Public School, Private Loans
On top of the $22,000 a year that I’d need to cover tuition and room and board, I figured that I needed another $2,000 to pay for books (some cost as much as $400!) and the additional credits I would need in order to take my CPA exam to become an accountant. This meant that I had to sign up for two summer sessions and a winter session of extra classes when most other students had breaks.
I went ahead and applied for the $7,500 in federal subsidized and unsubsidized loan amounts I was eligible to receive. Every year, I also reapplied for aid through the FAFSA, and every year I got the same response: no grants and a similar amount of limited, low-interest loans.
Over the course of four years, I ended up borrowing roughly $30,000 in federal loans. I pieced together the rest through five private loans, which added up to about $100,000, factoring in the interest.
I covered other day-to-day costs by working at the student activities office throughout college, as well as a paid internship my senior year. When I couldn’t afford certain books, I’d borrow them from friends or make photocopies of what I needed.
During my first two years of college, I conveniently forgot about how much money I owed. I just told myself I’d figure it out when I graduated. Then, in my junior year, I had to start paying interest on a few of my private loans. The payment option that most students get—a six-month deferral after graduation—wasn’t available for these loans, so I was forced to pay $175 a month. It killed me that this money never touched my principal, but it was the only way I was able to afford college.
It felt like a mortgage payment—except that I would have received a better interest rate on a mortgage than I did on most of my private loans.
Reality Bites: The $1,400 Monthly Loan Payment
I graduated in May 2013 with an accounting degree and was fortunate enough to land a job at a big accounting firm before I even graduated. I counted myself lucky: While many of my friends were frantically sending out résumés and wondering whether they’d have to move back home, I was negotiating my salary, which is north of $50,000.
As soon as I graduated, I started paying $178 a month in interest toward the private loans that I’d already started paying my last two years of college. Six months after that, when the other loans kicked in, my payment ballooned to $1,415 a month.
It felt like a mortgage payment—except that I would have received a better interest rate on a mortgage than I did on most of my private loans. My subsidized federal loan has an interest rate of 3.4%, and the unsubsidized loan is at 5.6%. But my lowest-interest private loan has a 7.5% rate, and the highest is at 9%. The private loans are really what’s killing me.
I’ve looked into consolidating, but I haven’t had luck finding an option that works for me. I’d either have to accept a variable rate, which seems too risky because the interest rate, by law, could shoot as high as 18%. The other option is to consolidate and pay the average on all of my combined interest rates—but with an additional .25% percentage tacked onto the rate. Plus, I would have to extend my loan repayment time from 10 years to upward of 25. This would ultimately mean paying close to $300,000 for my loans!
Since I can’t bear to give the lenders so much more in interest, I’ve had to wrap my head around the fact that I’ll be paying $1,415 a month for the next 10 years.