Are Student Loan Interest Rates Killing Your Progress?

By Zack | Budgeting

Jun 15

Are Student Loan Interest Rates Killing Your Progress?

We’re kicking off a new interview series about debt, where we seek out the best stories and ask questions that will be insightful and inspiring to you.

Why? Because when we hear others stories, we learn. We get inspired. And those stories challenge our thinking.

Our first story comes from Rebecca Forst. We spoke with her about her passion for becoming debt free.

headshot 1 - Are Student Loan Interest Rates Killing Your Progress?

Photo: Rebecca Forst

This story is unique and highlights an important aspect of managing your student loans, specifically your interest rates.

Background: Rebecca started with $109,000 of debt from earning undergraduate and graduate degrees, but because of her interest rate, her total has gone up to 121,000 in just a few years.

It takes courage to be transparent about money. I am incredibly thankful Rebecca is letting us share her story because it highlights not only her dedication to face her debt but showcases the importance paying attention to interest rates on loans. 

Rebecca, at what point did you decide to start focusing on paying down your debt so quickly?

When I came home from my year abroad getting my master’s degree in August 2014 was when I knew I needed to attack my debt. I was oblivious to how interest rates worked.

In my head, I had a certain amount of student loan debt from my undergraduate and graduate student loans.When I realized how much more I owed than what I had taken out was a punch in the gut.

Sadly, it wasn’t until December 2015, just over a year after coming home that I was able to get a decent paying job making $40K a year.

Before that, I was only able to make minimum payments on my loans and made little to no progress.

What was the last straw for you that made you want to take action?

The amount of interest I owed and how little my principle was coming down every month stressed me out.

Nearly 2/3 of my payments were going to interest alone! I began to wonder how I was ever going to be able to pay off my debt.

It was about the time I started my new job that I found a program online called You Need a Budget (YNAB).

It helped me set a budget for the first time in my life.

I was able to see how much I could put towards debt each month while still paying the rest of my living expenses.

It was a real motivator.

Related: Doing This could Save You Hundreds A Year on Student Loan Payments

What’s your advice to others that have large amounts of debt?

Honestly, my advice is to set reasonable goals and reward yourself when you get there.

It would not have been practical for me to set a goal of paying off all my debt in 2 years.

I set a goal for each year on how much I will try to pay off.

In 2016 my goal was $15K, which I hit! Now in 2017, it is $13K because I have extra deductions from my paycheck, unfortunately.

I also gave myself mini-goals.

I did something nice for myself when I hit my $5K, $10K, and $15K goal. It was nothing crazy. A nice dinner out or a small increase in my monthly fun money for a month helped me stay motivated.

equator - Are Student Loan Interest Rates Killing Your Progress?What are your goals once you become debt free?

Travel! 100% my goal is to travel as much as possible. I am a travel addict.

I will probably still live a frugal life after I am debt free, but travel is the light at the end of my debt tunnel.

How has this impacted your life overall? Has the sacrifice been worth it up to this point?

It has had a pretty significant impact on my social life in some ways, and in other ways, it has been fine.

Luckily, at my age (30), my friends like having social gatherings at home. I can buy cheap food and wine to take with me to help stay on a budget. The hardest part is when people what to go out to Happy Hours, dinners, or other events.

It’s hard to justify spending money on these things when I have so much debt.

I do give myself a monthly “fun” allowance, so I don’t feel like I am missing out altogether. I also try to suggest more frugally based fun when possible!

The sacrifice has been hard, but I know it will be worth it in the long run.

Sometimes you have to say no to fun now, to be able to say yes to your future self.

Related: Do this before paying off your student loans

 

What’s been the most rewarding part of this process for you?

The most rewarding thing is that I had a five-year car loan that I was able to pay off in a year! It is a huge relief not to have a $225 monthly payment.

I can now use that to snowball into my student loans, which means I am one step closer to financial freedom.

Have some things made you second guess your decision to try and pay off all your debt so quickly?

No. It will be hard for now, but it will be worth it in the long run. I can live without buying extra clothes, shoes, or other luxuries.

I set aside money each month so that once or twice a year I can travel. This is non-negotiable.

It helps keep me motivated and on track. I have also taken a job I never thought I would (a desk job) because it will help me pay my debt faster.

I use the travel as my work and debt journey reward. Plus, once my debt is paid off I can travel as much as I want.

How has this process changed your view on money? 

It has made me realize that I need to pay with cash/debit card whenever possible and that I need to stick to my budget.

I don’t want my debt to be increased with credit cards or interest.

I need to think carefully about my wants versus my needs to be able to stick to my debt plan.

What is your idea of an abundant life? How would you define freedom? 

I am in over my head with debt, but I have a plan. I have family and friends who love and support me. I may not be rich with money or possessions, but I am rich with happiness.

I already have an abundant life because to me this just means happiness.I define freedom as being able to do what I want (within reason).

I want the freedom to be able to travel when I wish without having to worry if that money should have gone to my debt payments.I hope that once I am debt free, I will have this freedom.

Given a choice, would you still go to college to get your two degrees knowing the process you’re going through now?

I would still go, but I would do things a bit differently.

I had a job throughout college, but I never put any money towards my loans.

If I were able to go back, I would at least pay my monthly interest so that my loans wouldn’t balloon out of control when I finished with school. I accept my debt but the interest is a killer.

 

Refinancing student loans to reduce interest rates

One of the ways we recommend others get rid of their is to consider refinancing.

I recommend considering refinancing your student loans with LendEdu.I wish we would have known about LendEdu earlier because it could have saved us a ton of money. Oh well. Now we’re sharing it with you.

If you have ever considered refinancing your student loans, we highly recommend you check out LendEdu

One of the best ways you can destroy your debt fast is to refinance to get a better rate. That’s what LendEdu does for you.

LendEdu has saved borrowers nearly $1.5 million in interest!

LendEdu’s model is designed to work for the consumer. They do this by making private student loan companies compete to earn your business by providing YOU the lowest rate possible.

You’ll get the best rates, and they are often lower than other rates you will get with other popular federal refinancing companies.

The best is that LendEdu is FREE, fast and straightforward.

The entire process can be completed in 3 minutes. You don’t have to pay a dime, and your credit will NOT be impacted. Sounds cool, right?

Click here to use this link and get your free quote on refinancing. You have nothing to lose. If you want to read more about the process, I wrote a step-by-step guide here.

About Rebecca

tree 1 - Are Student Loan Interest Rates Killing Your Progress?Rebecca is a newly engaged 30-something that lives just outside Baltimore, MD. She has a BS in Wildlife Studies and an MS in Conservation and Biodiversity from the University of Exeter in England. She is an avid wildlife lover and travel enthusiast. He has been a veterinarian and a zookeeper in her past lives before becoming a research assistant at a university.

Rebecca has two blogs where she shares her passions for personal finance and travel. Her travel blog is Wanderlust & Wildlife, and her personal finance blog is Surviving Student Loans

Do you have a cool story you want to share on the blog? Leave a comment below.

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About the Author

Zack and his wife started FreeUp to help share their passion for personal finance with others. He is the primary writer for FreeUp, where he discusses all things personal finance, entrepreneurship, and life. Click the icon to the left to follow him on Twitter and Facebook.

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