Sunday, June 25, 2017

Private Student Loans: How I got into debt in the first place!

In February of 2004, I started a journey that would change my life.  I moved to New York City, from Portland, Oregon, to study at a special musical theater conservatory program.  The program lasted four semesters, and not only taught me the essential skills needed in the acting world, but also the professionalism that goes with it.  In many ways, that education was one of the best choices  I have ever made because nowadays, I am extremely confident in my abilities as a singer, actor, and director.  I can thank these fine folks that I train with for my abilities and at least in part, my confidence.

This amazing education also came with a hefty price tag.  I was granted a substantial scholarship, and took out the maximum allowable amount of federal student loans.  Despite all of that, I still needed to come up with an additional $24,000.  Well, I certainly didn't have it.  So, I took out a private student loan.  That is pretty much what all of the students at my conservatory were doing, and it didn't occur to me that this would be a problem.  In the Summer of 2005, I graduated from the program.  I was living in a cute little neighborhood in Brooklyn.  I had roommates, worked as three part time-jobs: one as a personal assistant to a retired actress, a substitute teacher, and a waitress (NYC, actress, waitress--of course that happened)!  I loved my jobs, my roommates, my apartment, and for the most part, my life.  After the first 6 months, it came time to start repayment on the loans.  The private loan wouldn't let me defer like the feds would...  Okay, they WOULD, but I could only get 12 months of deferment over the life of that loan, and wanted to save that up for a real emergency, so I started paying them back.  The student loan company set me up on a 20 year loan repayment schedule, so that I would have a payment that I felt I could afford.

The loans (there were actually 2 of them) were at a variable rate, that decreased over time, working entirely to my benefit.  For that, I am incredibly thankful because it could have gone the other way and been a huge disaster.  They hovered around 3% for the majority of the time I was in repayment.  This is actually lower than the rate I pay on my federal student loans.  Regardless, a variable interest rate is  a dangerous thing because the lender can give you notice of a rate hike at any time, which could change your payment amount rather significantly.

I spent the first eleven years only paying the minimum amount on my loans.  I would typically round up to the nearest ten dollars, but I really wasn't making enough to be able to pay much more than that.  Finally, after eleven years of repayment, my financially world changed significantly.  I started making a lot more than I ever had before.  Rather than allowing lifestyle inflation to take over, I took the extra money and applied it toward my debts.  I wiped out credit card debt first.  Once that was done, I decided to focus on my private student loans.

June 30, 2017 marks the final payment of my private student loan debt.  On one hand, I feel hugely victorious.  I am finally free of that particular obligation.  On the other hand, it shouldn't have taken me 12 years to do it.  I allowed myself to fall prey to a student loan company "offering me relief" in the form of an extended repayment plan.  While, I don't let it get me down, or even feel bad about what happened in the past, the truth is that I should have worked harder to afford a higher payment in order to be rid of the debt sooner.  This private student loan has cost me thousands of dollars in interest! The idea of paying thousands in interest makes me feel pretty sick, but at least I didn't really extend it to 20 years!  That would have cost me so much more!  The reality is, while it cost me a lot of money in interest, I was successful at shaving 8 years off of my original 20 year repayment plan.

To read more about my final push to slay the private student loan dragon once and for all, read How I paid off $10,000 of student loan debt in 6 months.

For those of you that are working on repaying student loans, my sponsor, LendEDU (affiliate link) has a comparison tool that might help you to decide whether or not a refinance makes sense for you, and if so, which company might provide you with them best deal for your situation.  By following the link, you are under no obligation; rather you will have the opportunity to see quotes from several student loan refinance companies.

Additionally, when you follow my link to use their comparison tool, I receive a commission.

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