There is a lot to talk about when it comes to student loans, so today I’m just going to speak from experience.

I’m going to unwrap all the mistakes I made and what to do about them, as well as how to do it the right way! 

When I graduated high school, I could attend college for free. I lived with my mom and fell under her W2s. My biggest mistake was getting married 2 years later. This pushed me under my now ex-husband’s W2 and I was no longer eligible for free school.

I had to take out a loan to finish my degree, so I took out $25,000 to cover my last 2 years of school.

When I graduated, I got a job that paid $10/hr. I felt like I couldn’t pay the $450 every month, so I chose to defer my loans. I break this down further in this video, but I did not do it the smart way.

I chose to defer for 2 years and then I chose to follow an income-based repayment plan. This dropped my monthly payment to $180. If you are working with government student loans, call them because they will do their best to work with you in some way. 

Fast forward and I get my credit report only to see that I still owe 104% of my original student loan balance.

How does this happen?

Interest from the deferment had tacked on and was now embedded into the principle. At this point, I realized I had to take action. 

I did some digging and found that I was paying between 6-8% interest on my loan. At this point, I had amassed $37,000 in debt when I originally only took out the loan for $25,000. That debt grew and it was time to had to handle it.

I did all of my research and learned how to refinance my loan.

I used a site called Credible where they work with multiple lenders and use your info to do a soft pull. They then give you the pros and cons of each lender for your financial situation. It’s a good idea to apply for 3 different ones as you may not get approved. 

After applying to a lender I thought I checked all the boxes for and getting denied, I decided to dig just a little bit deeper. I found out that even though I had increased my credit, they denied me because I had overdrafted my account in the past. These things happen! I was approved for a loan at around 3.5% with Citizen and I moved forward.

Once I made some other financial adjustments, I chose to start putting my savings into an IRA.

Eventually, my account grew so that I could either pay off my student loan or let this account keep my money and let it continue to grow. I was able to run the numbers and see that since my interest rate was low and the market was doing well, I was spending less in interest and making more leaving that money in the market!

I keep that money as a cushion that I can use just in case I need it, even though it is technically labeled as the money for my student loan. This isn’t the safest option, the market could go down 40% tomorrow and I could have to re-save all of that money. I feel comfortable with this level of risk and have enough confidence in the market cycles to leave my money in my IRA. This may not be the case for you!

Everyone’s journey to financial freedom looks a bit different, and that’s totally fine!