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Let’s say you have a ton of student debt. You need help figuring out how to pay this thing off. Your veterinary program didn’t do such a great job on giving you the tools to do this before you graduated. So now you are on your own with your degree (yes!) and your debt (no!!!).
You could be a new graduate. Or you could be many years post-graduation. It doesn’t matter because you still have this debt hanging around, constantly reminding you that it exists. You do some research online, and you’re possibly even more confused. I was certainly confused when I attempted to make sense of the current student loan landscape, which looks very differently from when I graduated 15 years ago. So what else can you do?
Some people choose to go to a financial advisor, because not only do they need help figuring out how to pay off their student loans, but they want to do this in conjunction with making an overall plan with their finances. However, not all financial advisors are created equally. If you have a financial advisor that looks at you, bewildered, as you tell him/her that you have six figures in student loan debt, then I would venture to say that person is not a good fit for you.
In fact, there are plenty of advisors out there that fall in this category. Michael Kitces, a well-known financial advisor, recently had a guest post on his blog that focused solely on student loans and financial advisors. Here is a quote from his executive summary:
“Unfortunately, advisors are generally ill-equipped to provide student loan analysis and planning, because, unlike traditional debt, student loans – and federal loans in particular – are subject to a dizzying array of repayment options (each of which can result in significantly different outcomes for borrowers) and forgiveness programs, which in and of themselves, are stunningly difficult to navigate.”
OK people, that quote was coming from a respected financial advisor.
Ryan Frailich, a founder of his own financial planning practice, wrote the guest post that detailed different student loan analysis tools available to financial advisors. Here is a direct quote from his post:
“This complexity regarding student loans, and specifically the intersection of various federal student loan programs, means it’s an area most advisors aren’t equipped to give great advice on, especially considering the CFP curriculum only scratches the surface. And it’s an area that has enough complexity to warrant more sophisticated tools, if only to be able to effectively analyze the complex trade-offs in the first place.”
Again, this is coming from someone that is working in the field. Do you see the pattern?
The pattern is that when you have a significant amount of student loans, even a professional financial advisor may not be able to handle the complexity that it brings to your financial situation.
STUDENT LOAN ANALYSIS TOOLS
He then goes on to list the pros and cons of different student loan analysis tools. Here is the list of the tools that he researched:
- Certified Student Loan Advisor Technology (CSLA): Only available to financial advisors.
- Right Capital Student Loan Module: Only available to financial advisors.
- LoanBuddy: Only available to financial advisors. (Update 1/2020: they now have a free Student Loan Assistance tool that is available to anyone who visits the website.)
- Payitoff: Only available to financial advisors.
- PayforED: The platform for financial advisors is not yet live, but it appears that you can pay $59.95 to have your loan situation analyzed if you want to work directly with the company.
- Student Loan Planner: This is a standalone business that works with clients to find the best student loan repayment option for their particular situation. The tool on the website can be used by anyone, and it’s free. If you decide to go for a customized plan, then you need to pay for that service.
- StudentLoans.gov: Anyone can use this resource. However, the more complex your situation (having a partner with debt, having multiple types of loans, etc), the more difficult it is to use this resource.
- VIN Foundation: If you’re in veterinary medicine, you’ll recognize the name! This is also open to anyone, but it will require a lot of manual entry and private loans are not included.
Before I go any further, I want to re-iterate that the audience for this article is other financial advisors. They want the best tool that will work for them and their business. Just because a financial advisor finds a tool useful does not necessarily mean that a borrower that wants to DIY their own strategy will get the same value out of that tool.
The other caveat that he mentions several times is that these tools are rapidly changing and adapting to the real need out there for customized student loan analysis. I wouldn’t be surprised if this field continues to grow, as student loan debt has now outpaced credit card debt. This is a huge problem, and I’m personally horrified that so many people are burdened with an inordinate amount of debt just to attain a degree.
HOW DO I FIND THE BEST STUDENT LOAN REPAYMENT STRATEGY?
Well, if you’re going through this process and you feel overwhelmed, you’re not alone. I hope I’ve convinced you by now that even professionals who get paid to give out financial advice find the world of student loan repayment confusing and complex too.
I was excited to see that VIN made it onto the list. Huge props to the VIN Foundation for putting all the time and effort to get a free resource out to the veterinary world. In a profession that has one of the highest debt-to-income ratios coming out of school, having a resource like this is critical.
I’ve personally finished paying off my student loan debt. You can read about it in my debt payoff story, the first in a series of other payoff stories. Those of us that have paid it off are collectively relieved that we no longer carry that burden. My only regret is not paying my student loans off even faster.
For those of you that carry student loan debt, I understand where you’re coming from. It is frightening, and almost not even real, to see that number and realize that it needs to be paid back in some form or fashion. A huge reason I started this blog was because I continue to see a lot of financial stress in the veterinary world, especially revolving around student debt. So here’s what I would do if I were in your shoes and deciding my payoff strategy:
STEP 1: Go to each of the last three resources (Student Loan Planner, StudentLoans.gov, and VIN Foundation) and use their free calculators. Do the results match up consistently? If so, then you can feel more confident that you have a good repayment strategy. In a perfect world, you would also have a spending plan and understand how paying back your student loans fits into this plan.
STEP 2: If you still feel a bit confused, there are a number of Facebook groups that aim to bring together veterinarians who are talking about debt and personal finance:
- Debt-free Vets (for veterinarians and vet students)
- Richer Life DVM- Money Talk (for all vets; I am the creator and admin for this group)
- Moms with a DVM- Moving Past Baby Step 2 (for vets that are moms, Baby Step 2 is in reference to Dave Ramsey’s Baby Steps)
You can also contact the VIN Foundation at info@VINFoundation.org and see if they can point you to anyone that may be able to assist you. If you are a member of VIN (which is a paid membership, but you may be covered by your employer), I have been told that you have access to a debt forum where you can ask your questions. I am not a member of VIN, so I do not have any personal experience with this.
If there are any other resources that you have found helpful, please leave in the comments section!
Making a decision about student loans isn’t always black or white. There can be a lot of gray area when it comes to your decision on student loan repayment strategies. I had started out with one repayment strategy by treating my student loans like a mortgage, but then decided that enough was enough- I just wanted them gone. I wish I had the resources and a community that I could turn to for commiseration, conversation, and advice while I was going through this process.
STEP 3: If you’re still questioning your next step, or if you want to make absolutely sure that you’re making the best decision, then I would go ahead and hire a professional. If you’re at this stage, I would bet that the debt is stressing you out immensely and you may be suffering from analysis paralysis, where the choices seem too overwhelming and all you want to do is hide under a rock. Spending the extra money for peace of mind that you’re on the right track with your repayment strategy is worth it.
When hiring someone, make sure you know exactly what you’re getting. For someone like the Student Loan Planner, he will focus on your student loans. I know Travis personally (he was nice enough to write this guest post for me), and he will also include a detailed questionnaire for his clients so that he knows their overall financial situation. This way, he is not giving his advice in a vacuum, which is incredibly important since your student loans have a significant impact on the rest of your finances.
You could have two vets who graduated the same year with the same exact loan profile. But they could have two completely different repayment strategies depending on a whole host of other factors, such as: marital status, total household income, if they are carrying any other debt, spending and savings habits, financial goals (like saving for a house, retirement or for college if they have children), attitude towards debt in general, risk tolerance, etc. If you feel like your student loans are the primary financial issue that you want help with, using a service like the Student Loan Planner or a similar service would be a good fit.
If you want comprehensive help when it comes to your finances, such as budgeting and planning for retirement, go with a financial coach or advisor. But as I stated earlier, they are not all created equally. Are they truly listening to you and what your goals are? Are they able to come up with a plan that makes sense to you?
In addition to vetting your financial professional, go with someone that is very familiar with student loan cases. The more loans you have, the bigger the impact on your overall financial health, and a competent financial professional who has experience with this will help you navigate this maze.
So here are my two cents about student loan repayment based on my own personal experience. If you are a regular reader of my blog, you’re aware that I’m a debt-averse person. This has partially to do with my natural tendencies. But I’m also finding that as I get older, I’m REALLY starting to detest any form of debt.
I am squarely in the sandwich generation. My husband and I have three children that we need to raise to become responsible and generous members of society. In the midst of financial obligations for our children, we need to also ensure that our own retirement is well funded. We also have two sets of parents that are thankfully in good health, but we need to be at the ready in case they need our financial assistance.
Having any sort of debt while in this situation is the last thing we need. Debt robs you of freedom. There’s a reason that people hate debt- they feel chained to it. Especially regarding student loan debt: you went into debt for an asset that you cannot sell because YOU are the asset. The last thing I would want is to work, not because I want to, but because the debt makes me feel like I HAVE to. This is a surefire way to start disliking your job if you are not completely happy with what you’re doing for a living.
So for those that are deciding how to pay off their student loans: don’t just focus on minimum payments per month. Why? Because that’s a short-term strategy. Your repayment plan is a long-term game. If you’re stretching this out for decades, then be prepared to be in debt for decades. If you’re on a forgiveness plan (non-PSLF), then be prepared to see your loan balance go UP over time and planning on paying for that tax bomb at the end. There is not only the physical act of watching the balance skyrocket while saving for that tax bomb. Think about the emotional aspect, which is not benign.
There are absolutely those who DO need to be on a forgiveness plan. These are vets who are hundreds of thousands of dollars in debt. The math simply does not work out for them, and they must rely on this plan to put food on the table. For this subset, by all means, use the forgiveness program if it makes sense for your situation. You can still be financially responsible with the rest of your money by making a plan for how you want to use your money going forward.
However, if you run your numbers and you figure that you could pay these loans back in full in a shorter time frame, then I’ll quote Nike here and say: JUST DO IT. You can expect to have a debt-to-income ratio around 2:1 or less if you’re thinking you want to go this route. Remember that you have the ability to decrease this ratio by increasing your income, whether it’s through your primary job or through a side hustle. Your household income could increase significantly just by getting married (although I do not recommend getting married for the sole purpose of paying down your loans faster- I will venture to say that this will not make for a very happy marriage!).
Sure, you may feel the pinch financially. You may have to delay buying that house or getting that new car. You may enviously look at your classmates that have chosen a different path, and their lives look fantastic because they DO have the nicer house and the newer car.
Rather than focus on the short term, I challenge you to think long term. And stop keeping up with the Joneses- it’s not worth it. I did my own analysis of what my life was like 10 years ago and how I see my future self 10 years from now. I suggest you do a similar exercise and look forward 10 years. Here are two possible scenarios:
- You went with the lowest monthly payment and decided to treat your loans like a mortgage. You didn’t really track your expenses or stick with any sort of budget- you’re just cash flowing everything as it comes along. You saved some money, but there were too many other financial obligations that came up and you didn’t get to save as much as you had intended. The laws regarding the forgiveness plans have changed, and you have yet to understand how they pertain to your situation. Ten years from now, your loan balance has gone up significantly, your retirement nest egg doesn’t look so great, you’re pretty sure you’re going to rely on more student loans to get your kids through college, your parents could use some extra money because they’re having medical issues, your house needs a new roof, and you have more financial obligations than you know what to do with.
- You decided to pay off your loans in less than 10 years. It was a bit of a stretch, but you decided to live more frugally and still managed to find joy in life because you were very intentional with how you were spending your money. In other words, you were spending money on things that were important to you, not on things that society convinced you would make you happy. You also attained some basic financial literacy and learned how to budget, save, and invest for the future. Ten years from now, you’re completely debt free, having the freedom and ability to spend your money the way YOU see fit, not using that hard earned cash to pay back an obligation.
I really like the second scenario, because it’s shows your money that YOU’RE in charge, not your debt. You are the one in the driver’s seat, not a passive passenger.
So please keep these points in mind as you make your decision. Deciding how to pay off your student loans may be very stressful, but I hope that it will encourage you to think more deeply about your financial choices and how you want to make those choices moving forward. Don’t forget that you can check the Student Loan Advice page for the most current resources available to you.
Do you have any resources or tips you’d like to share? Please comment below!