My Student Loan Story

The world of student loans can be scary and confusing. I’ve been obsessing over my own student loan debt tirelessly since I first took out financial aid in 2009. All through undergrad and pharmacy school, I’m sure that my financial aid offices despised me, because I was always emailing them or stopping in the office to talk through how to decrease my debt or pay back my loans. Even back then, I fully understood the power of my education, and the value that my student loans were providing in future income, but I hated being poor for nearly a decade while my loans continued to increase to outrageous quantities. At the time of my graduation from pharmacy school, my student loans totaled almost $300,0000. And that was after renting low cost apartments and taking the school’s “Thrifty Budget” student loan option, which minimized the loan amount included for living expenses. It was a good idea in theory, but I don’t think most financial aid offices think through what actually happens to students after graduation.

After graduating from pharmacy school, I was able to secure a competitive residency at a for-profit company. Through this residency, my income was limited, so I started out on the Revised Pay As You Earn (REPAYE) income-driven repayment plan. This plan was great through my residency, because I wasn’t really able to start making much for payments on my student loans, and REPAYE reimbursed me for half of my unpaid interest each month. The sum subsidized on my interest was close to $500 each month. And, as long as I stayed in REPAYE, none of my interest would capitalize on my loan.
Unfortunately, the benefits of REPAYE wouldn’t help me forever. After scouring the details of my situation and gaining a better understanding of my personal goals, I realized I would be better off switching over to Pay As You Earn (PAYE). On the surface, REPAYE seems to be a better strategy than PAYE, and for many that may be true. For me, I was about to get married, which would have a substantial impact on my student loan situation.

My wife, who was a registered nurse, also attended private, non-profit universities for both undergraduate and graduate school. Her student loan balance when she graduated was more than $180,000. The average annual salary for a nurse where we live is right around $63,000. With my annual salary of $135,000 and $300,000 in student loan debt it maked sense for both of us to pursue student loan forgiveness. Fortunately, my wife’s employer was an established non-profit hospital. This meant, that as long as she worked there full-time and made payments under an income-driven repayment plan, that she will be eligible for Public Student Loan Forgiveness (PSLF) after 120 qualified payments (10 years). This might just be the best deal anyone can get when looking for ways to decrease their student loan payments. So my wife’s loans should be forgiven after 10 years of payments, and my loans should be forgiven after 20 years of payments. That’s great, right? Yes, of course, but the story isn’t over just yet.

Under REPAYE, my income and student loan debt is combined with my spouse’s income and student loan debt to determine my monthly repayments. This doesn’t become a problem for my wife and I until after my wife’s debt is presumably forgiven after 120 qualified payments. At this time, our combined annual income will be somewhere around $266,000 (due to increased wages and my wife’s increased income as a nurse practitioner), and my total student loan balance will be at least $300,000 still. With this combined income under REPAYE, my monthly payment would be about $2,000 per month, compared to only $1,200 per month with only my income alone. Under PAYE, we are able to file our taxes separately, and my wife’s income and student loan debt are not included in my repayment calculation, saving us $800 per month for 10 years. That’s a total of $96,000.

This is an open-ended story, as we’re only a quarter of the way through our student loan journey, but at least we have a plan in place. Even if you have almost $500,000 in student loan debt, like my wife and I do, by just getting a plan together and understanding your options, you can gain a lot of peace of mind, even if that plan doesn’t actually include paying back the entire sum of your student loan balance.