Friday, July 31, 2015

Death to Sallie Mae: How Refinancing My Private Student Loans Made Me a Happier and Financially Responsible Person

This is basically a love letter to the student loan refinancing company Earnest. I don't like throwing money away, but I do love throwing it away at a way better rate (I shaved nearly 2 percentage points of my loans) over less time and not in the general direction of Sallie Mae/Navient, the Sauron of the sinister world of lending large sums of money to dumb 18 year kids (like me).
Me, six years ago...and now too, actually.
After six years of letting Sallie Mae ruin my life to a small degree, I have finally slain the dragon. No, I didn't pay off my $30,000 debt to a company that is effectively the Devil, but I did refinance my loans to a lower rate with a different company. Call yourself Navient all you want, you'll always be Sallie Mae to me. The same Sallie Mae who called me at 6AM on Sunday mornings via some swaggering bro telling me to pay up or have credit ruined. "How about I just walk in front of a bus?" I asked a representative on one of those early morning wake-up calls. The poor girl seemed rattled. It wasn't her fault. She was probably just working there to pay off her own private student loan debt.

Private Student Loan Debt is a monster. Unlike government student loan debt, there's no getting around it. It'll haunt you all your days. When you are 18 and desperate to get out of your parents house, it is very easy to snatch up the money that is effectively being freely given. Unless you are a savant, interest rates mean absolutely nothing and repayment is so far off (four years, five in my case) that it's very, very easy to ignore the fact that taking out a loan with a 9.75% interest rate means you'll be making interest only payments when you are working a minimum wage job because the economy sucks and you got a worthless English degree because you had it beaten into you that you had to go to college or somehow you were lesser.

You don't have to go to college. No one ever tells you that. But if you do, and you took out private loans and they're giving you that heavy feeling of hopelessness, all hope is not lost.

I tried refinancing my loans a year ago with Sofi. After hours of hoop-jumping and paperwork and faxing documents and a month of waiting to see whether I was approved or not, I got an email telling me that my application was denied due to my debt-to-income ratio. It's a Catch-22. I'm buried in private student loan debt, I don't get paid enough, and the only way out is to get a better interest rate so I can make some headway on paying off this loan but I can't get a better interest rate because I don't make enough money and all my money goes to paying off loans with a too-high interest rate that seems to spin its wheels. It was a nightmare.

I had five loans with Sallie Mae/Navient. The highest was a $6000 one with a 9.75% interest rate. I refinanced that one with Wells Fargo for a 7.5% which brought it in line with my other private loans (two with a 7.25% rate, two with a 6.5% rate). It wasn't optimal, but it gave me the sweet sweet taste of the prospect of casting off Sallie Mae for good. At this point I hated them so much I didn't care that I had so much debt, I just didn't want them to get my money. Surely, someone out there wanted to take my money. And then I stumbled across Earnest.

Having been burnt by a loan refinancing company prior, I was not hopeful. The application was much easier than Sofi's and it took less than an hour to get all the financials and documents lined up and sent off for approval. A couple days later I was approved and instructed to select how much I wanted to pay! Holy shit! You mean I can pay as much or as little (down to like $200) as I want? Get out of town! They have a nifty little widget that adjusts the rate you will get compared to the monthly payment you want to make. I spent hours agonizing over this. Do I continue paying $420 a month towards private loans like I have been doing since 2009 or does it now make financial sense to lower my payment a little and still pay off my loans faster than I would with Sallie Mae?
Hey what's with that penny, Navient? Is this going to be a big fat headache for me, trying to pay this penny off for the next six months? Are you gonna make me do a rush payment so that penny doesn't keep accruing interest? Seriously you people are the worst.
Ultimately, I lowered my payment to $375 a month. Jenny and I are saving up for a down payment and I have our budget on lock down and have basically become Scrooge McDuck at this point. That's an extra $45 a month for savings. Not a lot, but it hit the sweet spot between a very doable interest rate (5.26% with autopay) and payoff timeline (just a smidgen over 8 years). All the loans got transferred over yesterday and I felt the happiest I've felt in a long time (since I'm still dealing with thyroid cancer, eliminating some financial stress eases the stress burden that sits on my chest at all times). Refinancing my loans led me down a personal finance rabbit hole. "Where else can I save money?" I wondered. I opened a high yield savings account. I applied for an American Express that gives 6% cash back on groceries (the second biggest part of our budget after student loans). I locked myself into an acceptance of want vs. need. I went to my parents house and dug up all the weird stuff I've been hoarding and started listing it on eBay. (Almost) everything must go. There's so much excess, I started looking at everything in terms of dollar signs. It's a nice side hustle, something to focus on to compensate for the fact that I'm still not making enough money to provide for my family like a grown man should.

A snapshot of our monthly finances. Yellow - Groceries. Orange - Student Loans. Light Blue - Car Payment & Gas. Dark Blue - Medical Bills (thanks cancer). Pink/Red/Green - Shopping/Misc Expenses/Chaff 
It feels good getting our financial house in order, and I feel like thanks to Earnest it is finally possible to set realistic goals. Both Jenny and I have our government loans on Private Service Loan Forgiveness because we work at non-profits, so those will take care of themselves after ten years of full-time employment. My private loans will be done in 8 (or sooner should we get to a point where we can afford to throw extra money at it or, better still, refinance it to a lower rate somewhere down the line) which would leave us with a (prospective) mortgage payment as our only debt before Rosie is even out of grade school (depending on when Jenny goes back to work full time).

It feels awesome, and while it's definitely weird to shill, I can't recommend Earnest enough. It also helps that they give a referral bonus and that nothing in the world would make me happier than everyone with Sallie Mae/Navient loans jumping ship to better rates and watching that company crumble to a pile of dust and ashes (my resentment is obviously, still very strong). Financial independence or bust.

No comments:

Post a Comment