Welcome to the world of health and wellness entrepreneurship, new graduates. Once you’ve had a chance to celebrate your accomplishments and are starting to look to the future, it’ll be time to start thinking about repaying student loans.
Student loan debt in the United States climbed to $1.57 trillion in 2020, so if you have student loans, you’re in good company. But just because you’re in good company doesn’t mean it feels good to have student debt. And while secretly hoping your debt will just disappear is a good distraction technique, it’s not a great plan for actually tackling debt.
Luckily, you’re not totally without options. Certain federal programs, private refinancing options, and even just shifting your mindset can help with the emotional side of carrying debt and make it feel less intimidating.
Terms to Know
Before we dive into options for repaying student loans, there are a couple basic terms to know.
Variable interest rate: An interest rate that can change over the life of the loan
Fixed interest rate: An interest rate that stays the same over the life of the loan
Loan servicer: The bank or lender who provides loans
Principle: The amount of money originally borrowed
Interest: The amount of money added to a loan as the cost of borrowing money
Find Out How Much Money You Actually Owe
Now that we’re all on the same page when it comes to the jargon, it’s time to get down to business. To create a concrete plan for repaying student loans, you first have to know exactly how much money you owe.
If you have public student loans, the best way to do this is to visit StudentAid.gov. Create an account or log in. You’ll be taken to your dashboard where you’ll see how much your student loans total, who owns the loan, and how much interest vs. principal you owe. There are also some great resources available on the Student Aid website, including a calculator that simulates when you’ll pay off your loans depending on how much you want to put toward them, information on loan consolidation, and more.
The process is similar for private loans. But in both cases, if you’re not able to get a clear picture of your debt from looking at their websites, don’t be afraid to get on the phone and speak to a representative. Sometimes it’s helpful to talk through any questions you have in real time, and the reps may have more information or advice as well.
Options for Repaying Student Loans
Once you have a clear idea of how much you owe, you can start forming a plan to repay it. There are a couple techniques you can use, depending on your situation and comfort level.
Debt snowball This method involves paying down the smallest total amount of debt first, and working your way up, regardless of the interest rate. This is sometimes best from a psychological perspective, as it helps you build motivation and momentum. Each paid-off loan creates a reward for your brain that makes it easier to keep moving forward.
Debt avalanche In contrast to the snowball method, the debt avalanche involves paying down the highest interest rate of debt first, then moving onto the next highest interest rate, regardless of the total amount. If your focus is on the numbers, and not own your own personal motivation, this method might work best for you, as you’ll save the most money by paying off your highest interest debt first.
Income-based repayment This option is only available for federal student loans, so make sure to check if your loans qualify. Income-based repayment sets your monthly loan payment at an amount deemed “affordable,” and usually ranges from 10-20% of your income.
Public Student Loan Forgiveness
If you have federal student loans, you may qualify for Public Student Loan Forgiveness (PSLF). This program forgives the balance on your federal student loans after you have made 120 monthly payments under a qualifying plan while working full-time for a qualifying employer.
It’s important to note the “qualifying employer” part of this program. Even if your loans are federal, you must work for a federal, state, local, or tribal government or for a not-for-profit organization to qualify for the PSLF program. You also must have direct loans, repay under an income-driven repayment plan, and make 120 qualifying payments.
As a health and wellness provider, you may meet those requirements, which means PSLF might be a good option for you. However, it also may mean that you have to work for someone else for 10 years (to make the 120 qualifying payments), which may not be the direction you want your career to take.
If you don’t qualify for PSLF or you aren’t interested in working for someone else for ten years to meet the criteria, there are many different ways to get help repaying your student loans. When I checked the Student Loan Hero database there were options for financial help ranging from physicians who work in rural areas, to state-specific help for folks who live in Florida.
Refinancing is when a different private lender pays off your existing loans and gives you a new loan with new terms. They make money on “buying” your student loans because they’re able to earn money from application fees, late fees, and on the interest you pay them. As with anything relating to finances, there are pros and cons to refinancing your loans, and you’ll need to carefully evaluate your own situation to see if it makes sense for you.
Public Loans Options
If you refinance your public loans, you can get access to lower interest rates, which could result in lower monthly payments and a shorter repayment period. It can also boost your credit score, if you’d previously fallen behind on making on-time payments but a new, lower rate was more doable in your budget.
However, in general, I don’t recommend private lender refinancing for public student loans. If you refinance your public loans with a private lender, you’ll lose access to some of the benefits of public loans, like income-based repayment, any federal mandates that freeze interest rates or forgive loans, and PSLF.
For federal student loans, you can look into loan consolidation through the federal Student Aid website. Consolidations will allow you to make one monthly payment to a single loan servicer instead of multiple payments to multiple servicers. At the time of this writing, there’s no application fee or cost to consolidate your student loans through the Student Aid website.
If you have variable interest rates, consolidation can be a great option, as you can lock in a fixed interest rate—which will make your repayment schedule more predictable. However, it’s important to note that it’s not a good option if you’re in the process of seeking PSLF. If you consolidate during that process, you’ll lose credit for any qualifying payments you’ve made towards that forgiveness.
Private Loan Options
If your loans are already with a private lender, refinancing might be a good option for you. You’ll get the same benefit of only needing to make one payment to one lender as opposed to multiple, and you might be able to find a lower interest rate in the refinancing process.
When you’re shopping around for a refinancing company, you should look hard for the lowest interest rate. A higher credit score will also be helpful when it comes to qualifying for lower interest rates, but you might be able to find a lower rate than your current one even if your credit score isn’t as high. You should also compare application fees, late fees, and other similar details when choosing a refinancing option.
Shift Your Debt Mindset
There’s no question that student loan debt in the United States is problematic. And sadly, without debt or higher education reform, we have no choice but to pay these loans. But rather than embody the belief that debt makes you a “bad person,” I encourage you to think instead of the things your student loans afforded you. Maybe your student loans gave you the opportunity to go to the program of your dreams, study abroad, or get the degree that led you to a career that’s fulfilling to you now.
Despite the weight that student debt is for many people, shifting your mindset can help it feel more manageable. Practice gratitude for new opportunities, and then arm yourself with as much information as possible. Make sure you reach out to the agencies and companies who hold your debt and make a plan for repaying it. Avoiding your debt will only make you stressed and anxious in the long run, but by being proactive and forming a plan that works for your circumstances and means will make it seem a little less daunting.
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