This will be a relatively short post on the “suffering” phase of your student loan process and will focus on some personal experiences
My student loans were bought and sold at least 3 times during my college career and I ended up paying 4 different lenders different amounts, on different dates, every month. The 4 lenders were Bank of North Dakota, Sallie Mae, Great Lakes and the North Dakota Student Loan Service Center. That was 4 different terribly designed websites, with at least 8 different interest rates, making it nearly impossible to keep track of my student loan situation. To figure out my total student loan debt every month, I needed to manually go to each website and do some math. Each site also had its own policies and procedures on processing extra payments and late fees that added extra confusion.
Failed attempt to Consolidate
First attempt at consolidating my student loans was a frustrating process, I contacted the normal big name banks and explained my situation, they informed me that they were “not allowed” to give a lower interest rate out for loans backed by the federal government (high percentage of my loans since I used FAFSA). After this I basically quit trying and kept paying multiple lenders for another year.
Entry Level Days
This was the worst, I was just starting to get regular paychecks from my first professional job and was having to pay over $750 a month to the many lenders listed above. I did not have my own house, but was paying $500 a month in rent (since I refused to move back in to my parents house out of principle). I was not making good money, looking back I am not even sure how it all worked out, minimal payments were the only thing I could handle and the principal balance was not dropping. One of my repayment terms was 20 years, I would have been in my 40s with student loan debt. That is not a good feeling.
Approximate payment range for student loans $20,000 -> $70,000 would be $200 to $800 a month
Average starting salary for college graduates: $45,478 (National Association of Colleges and Employers)
That is 5% to 21% of the average starting salary, before TAXES!
When I had a high principal balance on my loans I was racking up close to $5,000 a year in interest, but was only allowed to deduct $2500 for my tax return. Sallie Mae services loans on behalf of the US government, if they are going to set the rates (to high) they should at least let me deduct the full amount.
Over 80K in student loan debt after completing my MBA right after my undergrad (2010 was not a good time to find a job in my field) with interest rates ranging from 5.75 to 8.25% (had one over 10% but it was only for $2500). The average was 6.38% and repayment plans ranged from 10-20 years depending on the lender. It was seeing $5,000 in interest that was the tipping point for me to actually take action and do something. Setting that amount of $ on fire was unacceptable especially with my low starting salary. If I would have stayed on my original repayment plan, I would have payed over $28,000 dollars in interest over 10+ years.
In the next post, I will talk through all the steps to take control of my student loan debt and walk through my 2 consolidations (1 semi-successful, 1 amazing)
Action Items: In preparation for the next article, get a list of all your lenders, interest rates, balances, payments and loan term under your current payment plan. I may have missed some stages above, please post any other pain points below!