After faithfully making payments on my student loans for the past four years, I currently owe $643 more than I did when I first graduated from college.
“How is this possible?” you might ask, as I did. Well, shortly after I began repaying my student loans I switched to the income-based repayment plan because I couldn’t afford the standard payments. The federal government offers several different repayment options that can lower your monthly payments, while extending the life of the loan from 10 years up to 25. Because my income was/is so low, my monthly payments have not even offset the amount of interest accruing on my loan.
My loan servicer explained that the income-based repayment plan is based on your income, not on actually paying off your debt. The “good news” is that if I stay on that plan, any remaining balance at the end of my 25-year loan term will be forgiven – and considered taxable income.
As I’ve been working on this Paying for College series for the past month or so, I began thinking about how I financed my college education through the lens of the recommendations made by the numerous financial aid experts I interviewed. And I have to say, I think my decisions hold up.
I passed AP tests in high school, which transferred as college credit. I graduated from college a semester early, which somewhat reduced the cost of my degree.
I applied for local scholarships and received some academic scholarships from Grand Valley State University, where I completed my bachelor’s degree in journalism in 2010. My dad’s employer also offered a generous college reimbursement program of which I took advantage. I qualified for a state scholarship based on my MEAP scores (the Michigan equivalent to ISTEP), although that program was eliminated halfway through my college career. Still, I needed to take out student loans to make up the difference.
With my family relocating just as the recession hit in 2007 – and going through the process of buying one house while unsuccessfully trying to sell another – my parents couldn’t really contribute to paying for my college education. I worked summers cashiering at grocery stores (while completing an unpaid internship one year) and held various positions at the GVSU student newspaper during the school year to make enough for my rent, textbooks and other living expenses. Loans were how I paid for tuition - not a fancy apartment or lavish Spring Break trips.
Another “best practice” for financing your degree is not to borrow more than you expect to make in your first year on the job after graduation. I took out a total of $16,899 in federal student loans, which is less than the $21,320 annual salary I received at my first newspaper job out of college. My salary increased in my three years at that paper, but still the surplus cash I had after paying for basic living expenses left me with very little to designate to my student loans beyond the minimal payments. My gross salary and the $2/hour jump in my pay when I started at the Tribune equated to a more than $100-increase in my monthly student loan payments.
I want to pause here to say I hate talking about money, and it is somewhat uncomfortable to disclose my income to the public. But I also place a high value on transparency, and I think this is worth bringing out into the open.
I don’t want this to come across as a sob story, and I’m not trying to play a blame game here. Though if I was, I suppose there could be a finger pointing at the unreasonable cost of a college education, one aimed at the federal government for making money on my debt, another pointing at the journalism industry for failing to provide a reasonable standard of living for those in the field, and even another directed at me and my middle class family for not properly saving for my college expenses.
I don’t know yet what my “take away” is from this experience of re-examining how I paid for college and my current financial situation. Looking back, I don’t know that I’d do anything differently – I’m proud to be a journalist and I loved my college experience.
If nothing else, it’s worth noting that this system that was supposed to set me up for future success has actually left me in a financial hole, even though I followed all the best advice on how to pay for college.