing you all the best.

    • Irina says...

      A few suggestions based on my family’s experience:

      – See if you can get a debt consolidation loan to lower your interest rate on your credit card debt. I got a Lending Club loan about 6 months ago for about 1/2 of our total credit card debt and we’re scheduled to pay it off in 3 years I believe. The higher monthly payments are hard but it feels good knowing that we are saving money on interest and will pay off at least a part of our debt sooner than we otherwise would have. With a low credit score, you probably won’t get a great rate but it may still be lower than the interest rate on your credit cards.

      – Find a roommate or two. We live in a two-bedroom house and rent out the spare bedroom year-round. This past summer, we actually rented out the other bedroom too for 3 months, and slept in a tent in the back yard. This may not be for everyone but my husband and I enjoy sleeping outdoors, our back yard has lots of privacy, and we live in an area where summers are warm and dry, so it worked great for us.

      – See if your student loan lenders will work with you to apply your payments differently so that more of the payment goes towards the principal.

      – Ask your husband’s healthcare providers if they offer a cash payment discount. Also, therapists sometimes offer discounts where each session will cost less if you buy a “package,” or “book 10 sessions get the 11th free” type of deals.

      – This is a bit risky, but do the math and figure out if it’s more cost effective for you and your husband to carry health insurance or pay for healthcare out of pocket and also pay the tax penalty. For us it was cheaper to stay covered, but it depends on your specific insurance and how you utilize it. Psychiatrists are expensive, so if your husband sees one frequently, then it’s probably cheaper for you to keep your insurance. On the other hand, if he only sees a psychiatrist, say, a couple times a year for brief medication management visits, then it might make financial sense to just pay for these visits out of pocket and see if you can buy his meds for cheap through your state’s prescription drug discount program and/or drug manufacturer patient assistance programs.

      – Consider joining a caregiver support group in your area. I attend one in the town where I live and it’s been an amazing source of peer support as well as helpful ideas from the facilitators. My group occasionally offers respite care so if your husband is open to it, he could hang out with other caregivers’ family members and receive peer support too while you attend group.

      – I know you said that you don’t splurge or treat yourself but see if you can find a way to do that at least sometimes. It can just be something small, like a pastry from your favorite bakery or a song you really want to download or whatever it is you enjoy. If you have absolutely zero money to spare, it can be something cost-free like a slow walk in the park or a nice bath or spending most of an evening curled up on the couch with a cup of tea and a good book from the library. You’ve got to take care of yourself to avoid mental and physical burnout.

      Sending warm thoughts. Please feel free to reach out if you’d like; I left my email address in an earlier comment.

  76. Sam H. says...

    Great post! I’m barely staying afloat with my student loans. The problem isn’t necessarily the loans though… it’s the ‘how do I save money on top of paying down my loans?’ I feel like all of my extra money (outside of entertainment, clothes, etc) goes towards loans. Will I ever be able to save for a house or a baby or that 6 month sabbatical to SE Asia I want to take?

    • Tori says...

      Do you really NEED the clothes you’re buying? Can you find free entertainment instead of paying for it?

    • Stacy says...

      Not until you pay off your debt. It only makes sense to save (more than a minimal emergency fund) if your interest earnings are much higher than the interesting you’re *paying* on the debt. So pay it off as quickly as possible, and then you can save all those thousands each month!! It will feel amazing!

    • Kat says...

      Yes, this! My husband and I are in the same situation. We manage the student loan, but can’t manage saving for anything else!

    • SB says...

      Listening to personal finance and minimalism podcasts helped me find stuff I could trim in my budget (without trimming so much I lost my mind) while working on paying down my debt. Stick at it, and work to find something to help motivate and encourage you when you’re feeling like you can’t stick at it another minute. You can’t afford everything but you can reach your big important goals.

    • Sarah says...

      If you’re paying off loans, you ARE saving! Paying off debt and saving both push your net worth in the same direction, so think of them the same way. AND the discipline you’re exercising now will serve you really well after your payoff date, because you’ll be able send that exact same payment to yourself and build a savings fund really quickly.

      I speak from experience. I was laser focused of paying off my law school debt for six years (didn’t save any money during that time), and then I used that same payment to build my savings. I now own my home and have two kids and am on track for retirement. None of that seemed possible when I was still buried under debt, but hang in there! The light shines bright on the other side!

  77. Caroline says...

    I paid off my $30k student loan debt last year (5.5 years after graduating). Best advice: double your payments. Pay as much as you can to get rid of your debt and live frugally until then. If you get a bonus, buy yourself a drink, then put the rest towards student loan debt. I love the ridiculously frugal advice of financial guru Mr. Money Mustache:
    “YOUR DEBT IS NOT SOMETHING YOU “WORK ON”. IT IS A HUGE, FLAMING EMERGENCY!!!…” like a “CLOUD OF KILLER BEES COVERING EVERY SQUARE INCH OF MY BODY AND STINGING ME CONSTANTLY!!!! I NEED TO STOP IT BEFORE I AM KILLED!!!” :) http://www.mrmoneymustache.com/2012/04/18/news-flash-your-debt-is-an-emergency/
    ^^ this changed my outlook on how I prioritize my money (spending v. paying off debt). Don’t buy a new car when you have debt – take the bus or walk.

    • Wow, I love that advice! Wish someone told me this when I was 18!

    • Tori says...

      Love Mr. Money Mustache!

    • Rachael says...

      Kind of. If your rates are super low -and you can afford the payments then it might not be in your interest to pay off everything at once. You could use that extra money to invest in real estate or a 401k and make a much bigger return than the rate you’re paying on your loans.

    • Gina says...

      Yes! This is what we did with 67K of student loan debt and payed it off in 4 years with 3 kids this past summer! My husband is a physical therapist, so he has a stable job but not one with a big income. We chose to live in towns with a low cost of living (doable because of his job), I did a year shopping ban (a la Cait Flanders) where I only bought absolute necessities (food, gas, shelter) and absolutely no clothing or fun purchases for myself or a full year (it was so hard and I learned SO much). I learned how to borrow and just be content with what I had. Making that final payment this summer felt amazing and made all the sacrifices worth it.

    • Kelly says...

      Totally agree!!! And the lessons in frugality that you learn via this lifestyle will serve you well, forever!

      While I agree that technically it might result in more money down the road to invest versus pay down low interest debt, for me personally it was tremendously mentally freeing to get rid of debt first. Then I had ample funds to invest.

  78. Rachel says...

    Yikes. I really like Paco and love reading her columns, but I think her response just goes to show how limited the options really are for those of us with large student loans. After 8 years in grad school (and a doctorate in engineering), followed by 4 years of post-doc fellowships with no 401k or other retirement benefits, I now owe more than when I graduated. I’m hopeful that PSLF ‘might’ work out but my family keeps sending me copies of horror stories from the Times – and that’s really scary. I live way below my means and work with a financial planner but spend half my income on debt repayment. It’s also really important to take investing into account and ‘pay yourself first’. Just paying off my loans will leave me with no savings, so I’m trying to balance savings/investments with paying off the loans – it’s all incredibly stressful.

    • Alex R says...

      I’m a public interest lawyer relying on PSLF. I have done my best to keep meticulous track of payments, ensure that I’m in the right payment, plan etc etc, but I’m still terrified that I will be denied at the end of the day. I started out with a lot of loans, and I’ve been paying the income-based monthly payment and the number has only increased in the 6 years since I graduated. UGH.

    • Anne says...

      Dave Ramsey’s baby steps might be helpful to you. He helps you prioritize your payments (debts, savings, investments) in a way that makes you feel a bit more in control. Can’t recommend his podcast enough. You’ll get through it! People call in with HORROR stories, and they talk about about they got through them. Listening helped me through some really dark and overwhelming times.

  79. Public Service Loan Forgiveness. Your payments are income based and the forgiveness period is the same as the standard payment period (10 years). I’m exactly 5 years through and I can now start to imagine the future/end of the student loan nightmare. My friends in for-profit have 20 years ahead of them.

    I agree with what Stephanie said…I’m not sure everything in this article is the best advice as student loans are a different beast; but some of the ideas are helpful.

    There should be more education out there about responsible student loans. Don’t take out a million dollars. At the same time there needs to be more understanding from older generations that college isn’t $3,000 a year anymore and you are literally handicapped in professional jobs if you don’t have at least a bachelor’s degree.

    Also – we should have public free university like they do in Europe.

    • Alex says...

      This program, Public Service Loan Forgiveness, unfortunately does not work as a lot of people expect. Sadie, I’m sure you are familiar with this but for others reading- about 1% of people who apply actually are granted loan forgiveness because of technicalities. A lot of financial advisors who claim to understand this process give misleading information that you’re on the right path when for one silly thing or another, you aren’t eligible. I think that could be devastating to someone who has been counting on the program, so I just encourage everyone to seek a real expert (not just a general advisor) and do some really thorough research. Sadie, best of luck!

      https://www.marketwatch.com/story/this-government-loan-forgiveness-program-has-rejected-99-of-borrowers-so-far-2018-09-20
      https://ifap.ed.gov/eannouncements/091918FSAPostsNewReportstoFSADataCenter.html

    • Laura says...

      PSLF is not always reliable

    • Natalie says...

      I am just starting PSLF as well, and I am optimistic about it. I read last week about how only 1% or so of people who are now eligible are getting their loans forgiven, and it seems like a consequence of not getting the correct info rather than the program denying people for no reason. Most people were not on the right repayment plan, did not have the right type of loans, did not make the right number of payments, or refinanced. All those things will disqualify you from PSFL. Loan servicers seriously dropped the ball on this – I don’t trust mine whatsoever.

      But if you are on one of the approved income-based repayment plans and do the employer certification while also tracking the number of payments on your end (making sure not to miss payments or try and pay more each month that required), then you should be on the right track. Assuming that the terrible awful Devos + Co don’t nix the program entirely.

      That being said, I might be unique in that I’m ok with the investment I made in my education – 100k for three degrees, including a doctorate. I would not have the job nor be in the place I’m in now without my education, so for me it’s worth it. Right now I’m trying to decide if I should pay the minimum for 10 years to get the forgiveness, or try to pay off the total balance before that time. But I realize I’m lucky to be able to consider these options.

      But seriously, ladies, don’t refinance your loans on a whim. You may lose out on federal protections as well as access to forgiveness programs. Do the research!!

    • Laurab says...

      I hope you qualify for the loan forgiveness program, but please have a plan b or make sure you have read ALL the fine print. As other readers have commented, it’s much much harder to qualify for than was advertised.

    • Jenny M. says...

      Yes! It’s tricky to get all the paperwork in and your loans set up right in order to be eligible, but definitely worth looking into if you’re in public service. I had to apply a couple of times and rejigger my loans a couple of years after I started repaying in order to qualify, but it will still be a huge boon to my family to have half of my loans forgiven… 5 years down, 5 to go!

    • Sadie says...

      To add to this great conversation: yes, it is important to know all the facts! My type A brain has had no trouble being 150% on top of how it works/what qualifies, but it is SO confusing and frustrating, so getting help is important if you are unsure. I am definitely fully informed and on the right track. It is helpful advice but let’s not assume that people don’t know better :)

      The people that don’t qualify tend to be people who’s jobs aren’t straight forward nonprofit/governmental or they don’t understand what they need to do to certify. I certify every year and THEY send ME the number of payments that THEY ARE currently counting, so there are checks and balances if you are doing it right.

      PSLF is absolutely a great path to pursue, but yes, do your homework!!

  80. ALJ says...

    I recognize that the final comment was made in jest, but it’s not funny and really should not be made, even as a joke. Further, as it’s written right now — it is almost a “wink-wink, nudge-nudge”, sarcastic comment — as though Paco IS telling the question writer that is what to do.

    Leaving the country does not eradicate your student debt, and just ignoring it can have serious implications: it will ruin your credit, you’ll lose access to American financial institutions, and more importantly — your family may end up stuck with YOUR debt. Vice has a nice piece about the potential implications — and that you can’t just run away from your debt, even if you leave the country: https://www.vice.com/en_us/article/qbx7dm/talking-to-american-debt-dodgers-who-moved-to-europe-to-avoid-paying-off-their-student-loans-111

    Cup of Jo, PLEASE take that part of the piece down. I don’t think I’m taking this too seriously. It’s not helpful, its bad advice that could be easily misinterpreted, and could get someone in serious trouble.

    • Joanna Goddard says...

      please be assured that it’s 100% a joke to lighten the mood, and i’m confident that everyone will see that. thank you so much!

    • danielle says...

      This comment is a little over the top. Paco is clearly joking. Fleeing the country is hardly a decision people will make as a result of an offhand comment in a blog post.

    • KS says...

      Your family CANNOT be held responsible for YOUR student loan debt. Not possible.

      But also, it was a joke.

      If someone flees the country because “a stranger on the internet told them to” then whose fault is that, really?

  81. Danielle says...

    I just paid off my student loans this year (takes a bow) and I couldn’t be happier! I paid them off almost 9 years to the day that I graduated. Love this advice, but I had a few things to add for anyone still struggling with this (I definitely did):

    — If you get a raise, or pay off your car, or find yourself with a bit more money per month, up your payments – even slightly helps. My brother paid off his car I believe at one point and then started doubling his student loan minimum to get them over with more quickly.

    –The way I did it (which isn’t always available for everyone, but just an option): I happen to get a bonus at work and my tax return in the same month – and I used most of that to pay off the remainder of my loans. Again, it totally depends how much debt you have and your situation but for me, it really helped to use that money I wasn’t necessarily counting on to survive/live (i.e. not out of my paycheck).

    • Joanna Goddard says...

      congratulations, danielle!!!

  82. Kate says...

    Being able to increase my payment a tiny bit at a time helped me out, probably mostly mentally, but it felt like SOMETHING. Every time I found somewhere that I could save $10 or $100 a month (Car got paid off! Cancelled Hulu! Adjusted my 401(k) to take home $15 more a month!) I applied that to my monthly payment.

  83. Stephanie says...

    I love Paco’s sense of humor, but I’m not sure this advice is all that helpful or hopeful. When I paid off my student loans, I did so following Dave Ramsey’s advice. I know he’s controversial but he’s also incredibly practical.

    Here’s what he says in a nutshell: list your debts from smallest to largest, put every dollar you can find toward the smallest debt (regardless of interest rate) and make minimum payments on the rest. As soon as you pay the first debt off, apply the money you were sending to that debt to the next debt on the list. You’ll gain momentum, which is super motivating, and if you give it all you’ve got you can totally reach your goal of paying off student loans and any other debts you’d like to get rid of. It totally works!

    • Allison says...

      I love Dave. His “baby steps” are also brilliant for personal finance. It’s nothing complicated (just work hard and spend less than you make), but it’s life-changing. People might think, “Well, duh, of course that would work but sometimes you can’t spend less than you make!” but really it is possible. I like to listen to his show and hear all the people who have gotten out of debt talk about how they did it. It shows people who are in debt how it’s possible to get out, and it’s just fun to listen to.

    • Laura says...

      That’s good advice, but it applies more to situations where people have multiple types of debt. Student debt tends to be mostly one extremely large sum.

    • Annabelle says...

      I understand the psychology of this, but it’s bonkers. And bad advice…..

      If a larger debt is at a much higher rate of interest, it’s actually costing you more in accrued interest to pay the small one off first. You should be indifferent to the “pockets” your debt is in, and just focus on the total amount.

      If you’re going to pay off things in any order it makes sense to pay down the most expensive debt first.

    • Stephanie says...

      It sounds bonkers but researchers found otherwise! I think it’s the fact that (for many people) motivation matters more than the math.

      https://www.cnbc.com/2018/03/01/the-snowball-method-is-the-most-effective-way-to-pay-off-debt.html

      And, yeah, student loans often come in one lump sum, but not always. I had multiple student loans by the time I graduated and this method worked well for me. And many people also have other types of debt (credit card, car loans, medical bills, etc) that they may like to unload.

      Of course the biggest point I wanted to make is that it’s totally possible to pay off your student loans and I hate for anyone to think otherwise. Even with one lump sum, the best way to get rid of student loans is to not to “pay what you can and hope for the best” but to buckle down, stick to a budget and make sacrifices temporarily so you can get rid of your debt as quickly as possible, if that’s what you really hope to do. :)

    • Betsy says...

      I started listening to Dave Ramsey recently. The callers and advice really motivate me to save more, spend less and pay off my student loans more aggressively.

    • Stacy says...

      @Annabelle: you can calculate the different methods here
      https://undebt.it/

      I was very anti-snowball method even while following Dave Ramsey’s methods so I went with the avalanche method…but it only saved me $71. Hahaha

    • Katy says...

      I’m so glad someone mentioned Dave Ramsey in the comments. My husband and I are currently working on paying down his $40k in student loans using Dave’s Snowball method and it’s working! We started last month and will pay off all debt–including a car loan–in 10 months, using his principles. I don’t necessarily agree with Dave’s politics, but I listen to his podcast daily and have learned SO much about how to handle my personal finances and how to successfully pay off debt.

  84. Thanks for the advice Paco!! :D
    *buys a one way ticket to Mexico*

  85. Princess Hajjar says...

    I laughed out loud at that last bit of advice! My dreary Wednesday really needed that. Thank you Cup of Jo.