Time for some real talk.
Some personal sharing.
In 2008, I went into graduate studies with very little debt, a teaching assistantship, and grand visions of academia. As sometimes happens, things did not go as planned, and I ended up with a ridiculous amount of student loan debt after two years of my master’s program. I honestly had no idea how the little I had borrowed ballooned into the balance it became. This was before I truly understood how student loan debt is structured; it is a predatory product, as anyone who has really dug into it can attest.
I graduated in 2010, and after 10 years of paying what I could, what was required, I found myself still looking at a balance of $70,000.
In 2018, I paid $11,300 in interest alone, and in 2019 it increased to over $13,000, meaning every payment I sent went to interest as it continued to accrue. There was no end in sight.
In 2020, I made the decision to refinance with a private lender. I was very fortunate to be able to qualify for a $70,000 unsecured loan! That is not something most people carrying this debt are able to do. Now, three short years later my balance has been cut by more than HALF. There is an end in sight now. In another two years I will finally be able to wash my hands of this emotional and financial burden I’ve been carrying for over a decade.
When the Biden administration announced some debt forgiveness, I knew I would no longer qualify since I had refinance into a private loan, but I was overjoyed for my fellow humans who would get some relief. Not enough relief, but some. And later, when I sat down and did the math, I realized that had I not refinanced in 2020, the amount of debt forgiveness being offered wouldn’t have even covered the interest I’d accrued in those two years!
What is your point, Tammy??
My point it, if you are a homeowner chances are you are carrying a significant amount of equity in that home. The past three years we have seen incredible increases in property values. Harnessing that equity in the form of a cash-out refinance to eliminate your student loan debt would be a smart financial decision. Mortgage loans are not structured the way student loans are. You will be paying toward principle each month and see that debt decrease.
Once your refinance is complete you have two solid option to improve your financial profile:
Option ONE: Whatever you were paying on those student loans, continue to make that same payment each month toward the principal on your mortgage. This is the more emotional way to go, but still not a bad plan. Obviously, your mortgage payment will increase with the additional debt and higher interest rates of today, but let’s do that math and see what it looks like long and short-term.
Option TWO: Take that money you used to put toward your student loans and invest it. Investments accrue compound interest on an increasing balance, so this game plan will most likely be better for your long-term financial goals, even though it means carrying some debt for a longer term. I can help you run these numbers, and work with your financial advisor to create your best plan! If you don’t have an advisor, you should. I can recommend a couple for you to meet with.
If you’re tentative, but curious what this scenario would look like for you, please reach out and schedule a chat with me. There is NO COST for my time, and I am happy to provide information, even if you don’t plan to act anytime soon. Let’s see what different scenarios would look like for you and brainstorm a game plan to get you out of this vicious student loan debt cycle.
I am here to be of service, to provide you with information and tools to plan a better future.
