This post details my experience and my plan with my loans but is in no way intended to be used as financial advice for anybody else.
Recently, I wrote about my very large Chinese medicine school student loan debt. In two and a half years of interest accrual, my loans have gone from $170K to $290K.
“What do we do about these loans?” I ask my classmates and colleagues, with furrowed brow and frustrated stance.
“Don’t worry so much! My IBR payment is zero every month. Just get on IBR.” “There are so many people with this debt, it will have to go away! There is strength in numbers.” “I can’t even think about my loans. Can we talk about something else?” “The government is going to collapse. Once that happens, we won’t owe anything.” “There’s nothing we can do.”
I got enough of those types of answers to know that I need to rephrase the question. What I mean is:
How do we pay down our loans? How do we reduce the debt we acquired in Chinese medicine school?
I am on IBR with a payment of $0. And while I pay nothing on my loans, they continue to accrue interest. They just keep getting bigger. I am sitting in a metaphorical canoe, with a big hole in the bottom of it that just continues taking on water. First, I need to find a cup so I can toss that water (interest) out of my boat, but ideally, I would like to close the hole (principal.) I wanted to be a healer and I made choices to borrow from my future to make that happen. (I won’t say that I am entirely to blame for those choices that were dangled before me, but blaming doesn’t fix the situation.)
Now, I sit in that future and I must figure out how to pay back what I borrowed. And to be honest, I borrowed far too much. While I did live as a “starving student” in my undergrad, that was not the case during graduate school. I was able to take out loans to cover my tuition and books. I paid pretty expensive (safe, clean and close) daycare for my son and ate mostly organic food. I practically rented out a table at a coffee shop near the school and I drank tea and ate scones and omelets while I worked. I bought most of the books on the recommended list of the syllabi. While the program caused me massive mental and physical stress and exhaustion, I got more treatments and herbal formulas than I could ever imagine paying for at this point in my life. My classmates flew across the country or halfway around the world during our breaks and most of us were dressed better than I can dress now.
Fast forward to the present, where I imagined (and was told) that I would be able to make enough money to pay these loans back. I can’t afford daycare for my younger child and healthy, organic food is something I try for but cannot always achieve. A cup of tea out is a very special occasion and eating out is even more rare. Any books I get come from the library and when I can occasionally do trade for a treatment, that’s how I find acupuncture or cranial work for myself. Four of us happily squish into an 800sq foot, two-bedroom house and the trim sits partially painted as the cost of another gallon is repeatedly allocated, month after month, to some more worthy cause. Paying anything on my loans seems impossible and when I could pay something, it seems unhelpful, like a drop in the ocean. (It must be said here that I feel lucky to have repayment options like the IBR available to me because it means that I can be at home, taking care of my children right now and I have the privilege to work during my “off hours” as Chinese Medicine Practitioner, making next to nothing, instead of being forced into three jobs to make an overwhelming standard monthly payment on what I borrowed.)
I was taught that money is categorized in the symbol of the Water phase and it is often related to the Jing. I would never sit with a patient, being angry or pointing blame, while their Jing leaked out into the ether, further weakening them and exhausting everything else in their body. I would make a plan and put it into action, no matter how many years that plan took. I would stick to it and support them. So, I’m going to do the same thing for myself.
腎 者 主 水 ， 受 五 臟 六 腑 之 精 而 藏 之 ， 故 五 臟 盛 ，乃 能 瀉 。
The Kidney rules over Water. It receives the essence from the five solid organs and the six hollow organs and stores it. The five solid organs must have a surplus of essence, only then can it overflow to supply the Kidney.
Suwen Chapter 1
I believe that our realities are holographic and that we must address our imbalances where they occur in order to achieve health. We are taught in the Neijing that the macrocosm is seen in the microcosm and vice-versa. What we do in one place reverberates into the other. This is part of what is taught in fengshui. What my knowledge tells me is that we need Jing, essence, to survive, it’s what builds the structure of our bodies and our lives. The Suwen says that when our organs are overflowing with essence, the excess is routed to the Kidney, to be stored there. To be saved. To makeup for losses. And where do organs get excess essence? From food and the healthy digestion of that food.
In life, it comes from healthy work and a healthy ability to distribute that work out, in the manner of the Stomach. So, even without much, I know that I can work on that Earth function, that beautiful distribution that the Stomach does, to build a better container to hold the essence and eventually, I will have more work available to me and more resources to route that way. For now, it’s about setting up the habits and the healthy plan to pay my loans off. It’s about the intention and the practice of small actions that will become greater over time.
In the last couple of weeks, I have spoken with graduates, practitioners, a financial counselor and a lawyer. I have spent hours researching, talking with lenders on the phone, listening to interviews about student loan debt on the radio. I have heard that: Student loan debt is a personal thing, what is right for one is not right for all. I absolutely agree, this is true for any treatment plan. But, I am going to post my plan here, so that I can come back to it as I need to and in case others may find it helpful. First, as to the income based plans:
- My loan balance will be forgiven in 25 years of IBR payments. However, as it stands to date, the income that is forgiven is taxable. My loans are currently at $290,925.26. When I signed up for IBR, my “projected loan forgiveness amount” was equal to: $798,394. I’ve heard different estimations on what is taxable here, anywhere from 25%-34%. Let’s go with the lower one and assume the best. That means that the taxes I owe to the IRS on the day of forgiveness equal $199,598.50. The lower I get my loan before forgiveness, the lower the taxes will be.
- Paying $0/month on loans seems nice right now, but it means that I get further and further away from ever touching the principal on my loans. Paying down the principal is the only way to stop the interest from accruing so quickly. If my IBR payment each month is less than the interest that is accruing, I am building up “outstanding interest” every month. Any payment I make with outstanding interest is applied to the interest, rather than the principal. (Or so the Department of Education informed me.) This means that years of IBR payments at $0-25/month are building up hundreds or thousands of dollars of outstanding interest which I will have to pay off (while more interest is accruing) before I can ever touch the principal of my loan. Paying down interest, even if it’s $5 a month, leads to less interest in the long run and a better chance of paying down my principal.
Step 1: Ground Myself and Remember that Earth Holds Water
When I started to look at my loans, there was a great deal of despair that came up (see Step 2.) It was important for me to ground myself and remember that I am skilled and educated and most of all, I am a good person. I may have made some choices that feel painful right now, but I am worthy, strong and capable, and that’s what I am going to concentrate on.
Step 2: Deal With the Emotions
It’s impossible for me to create a plan to deal with my loans if I cannot accept them and face the reality that they bring. If I am constantly angry, blaming, seeking ways out, then I can’t deal with the truth of my present situation to make it better. One practitioner I talked to, who is making payments on his loans, said to me, “Debt doesn’t bother me on an emotional level, and I manage it well.” When I am overcome with emotion about my debt, it becomes crippling. I imagine fantastical futures with horrific endings (the loss of my license due to default, the government taking everything from me!) or fantastical endings (everything will be forgiven, government collapse, hackers erasing all of the federal student loan data.) Elisabeth Kubler-Ross defined five stages of grief and these clearly apply to my student debt: Denial, Anger, Bargaining, Depression and Acceptance.
- Denial: I was in shock when I saw the six-figure debt statement after I graduated. “This isn’t happening.” I have never applied for a credit card in my life, because I was afraid of the staggering debt that might be created, yet, through my education, one of my worst nightmares came true. I just had to pretend it wasn’t so.
- Anger: I don’t deserve this.” I got mad. “A naive, dream-following 20-something like myself never should have been allowed to borrow this much!” “The system sucks.” “The school and the government don’t care about me, or my dream, all they want is to make money off me!” Yes. Yes. And, yes. “I am an idiot. Why did I take these loans out! I will never pay them off!” “It’s an impossibility. I have totally screwed myself over.” “Why didn’t I research more? Find out what an acupuncturists salary would be? Or any-freaking-thing-else?” Man, after I stopped blaming the government, the school, the system, my parents, my “lot” in life - then I started blaming myself. And that sucked too. It didn’t make my loans any smaller. In fact, they grew while I was doing this.
- Bargaining: “I’ll do anything not to pay this loan right now.” “How can I put this off for just a few more years?” “I can sign up for IBR, I’ll pay very little for 25 years and then they will go away!” Yes, the IBR bargain. That’ll do it. Or, various other loan forgiveness bargains that I created in my head. And all the while, my loans keep growing. (This is not to say that looking at loan forgiveness is not an awesome option, it just means that it comes many steps down the road for me, after I have taken care to make sure the ship I am in is not sinking further and further into the ocean! And, loan forgiveness options require full-time work that I am not available for right now.)
- Depression: “I messed this up so bad, what’s the point?” I spent at least a few months here. Whenever the subject of the loans came up, I felt like I was spinning down into a deep, deep spiral. I saw nothing but despair. I felt disconnected from the people in my family, my friends, everyone, because “nobody could possibly understand what it feels like to have student loan debt in the six figure range.” Even trying to read about loans was depressing. The average student loan debt is $27,000? “Add an extra zero for me, my friend. That’s how totally and absolutely screwed I am. I can’t even pay down the interest, much less touch any bit of what I owe. I never should have gone to school. My life is ruined.”
- Acceptance: Blaming, worrying, being angry, ignoring it, trying to sleep through it – somehow, none of these methods made my loans get smaller. They continue to grow. “I can’t fight it or change it. I can make a plan to deal with it.” There is a much different feeling in an intention to take responsibility for my debt, a strength in my body rather than the anxiety and fear that comes when I try not to accept it. It doesn’t feel emotionally overwhelming. I understand what that other practitioner meant, I can’t manage my debt while I am having an emotional reaction to it. I have to come to a place of acceptance and empowerment. I don’t know that I can pay all of this debt off, but I do know that I can try.
Step 3: Get Organized
I had no idea how many loans I had, where they all were, what my login information was, etc. I needed to see them all laid out to know if it made sense to consolidate them and more. To figure it all out, the first thing I had to do was get organized.
Make a List of Loans: I made a list of all of my loans. These were hard to find so I kind of cheated by going to the Department of Education direct consolidation site and starting the consolidation process. This gave me a list of all of my loans. I made a table and put them all in there including the (1) Loan Holder’s name, (2) Loan Type, (3) Current Balance, (4) Interest Rate, (5) Dispersement Date. I ordered my list of loans by the interest rate, putting the loans with the biggest interest rates at the top. This way, I can see which loans are causing the most damage.
Logins and Passwords: I wrote down the websites, logins and passwords for each of the lenders that I was dealing with and put these all in a file with my loan list so that it’s all easy to find when I need to get information or deal with my loans.
Step 4: Get The Lowest Interest Rate
I need to get the lowest interest rates on all of my loans, regardless of whether I am paying $0 or $1200 per month. Lower interest rates mean that when I can’t pay much, my loans grow less quickly.
Weigh the Benefits of Consolidation and Consolidate as a Smart Payer!
I thought that having one loan to rule them all would be better because then I wouldn’t have to log into various websites, deal with different lenders, etc. BUT, I tried consolidating my loans and quickly realized that while the 7.125% averaged interest rate they gave me was better for my GradPlus loans, it was not better for the majority of my loans, which are in the 4%, 5% and 6% range. The interest rates used are based on these values. To consolidate more wisely, I looked at the list I made of my loans and only consolidated loans that already had interest rates over 7.5%. Most of these were GradPlus loans with a rate of 8.5%. I used the information about interest rates to determine that this consolidation would lower those interest rates. I only consolidated eight of my 23 loans. This is obviously a very personal part of my loan process, we all have different dates and interest and loan types. One thing I was worried about was whether or not my subsidized loans would still be subsidized if I consolidated them (which I haven’t. I can always consolidate, but I can’t UN-consolidate!) For the first three years on either IBR or PAYE repayment options (see below,) the government is going to pay any unpaid accrued interest on Stafford Subsidized loans….well, that is, if the required payment isn’t covering it. So that’s a big deal. If I consolidate through Direct Consolidation Loans (which I did), I would retain those subsidy benefits, as the consolidated loan has two parts: subsidized and unsubsidized.
Step 5: Seek Good Counsel
Counsel is becoming more and more available as people are realizing that they can make money off helping us in the midst of all of this anxiety and confusion. It’s harder to find free or affordable counsel. I tried calling the lenders themselves to ask for support. That was often unhelpful in the ways that I needed. (Back to Stage 1 of my student loan grief process: these institutions are not here to help me, they are here to make money. Note to self: Accept it and move on.)
My partner and I were able to speak to a financial counselor after we found out that we had three, twenty-minute phone calls covered through our health insurance. That was weird and awesome, so it’s worth mentioning. Otherwise, they can run in the neighborhood of $125-200 for a basic session, according to this article about how to find one for yourself. If you’ve got some cash to throw at something like that, check out GL Advisor, who specializes in helping medical students and lawyers pay off their debt. Heather Jarvis is a lawyer who specializes in student loans. On her website, you will find a lot of free information and a blog with up-to-date information about new repayment options, which is definitely worth following, so as to avoid one of a number of Todd Balsley’s Common Mistakes When Repaying Student Loan Debt, particularly, “Failing to Learn About New Repayment Options,” and “Managing Debt Without the Assistance of Experienced Support.”
Another resource worth looking into is through Clear Point Credit Counseling Services, who offers a free student loan counseling session. This is definitely worth taking them up on if you’re feeling as lost as I was. This, like other free consultations are most likely akin to gateway drugs into the fee-based hours of student loan counseling, but a free call can go a long way on it’s own.
Step 6: Create a Strategy:
Decide Which Repayment Option Is the Best
For me, the standard repayment wasn’t even an option. I’m looking at something that’s based on my income of ZERO right now – and since I have partial financial hardship, there were two options that looked best to me: The best plan in the moment seems to be the Pay As You Earn (PAYE) as the payment is slightly lower than the Income Based Repayment, the term before forgiveness is slightly shorter and if your financial hardship ends during the term of repayment interest cannot capitalize in an amount of more than 10% of the original loan. However, I am not eligible for this loan because I had undergraduate loans out before October 1, 2007. Even if that was the case, you also must have received a DIRECT loan after October 1, 2011 and I had already graduated. But, for newer graduates who did not take out undergraduate loans, this looks like a sweet deal.
The Income Based Repayment (IBR) option is the best looking thing that I qualified for. I have a partial financial hardship and all of my loans are eligible. The payments are slightly higher than the PAYE, but it doesn’t matter at my current income. The payment term before forgiveness is 25 years (it’s 20 for the PAYE.) Interest does not capitalize on this loan unless you leave the IBR program OR you no longer qualify for partial financial hardship. (That could be the kicker right there.)
Both PAYE and IBR qualify for the Public Service Loan Forgiveness Program. You can find a nice comparison of those repayment options on HJ’s site here. Note that with the loan forgiveness on both of these options, what is forgiven is considered taxable income. What is forgiven under the PSLFP is not taxable however, and according to what I’ve read, both IBR and PAYE can be used under that program.
Payoff the Loans with the Highest Interest Rates First
I imagine a greater sense of accomplishment would come from paying the smaller loans off first. This may make things feel more manageable, or even successful, “but the mathematical truth remains that holders of multiple cards get out of debt faster and cheaper if they first pay down the cards with the highest interest rates.” I really like Dan Ariely’s philosophy about paying down debt by going with the numbers and saving money in the long run. At this point for me, that may mean five bucks in a month, but that is better than nothing. Paying any amount of the interest down during the year is only going to get me closer to paying off the principal. The more you pay on the high interest loans, the less your loans are going to grow. They are the biggest Xie Qi on the list of loans. Even though my Perkins Loan is the oldest and nicest of all of my loans, it doesn’t make sense to pay it off when I have gigantic loans with 8% interest rates just leaking debt into my life.
Loan Forgiveness Options
These may be programs that I would be wise to try and move towards because they help to pay off larger portions of my loans than I could pay alone. Both options require full-time work for a good number of years.
Indian Health Services Loan Repayment Program: The LRP awards loan repayment to health professionals practicing in specific health profession disciplines in exchange for an initial two-year service commitment working in health facilities serving American Indian and Alaska Native communities.
Public Service Loan Forgiveness Option: Under this program, borrowers may qualify for forgiveness of the remaining balance of their Direct Loans after they have made 120 qualifying payments on those loans while employed full time by certain public service employers.
Step 7: Guard The Shen And Learn How to Use Money
Money flows in and money flows out. I find a few dollars here and I use it for a pot of tea. A few dollars there goes to some extra sharp organic cheese that wasn’t required in my meal. I buy a skein of yarn to make a hat when I already have three. These things make me feel a bit guilty, as if I am enjoying myself when I should be paying off debt or otherwise routing this money into a jar for a rainy day.
Should I sit down and create a hefty budget that I am required to stick to, where each cent is accounted for? Should I live like a pauper, under this budget, punishing myself for having taken out these loans so that I can pay them back, never going to a public place where I may accidentally spend some money on something frivolous? Or, should I say, “Screw It All,” and spend every dollar as if it will be my last, giving no thought to my debt? Dan Ariely, a professor of psychology and behavioral economics at Duke, talks a about “Ego Depletion” and that seems like an important consideration in making good repayment decisions:
Here’s the reason we make bad decisions: we use our self-control every time we force ourselves to make the good, reasonable decision, and that self-control, like other human capacities, is limited. Eventually, when we’ve said “no” to enough yummy food, drinks, potential purchases, and forced ourselves to do enough unwanted chores, we find ourselves in a state that Roy Baumeister calls ego-depletion, where we don’t have any more energy to make good decisions. When we become depleted, we’re not only more apt to make bad and/or dishonest choices, we’re also more likely to allow ourselves to be tempted to make them in the first place. Talk about double jeopardy. A crucial aspect of managing depletion and making good decisions is having ways to release stress and reset, and to plan for certain indulgences. Simply knowing you can become depleted, and moreover, knowing the kinds of decisions you might make as a result, makes you far better equipped to handle difficult situations when and as they arise.
This concept of self-control and good decision-making requiring rest and vitality is talked about in the Neijing. The Zhen Ren stands guard over the Shen. The Zhi Ren went about daily tasks in a leisurely way and with joy and they built up their Jing. while keeping their Shen intact. The Daoists value the Wuwei, or quality of “Effortlessness.” So perhaps, to save money, to pay on these loans, what I need to do is a little less trying and laboring and a little more resting and guarding. I like the sound of this so far. Over the next few months, I’m going to meditate on the ideas around having enough essence that it can overflow into storage (or to care for debt.) For now, I will send $5, $10, $20 per month as I find it.
Above all I think it’s important to get into the habit of paying on the loans monthly, anything above the required payment, no matter how small the amount. This gesture of payment is an important start in my keeping the channel of overflow open to my loans. Overtime and with more resources, this practice and intention will allow me to flow more money into my debt.