I borrowed $58,000 in student loans, but years later I owe $96,000 and I'm still not sorry I did it

Melinda Sineriz

Sep 23, 2019, 21:57 IST

I borrowed $58,000 in student loans, but years later I owe $96,000 and I'm still not sorry I did it

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I have almost $100,000 in student loan debt, even though I only borrowed $53,000 for my undergraduate and graduate degrees together.
About 20 years post-undergrad, it's clear to me that my loans grew that much from a combination of my poor financial decision-making and a high interest rate.
I have affordable payments now, and no regrets - I did the best I could at the time, with the information I had.
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I graduated from Miami University (the one in Ohio, not Florida) in 2000 with $17,000 in student loan debt. Today, that loan has grown to $53,106.35. Yes, it's still the same loan, almost 20 years later.

In my infinite wisdom, I went to graduate school six years ago. That loan is $43,222.

I have a total of over $96,000 in student loan debt, and I don't regret it.

Why?

I needed to pay my bills

When I graduated, it was before the 2008 recession and before moving back in with your parents was standard for recent grads. I needed to make it on my own, in my first apartment and with my first job.

I had no idea how to budget. My parents never talked to me about money or how to manage it, and the school system only taught me how to write a check and balance a checkbook. Two skills that are almost completely useless today with online billing and banking.

My $17,000 student loan ($25,000 in 2019 dollars) was a low priority. It was, rightfully, a lower priority than paying my rent and making my car payments. It was also a lower priority than dining out, which remains my main budgetary sin.

I made sporadic payments and tried to keep up. Once I moved to Washington, DC (one of the priciest cities in the country) and started working a commission-only job (I know, I know), I got behind. Really behind. As in student loan default.

It could have been worse, if I hadn't made a plan to rehab my loans

What I didn't realize is that student loan servicers offer a lot of repayment options. They only do that if you take the time to talk to them, though. At some point around 2006, I was smart enough to pick up the phone and talk to the person on the other end. We developed a plan for me to rehabilitate my student loan to get it back in good standing, and I would pay $100 per month.

It took a year to rehabilitate my loan, and then it was sold to my current loan servicer, Nelnet. In the years since, I deferred my loans for a year while I was going to graduate school and for the three years I was teaching. I also took a forbearance when I needed to, like after I got divorced and when I moved across the country and had trouble finding work.

With deferments, your interest is usually waived during the deferment period. With a forbearance, the interest is added to your loan at the end of your forbearance. Until last year, Nelnet offered up to 60 months of forbearance over the life of your loan. Then they cut that number to 30 months. I've used 50 months, so that's more than four years of interest that got added to my loan without paying down the principal.

And that's how that loan ended up with a $53,000 balance on my undergraduate loan. That, and the 8.125% interest rate.

I've been paying on both loans steadily over the past few years, though, even since I started freelance writing. I've been able to do that, despite the high balances, due to income-based repayment.

Income-based repayment arrived late, but I've taken advantage

When I graduated, there were a few repayment plans you could choose from. There was the standard 10-year plan, an extended repayment plan for up to 25 years and a graduated plan, which was 20 years with gradually increasing payments. All of these asked me to pay more than I could when I first graduated.

In 2009, income-based repayment plans were introduced, and that has been a game-changer. You can choose from four income-based options now, and your payment is based on a percentage of your discretionary income. You pay for 20 to 25 years, depending on when your loans started (age 25 for me). After that, the rest of your balance is forgiven.

For me, this has been especially helpful when I had changes in income. You can use your tax returns for calculation purposes, or you can submit documentation of your current income. I've done both. When I changed jobs, I would re-certify to ensure my payments accurately reflect my income.

Since I have two loans, I re-certify at two different times. Right now I pay $180 on my Nelnet loan ($53,000 balance) and $213 on my Great Lakes loan ($43,000). I expect the Nelnet loan to increase when I re-certify in December. I'm paying less than 1% of my balance each month, but it adds up.

I made the best decisions I could at the time

I made the best decisions I could at the time, and I might have my student loan debt forgiven before I qualify for Social Security (if Social Security still exists in 25 years). I invested in my education, which is priceless both in terms of what I learned and the friends I made. I have about 20 years of payments left, and even if my payments stay the same forever, I'll have more than repaid what I originally borrowed.

I borrowed $17,000 ($25,000 adjusted for inflation) for my undergrad degree and $33,000 for my graduate degree. That means I borrowed $58,000. I pay about $5,000 per year toward my loans. Over 25 years, that adds up to $125,000.

I think we're even.

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