This post may contain affiliate links. Please see my disclosure to learn more.
Almost a year ago, I wrote about refinancing and leaving IBR for good. We hadn’t refinanced up to that point because we were not sure if we had the frugal muscles and the mental and emotional strength to tackle my student debt, and we knew that refinancing would mean that we could never run back to the Loan Forgiveness Program if we ever hit a rough spot. Once you refinance, you are no longer eligible for the Loan Forgiveness Program. A pro of the Loan Forgiveness Program is the flexibility to revert back to a minimal payment of a small percentage of your income when times are tough. Meanwhile, you also having the choice to pay back the debt aggressively if you are able. If you refinance, well, it’s either you make those whopping payments (which in our case is $6,500 per month) or end up in mad doo-doo if you fail to do so.
After a year of paying back debt aggressively, it was obvious that we were BOTH in it for the long haul! We were ready and capable of getting these loans out of the way. So we said, “SCREW IBR, let’s refinance!” The worst part about IBR is the high interest percent rate of 6.8%, which meant that about half of our monthly payments were going towards interest alone! YUCK. This is the main reason why we wanted out.
We were very serious about the whole thing and even started researching refinance options. The list of lenders that we found included the following:
We got quotes from every lender and were about to pull the trigger, but we didn’t.
Why? By some stroke of luck, we went down the rabbit hole of purchasing our first property and held off on the refinancing of the loans until that was secured. However, once we had settled into our new home, Mr. Debtist’s start-up company went through some tough times and Mr. Debtist’s salary went down by 50%! At the time, this seemed like terrible news, but we were actually lucky in that we hadn’t refinanced yet and life had the opportunity to teach us a lesson: that maybe the flexibility of Loan Forgiveness Program was essential. With a loan this large, the flexibility of the Loan Forgiveness Program makes our journey much more comfortable! Shortly thereafter, I had my third stroke of luck. I spoke with Travis Hornsby of Student Loan Planner. If you have not already interviewed with him and you have a lot of student debt, I would just like to say that although his calls are pricey, they are WORTH it! You’ll soon see why!
In this interview, Travis informed me of a way to improve our aggressive loan repayment strategy. I learned that by being in IBR, we were missing out on an opportunity that another loan forgiveness program offered. Which is why it is important to know the differences between IBR, PAYE, and REPAYE! We learned that REPAYE helps our significantly by covering 50% of our interest every month! Just by switching to REPAYE, we were able to save over $7k in 8 months (find out here).
Since REPAYE covers 50% of the interest, it is as if we refinanced to get a better interest rate. The interest that we have still yet to cover with our payments come out to be about 3.4% of the loans. I like to think of this as a way to get a lower interest rate while still keeping the flexibility of loan forgiveness. Even though Mr. Debtist’s job situation has stabilized, we still never know what life may throw our way. Being able to fall back on those small payments give us a lot of peace of mind. Meanwhile, we are able to funnel even more money towards paying down principal! It’s the best of both worlds.
I think that Travis saved us from making a decision that could put us in a bind during tough times, and he also helped facilitate our loan repayment journey. This is why I think it is so important to talk to someone who can really guide you find the most optimal path for your loan repayment journey, especially when you are talking about student loans this big. If you’ve been thinking about talking to someone but are not sure if it will even help, I bet you Travis is your guy. Schedule your consult with Student Loan Planner if you are feeling lost or simply looking for loan repayment alternatives.
In short, my advice is this. If your student debt is less than two times your salary, then maybe refinancing is a doable option. It won’t be easy, but it would be doable. However, tread with care. If your debt is more than two times your salary, highly consider sticking with Loan Forgiveness, even if you have plans to attack it aggressively. Only because life is a mess and would take any chance it has to throw you a curve ball. Ultimately, I truly believe that everyone can find a path that is in line with their lifestyle and life goals.
When we started, we were told that paying down our loans in ten years with our salaries was impossible. But deep down, I knew that we could do it and that it would be the best path for us. So we set a plan to pay it down in 9 years. Before we talked to Travis, I was hoping to escalate the plan even more and pay it back in less than 9 years. After we made the change to REPAYE, I now have hopes to get rid of it all in 7 years or less. We are implementing a number of side hustles and budgeting tactics that are speeding up progress! I can’t wait to see how much more we could do. Thanks for being here, supporting our journey, and following along.