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During her three years at law school, Cindy Zuniga-Sanchez racked up nearly $ 215,000 in student loan and credit card debt. While she was diligent in making the minimum monthly payment of $ 2,000 on her student loans, the $ 24,000 she paid in her freshman year had barely reduced the principal amount of her debt. When she received a tax slip showing all of her monthly payments, she was shocked to find that $ 20,000 was spent on interest while a meager $ 4,000 was spent on the principal of her student loans.
She realized that she would have to become more aggressive in paying off her student loans if she was ever to be debt free.
“The kind of obsession with getting to know about money really started when I realized that a lot of my work hadn’t even been devoted to paying off the loan I had taken out,” explains Zuniga-Sanchez.
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Zuniga-Sanchez began to seek educational resources to help her learn about debt repayment and personal finances. Like many people new to the world of personal finance, she found herself drawn to advice from Dave Ramsey who preached on the importance of budgeting and freedom from debt. Yet for Zuniga, the personalities who influenced her the most were other women of color, particularly Yanely Espinal’s Miss Be Helpful YouTube channel and Jamila Souffrant’s “Journey To Launch” podcast.
“I was really looking for information from women, especially women of color,” says Zuniga-Sanchez. “Our money matters are very much shaped by our circumstances… And so I wanted to see if I could get an education from these kinds of designers.”
Zuniga’s desire to pay off her student loan debt as quickly as possible was also driven by her desire to help her parents financially. She grew up in a low-income community in the Bronx, the daughter of immigrants from Ecuador and Honduras.
“When you are the child of immigrants and you are in a better financial situation than your parents have ever seen. You have an obligation to help your parents financially, ”she said.
While she notes that many people brush her comments aside saying that immigrant children do not have an obligation to provide for themselves financially, she says that in reality, many immigrant children end up taking responsibility for help their parents or loved ones. back home. In the past, she had paid her parents’ medical bills and provided them with money for monthly expenses and wanted to start over.
In early 2017, she decided to repay her debt. His first step was to refinance his federal student loans with a private lender, SoFi. SoFi repaid her student loans to the federal government, which meant that she was now responsible for paying SoFi. (Zuniga-Sanchez is currently a partner of SoFi. When she refinanced her loans with them in 2017, she was not a partner of the company.)
SoFi student loan refinancing
No origination fees to refinance
Federal, private, graduate and undergraduate loans, Parent PLUS loans, medical and dental residency loans
Types of loans
Variable rates (APR)
From 2.24%; from 2.37% for residents in medicine / dentistry (rates include a 0.25% discount on automatic payment)
Fixed rates (APR)
From 2.99%; from 3.12% for medical / dental residents (rates include a 0.25% discount on automatic payment)
From $ 5,000; over $ 10,000 for medical / dental residence loans
Minimum credit score
Authorize a co-signer
By refinancing her student loans, she cut her interest rate and repayment term in half, from ten years to five years. Her monthly payments increased to $ 3,000, but she was able to pay off all of her student loans by the end of 2019 and saved herself from paying an additional $ 40,000 in interest.
How to Create a Student Debt Repayment Plan
Now Zuniga-Sanchez is debt free and teaches others how to manage personal finances within his company. Zero-based budget. When Select asked her what advice she would give to those new to their debt, she broke it down into three simple steps: knowing your numbers, creating a budget, and calculating your debt payments.
First of all, you need to know your outstanding balance, the interest rate, and the value of your payments.
Second, you need to create a zero-based budget, which means you should be able to keep track of all of your income, expenses, and savings. With this method, when you subtract your expenses and savings from your income, you should get zero. There are a number of budgeting apps that can help you out, like Mint and You Need a Budget.
Finally, you should use a debt repayment calculator to determine how much you can contribute to your loans each month. Even if you can’t allocate a large amount of money, any additional contribution can reduce the amount of interest you owe and the length of your repayment period.
While Zuniga-Sanchez saved money by refinancing her federal student loans, she recommends that people currently holding federal loans not to refinance them because the current interest rate is 0%, and the current break in l The Biden administration on student loan repayments (known as forbearance) lasts until January 31, 2022. Since there is no interest accrued on federal student loans, you can save money by continuing to repay your monthly debts, which go directly to the principal amount.
Plus, if you choose to refinance your federal loans with a private lender, you lose out on important benefits like income-tested repayment plans or forgiveness plans like Public Service Loan Forgiveness (PSLF ) and forgiveness of teacher loans. So if there is a chance that you can use any of these perks in the future, you might not want to refinance.
It is also unclear whether the administration will take further action, such as a widespread forgiveness of student loans or an extension of the current repayment pause.
For people with private loans, Zuniga-Sanchez suggests that people consider refinancing because of the current competitive interest rates. You could go from a loan with a 10% interest rate to a loan with a 2-3% interest rate, which could have a huge impact on how much you end up paying, she says. .
Zuniga-Sanchez had to face the reality that it would take ten years to pay off her student loan debt if she continued with the interest rate she had on her federal loans.
While Zuniga-Sanchez was able to refinance his federal student loans and pay them off in less than five years, most people currently with federal student loans are expected to put refinancing on hold due to the forbearance period. And if they keep making payments during that time, they’ll avoid paying more interest in the long run.
If you have private loans, consider refinancing for a lower interest rate – this will reduce the amount you owe and possibly shorten your repayment period.
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Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of the editorial staff of Select and have not been reviewed, endorsed or otherwise approved by any third party.