When Student Loans Bite Back

This year, I finally paid off my student debt. I’m lucky enough to have parents who paid for my education costs upfront, then let me pay them back in my own time, interest-free. For many students, this is not the case. There are countless stories of people who dutifully send monthly payments toward loans, only to find out years later that their principle hasn’t significantly decreased, or even increased. It happens to the most well-meaning people because of little clarity provided on the part of the providers.

The debt that is too close for comfort

Ian and I had a bit of a surprise recently. Several months ago, he renewed his income-driven repayment plan at an income level significantly below what he was earning at the same time last year due to income volatility (#FreelanceLife). Since he took on a full-time job this August with a much healthier salary, and because he knows how much I care about having our numbers in order, we recently sat down to better understand his financial picture.

We’ve done this before, although the last time was well over a year ago. I may be biased because I write about personal finance, but in a relationship, I think it’s important to go through your financials regularly as a couple. Me? I’m an open book. I tell Ian about the purchases I’m fretting over, my big expenses, and whether I’m going about investing in the right way.

Lately, we’ve been discussing bumping up the priority of his student loans. Ian is more of a risk taker than I am when it comes to money; he’s always been focused on investing his extra funds. When it comes to investing, Ian’s definitely savvier than I am. But I don’t believe in making major financial decisions while he’s still carrying student debt. Knowing how much this means to me, we decided to take a deep dive into his loans, looking specifically at how much faster he’d be able to pay it off if we made changes to how much he repaid each month.

How do things look?

With income-driven repayment, loan providers will lower your minimum required payments to an amount that is “reasonable”, given how much you’re making. The basic gist behind this option is that over time, the payment amount will increase as your income grows. This also often extends the life of your loan, although providers don’t emphasize this as much as they should.

Ian went from paying $850 a month to under $300. When we checked in on the status of his loans, he wasn’t pleased to see that his principal amount hadn’t gone down at all in the last few months. This was a surprise to him, as his provider hadn’t done a good job of communicating how much of his payments covered his actual student loans vs the interest accrued. Ian was also to blame in that he hadn’t paid much attention to the automatic deductions being made from his bank account every month. In fact, his minimum payments didn’t even cover the interest accrued in those months.

What’s our game plan?

Ian and I are working through his debt payoff options together. But when it comes down to it, he’s the one that needs to figure out what’ll work best for him. I think he can do it in three years, although it’ll require a lot of tightening his belt. Hurry up and come aboard the frugal train, Ian! At the very least, we know it can be paid off in less than 10 years (which was Ian’s previous “I’ll pay it off as needed” outlook). Three years is the reach goal. I know it’s 100% possible to do it in less, but it’s important to Ian that he 1) maximizes his retirement savings at work, and 2) still has some funds to put towards investing every month. For now, he’s ramped up his repayment rate to $1K a month with the goal of increasing to $2K a month by the end of the year.

Ian outearns me, so there’s no reason for him to carry around these pesky loans longer than necessary. I paid off my debt in three years, earning $60K for a majority of the payoff period. Even with twice the debt and interest to worry about, having a significantly higher salary really makes a big difference.

This is a cautionary tale

I’ve always been aware that student loan providers suck. Their goal is to make the most money as possible, and some companies purposefully misdirect consumers, as Navient allegedly did in a recent lawsuit. I’m a little shocked that something like this happened so close to me. Ian and I aren’t immune from financial problems, although this one is thankfully small. Ian’s debt balance is high – almost $60K, whereas the average American in their 20s carries a balance of $22K. But because we are relatively well-informed individuals, I’m confident Ian will pay off his debt well before the average American. (He doesn’t really have a choice… MUAHAHAHA!)

Have you experienced a similar financial wake-up call? What’s the worst financial ‘no-no’ you’ve encountered?


  1. I was in a similar boat to you with my student loans. I did receive student loans through my provincial government (like 95% of Ontario students), but my mom paid off the majority of it when it came due. I then paid her off at my own pace, without the pesky interest rates. I am incredibly grateful that she was able to do that for me (the money came from her divorce settlement, so she definitely did not have to do that). Major props to you guys for taking a deep dive on your numbers and setting an aggressive repayment plan!

    1. Author

      Thanks, Britt! Everyone’s repayment story is different; I’m excited by the prospect of being a part of Ian’s. As much as it sucks to have debt, at the very least, it’s a relatively short-term goal to focus on. Since paying my debt off this summer, I’ve been feeling a little lost; my FIRE goal feels so far away! It doesn’t mean I’m helping him pay off his debt, but I get to support him as we adjust our lifestyle to be more frugal.

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