The Low Down on Student Loans

I have been binging on Game of Thrones a lot recently (do not worry -- no spoilers here!), I had not joined the bandwagon at the beginning so there is a lot of catching up to do. It can get pretty confusing sometimes too, and I have to stop and ask about the storyline or the character's situation and how that is significant! And then, just when you think things are going one way, the storyline throws a curveball and all of a sudden the two most unlikely characters are on a journey together across the land/sea/forest. Sometimes things are not always as you think they are. One minute you feel like you are on the path to being debt free from student loans only to realize those pesky student loans will not be going away for a while!

The other day I was thinking about how much money I am putting towards my student loan payments each month, and feeling that I am on the road to repayment. Then, I put my calculations to the test. I calculated the balance of my student loans, how much money I really am paying each month, against how long I have left to pay; and the numbers were not adding up as I hoped.

Here I thought I had everything set up the way I wanted when I graduated, for both undergrad and graduate school! So, why is it that I am just now realizing how long it will actually take for me to pay things off?

This stops today.

I stayed up way past my bedtime that night and recalculated all of the numbers to my liking. I used the Dave Ramsey debt snowball effect, and will start cutting down the amount of time it will take to pay back my student loans!

I know I am not the only one who is working this out. I know that there are many out there who also have student loans they are paying back. If that is the case, then why does this topic feel hard to discuss? I think we need to get beyond these tough conversations to break through our student loan debt together! So just as Game of Thrones has all of their characters on a massive number of journeys, will you join me on this student loan debt journey?!

I think we have to ensure that we understand what we are really dealing with. There are several different types of student loans (and we won’t even get started on the parent loans out there as well!). When we fill out the FAFSA form we might be thinking that they are offering us a free money. The FAFSA does not offer us free money… The FAFSA allows students access to Funds from the federal government that has been earmarked for an investment in their education. This is all very fine and dandy, and it is definitely an investment into your future… But, it comes with a price!

The types of loans are important to understand. I will share content from the Federal Student Aid website that lists the loans out:
“What types of federal student loans are available?
The U.S. Department of Education has two federal student loan programs:

  • The William D. Ford Federal Direct Loan (Direct Loan) Program is the largest federal student loan program. Under this program, the U.S. Department of Education is your lender. There are four types of Direct Loans available:

    • Direct Subsidized Loans are loans made to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school.

    • Direct Unsubsidized Loans are loans made to eligible undergraduate, graduate, and professional students, but in this case, the student does not have to demonstrate financial need to be eligible for the loan.

    • Direct PLUS Loans are loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid.

    • Direct Consolidation Loans allow you to combine all of your eligible federal student loans into a single loan with a single loan servicer.

  • The Federal Perkins Loan Program is a school-based loan program for undergraduates and graduate students with exceptional financial need. Under this program, the school is lender.
    If you have questions about Perkins Loan eligibility, please contact your school's financial aid office.”

Source: https://studentaid.ed.gov/sa/types/loans

So, in order to understand what we are dealing with, here are my top 3 tips:

  1. Pay attention to the fine print - Sometimes it is hard to identify what the APR is. Make sure you take note of that from the beginning. You always want to know, with any type of line of credit, what type of interest rate you have, and how it is calculated.

  2. Understand the type of student loan you are receiving - See the link above and make sure to read through it until you have an understanding of the type of loans you have.

  3. Start paying interest while in college - Most loan companies allow you to start paying interest while you are going to school! Take advantage of this as much as you can. Remember, every little bit helps!

Most importantly, I would encourage everyone who is thinking about college, anyone who is in college, and those who are paying back their student loans to do their own research as far as the types of student loans they have, how much they are paying, and how long it will take them to pay back their student loans. Do not be afraid of this topic. There needs to be an understanding of where your money is going and how long it will take you! As always, if you are in doubt of your own calculations, I am a phone call away and always here to help!

Edrina Calderon