3 People, 1 Big Student Loan Debt: My Make-Ends-Meet Plan
A college graduate without student loan debt is akin to reading a kind quote about Kim Kardashian in a tabloid—it’s rare.
In the past eight years, student loan debt has nearly tripled to a whopping $1.1 trillion, and in the past 10 years, the percentage of 25-year-olds with such debt has risen from 25% to 43%.
It’s gotten so bad, in fact, that New York Fed economists warned last month that the burden of student debt could stilt consumer spending by twentysomethings, as well as further hamper the recovery of the housing market and economy.
To get a better idea of what massive student loan debt (we’re talking over $100,000 massive) looks like, three people in different professions have given us a glimpse at their situations—specifically, how the debt is impacting their lives and how they plan to pay the money back. We also consulted LearnVest Planning Services CFP® Katie Brewer to see just how their repayment plans stack up.
Dr. Amy Vlachakis, 31, Dentist
How Much I Borrowed: $150,000
What I Still Owe: $91,000
Although $150,000 is a lot of money to borrow, I didn’t really stress about it when I took out the government loans. In dental school, you don’t have time for a job, and borrowing money—unless you’re independently wealthy—is the way to afford it.
For four and a half years after I graduated, I worked as a dentist, making about $150,000 to $200,000 a year—10% of which I used to pay down my student loans each month. Then I decided to open my own practice in 2012, so I had to put my loans on deferment because I knew that I wouldn’t have the extra money to cover my school loans, along with the ones that I had to take out for over $400,000 to start the business.
Right now, I’m only paying the interest that’s accruing each month on my student loans (I have two different ones, with interest rates of 2.3% and 4.3%). Getting them both off the books is ideal, but I don’t stress about it—I know that I’ll be able to pay more as my business grows, hopefully within the next year.
I know several other dentists who have done the same thing—and one of them didn’t pay anything but interest for about two years. I myself feel very lucky to have been able to open my own practice. And the fact that I was able to defer my student loans is an amazing advantage that has helped to minimize my stress levels when it comes to the bills relating to my business. Of course, it would be nice not to have so much debt, but it hasn’t held me back from pursuing my dreams.
What Katie Says: It’s impressive that Amy has only been out of school for six years, and she’s already paid off about 40% of her student loans. Waiting a few years to start her own practice was probably a good call because she was able to make some serious headway paying them back. The one thing that I would recommend, since she’s now deferred her loans, is to set a deadline or a trigger for when she’ll resume paying—perhaps when her practice becomes profitable.