GOODBYE Student Loans

Starting amount: $122,000
Current amount: $0

A few evenings ago, I was doing a mobile deposit for a check, and when I logged onto my bank account, I saw my loan repayment amount deposited: +18,164. It only took 6 weeks from the time I sent my verified documents to when this money showed up in my bank account. The first year of my IHS contract, it took 6 full months. Needless to say, I was quite surprised to see the deposited amount, and also ECSTATIC.

If you read my last blog post from February, I detailed how the Indian Health Service loan repayment program works, i.e. an initial 2 year contract with $18k each year, with the option to renew annually after. Once the money is received in your account, you can choose how and when you want to spend it. Personally, I prefer to lump sum the payment all at once, while others will divide it into monthly payments. As long as you can prove the $18,164 went towards your loans, the Indian Health Service is happy.

So the moment I have been waiting for since November 2018, or more realistically probably since I first received my grad school loans, had arrived, and I was about to be debt free.

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About one month before COVID hit in early 2020, I refinanced my loans from Nelnet, a government servicer, to SOFI, a private loan lender. My average interest rate between 4 federal loans was 6.53%, and after refinancing into one big loan, it dropped to 4.2% on a 5-year plan with a monthly payment of $1583. With SOFI, I was averaging 11% of my payment going toward interest, as compared to 35-40% previously with Nelnet.

However, because I chose to refinance, I was no longer protected federally, such as with forbearance and other qualifying loan forgiveness programs. Thus, when COVID hit and loan payments were postponed (and still are through Oct 2021), I was not eligible. I had to keep making monthly payments. Luckily, my position is secure and this wasn’t an issue for me. So I kept paying them down about $2k per month.

During the springtime, I started to consider talking to a financial planner. After reading some blogs and books, I had the basic roadmap to FIRE but needed help structuring mine and Zeph’s finances so we could envision how to carry out our financial independence, retire early journey; well, partial-FIRE as I mentioned in my last post. After searching the XY Planning Network, I came across Jake with Experience Your Wealth. After a few meetings with him, Zeph and I felt solid about our finances moving forward, how to structure our investments, and how to look at our short and long term goals financially and personally. As a certified financial planner, Jake helped us understand our flow of money and how it could best be spread out in different buckets according to our goals. But he is not a financial advisor who manages our money for us. Because we invest and manage accounts on our own, we avoid almost all fees, and these fees add up hugely over time. I couldn’t recommend using Jake more 🙂

In regards to my loans, Jake presented an idea I would never have thought of: refinancing again. With COVID in full swing during summer 2020, interest rates were incredibly low. So I took the plunge and refinanced with Earnest in August, this time a 3.01% interest rate, with a $1248 monthly payment over a 5-year term. (There is no penalty or fee for paying off early/more frequently/more than the monthly amount). I am still unprotected from federal forbearance, but honestly I just had more motivation than ever to pay them off after working with Jake. He even presented me a plan with how I could be done paying off my loans in just over a year with a month by month outline. I was mind blown. This guy was good.

Soon after refinancing with Earnest, I received my first installment of my IHS repayment. I immediately put the bulk $18,164 into my loan as well as another big chunk of money that had more or less been sitting in my savings account (not emergency account) not accruing interest or serving a beneficial purpose. BAM, I was down to sub 55k and feeling good. As the months went on, I followed Jake’s plan for me and put 60% of my post-tax income toward the loans, with only an average of 4% of the payment going toward interest!!! This plan carried through through current and got me to where I am today.

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Now that I had the second installment of IHS sitting in my account, I was ready to click that final “submit payment” button. In addition to the $18k, I had a few thousand more to pay off, but that money was also sitting in my account because I had more or less “timed” things so that when the IHS money arrived, I would have those couple thousand extra bucks laying around to say farewell to loans all at once.

After just shy of 2.5 years, I have paid off $122,000 in grad school loans, and I am dang proud of that. I realize that a lot is and was “set up well” for me working in Alaska, but from the very first payment I submitted, I knew I wanted to have an aggressive pay-off plan. Although I wish I never had student loans, they have 1) taught me a lot about the student loan crisis itself, 2) opened my eyes to personal finance topics like budgeting and index-fund investing, 3) introduced me to the FIRE movement, and 4) taught me ways to maximize your money in a way that works FOR you, not against you. I also have an appreciation for any other borrower who is on his or her own path to paying these outrageously high interest rate loans off.

At this time, I can officially say I am DEBT FREE, and I even celebrated with one beer, a night ski, bowling, and a Sunday with friends outside Nome in the hills. I wont’ be spending any more money than I have been, rather shifting my freed up income toward long term index fund investing.

If you’ve read my previous posts until now, thanks for following along!! And if you’re new, hopefully there’s some tidbit of info you found helpful. I love to chat personal finance with everyone and anyone, so if you have any questions, just let me know!

Onto the next personal finance goals!