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Paying off law school debt can be a daunting task, even with a high salary. On average, law school graduates enter their career with nearly $165,000 in student debt, according to a report by the American Bar Association.
In a YouTube video, attorney Erika Kullberg explains how she paid off more than $200,000 in student debt from her law degree from Georgetown University just two years after starting her career. Here’s how she did it.
Before you can develop a strategy, you’ll need to know what you’re working with. Kullberg’s first realization when she started receiving notices about her student loans entering repayment was that she wasn’t prepared.
“I realized I just had no idea what was going on,” Kullberg said. “I didn’t know who was servicing my loans, I didn’t know what the interest rates were or even that there were even different interest rates for my different loans. I didn’t even know how to make the payments.”
Take some time to gather information about your student loans, including the balances, interest rates, loan servicers, payment amounts, and due dates. “I spent over 60 hours that week researching everything I possibly could,” said Kullberg. “By the end of that week, I had a very concrete action plan for exactly how I was going to tackle my student loans.”
Being debt-free is a worthwhile goal, but on its own, it may not be enough to keep you going when the process gets difficult. Kullberg recommends figuring out your motivation for paying off law school debt faster.
“I love entrepreneurship, I love taking a problem, finding a solution to it and marketing it out to people,” she said. “I didn’t necessarily want to be a corporate lawyer forever, I just wanted to do corporate law long enough to be able to tackle those student loans aggressively so that I could take that big jump, that big risk of pursuing entrepreneurship once again.”
Take a moment to think about your motivation for paying off your student loans. It may be the desire to be able to take more risks, buy a house, enjoy certain lifestyle perks, or something else.
The critical thing is that you think about what’s important to you and how it will sustain your motivation.
Once Kullberg had all of the information for her loans in one place and defined her motivation, her next step was to look into student loan refinancing. “My primary goal with refinancing was to just get the lowest interest rate possible,” she says, “so all of the decisions that I made, I made with that goal in mind.”
As you shop around and compare student loan refinancing options, Kullberg recommends you ask the following questions:
● What will the term of the loan be? The shorter the term, the lower the interest rate. But you’ll also want to make sure you choose a term with a monthly payment that fits your budget.
● Should you do a fixed or variable interest rate? Kullberg went with a variable interest rate because she planned to pay off her loans within just a couple of years. But because variable interest rates can fluctuate over time based on market conditions, it’s best to avoid them if your loan term is longer.
● Should you refinance all of your loans or just some of them? You don’t have to refinance all of your student loans at once. If you’re not certain about losing access to federal benefits, refinancing just a portion of your debt can still help you save money without losing those perks entirely. It may also not make sense to refinance loans that already have a low interest rate.
● Which lender should you refinance with? Kullberg obtained quotes from five different student loan refinance lenders to see which one would offer her the lowest interest rate. From there, she narrowed down the list of options to two lenders and contacted both to see if they’d be willing to compete for a lower interest rate. Going back and forth between the two lenders, she got one to improve their offer from 4.37% to 3.84%, saving her almost $3,000 in interest, plus a cash bonus that the other lender had offered through her employer.
However, she does note that refinancing federal student loans isn’t for everyone. “You will lose a lot of the federal protections you have with your federal student loans,” Kullberg said. “So, that’s something you have to research and weigh the pros and cons of very carefully.”
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As you design your approach to paying off your student loans, it’s important to determine when you want to achieve your goal.
“After I refinanced my student loans, I set a goal for exactly when I wanted to be student loan-free, and I created that goal based on how much I knew I’d be able to put toward my student loans every month,” Kullberg said.
In particular, she reviewed her budget and realized that if she continued the spartan lifestyle that she had been living while in school, she could put a staggering $9,000 toward her student loans every month. The result was being able to pay off her student loans within two years.
Once you set your goal and know how much money you can put toward your student loans every month, Kullberg recommends tracking your budget and expenses to ensure that you’re still on track to reach your goal.
“Every payday, based on how much I was able to save during that two-week period, I would then determine how much I could pay as an additional payment toward my student loans,” Kullberg said. “Then, I’d go into my trusty Excel spreadsheet and update it to reflect how much additional payment I had made toward my student loans.”
Keeping very close track of your budget and expenses along with your progress on your student loans is crucial for ensuring that you stick to your plan.
Check how long it will take you to pay off your student loans. Quickly see the effects of lower rates, extra payments, and different terms on your repayment plan.
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No matter how dedicated you are to your student loan repayment plan, you can’t control everything. Kullberg notes that there were a couple of months during her two-year payoff period that she couldn’t reach the $9,000 goal due to medical expenses and other emergencies.
“I had to figure out ways to further reduce my spending over the next several months and increase my payments so that I could still stay on track,” she said.
Kullberg also recommends avoiding lifestyle inflation, saying that it can creep up gradually. “First, you start taking Uber to work once a week, and then you start eating lunch out once a week, and suddenly becomes routine,” Kullberg said.
To avoid this trap, Kullberg wouldn’t allow herself to think that she wasn’t still a broke law student. While it was difficult, she says that the short-term sacrifice was worth it.
Also, as market interest rates continued to go down, Kullberg kept refinancing her loans to take advantage of lower rates.
Kullberg acknowledges that her ability to secure a high-paying corporate lawyer job was a mix of hard work and luck. While she was the top of her graduating class, she recognizes that that’s not always going to translate into a high-paying career. “I don’t feel like I deserved that job any more than anyone else,” she said.
While you may not be able to pay off your student loans as quickly as Kullberg did, she believes that many of the tips she offers can help you achieve your goals to pay off your debt, regardless of your income.
“Ultimately, the thing that matters and the thing you have the most control over is not necessarily how much you make, but what percentage of that income are you able to save to put toward the debt?” Kullberg said.
As you consider how to pay off law school debt, Kullberg’s approach can work even if you don’t have a high-paying career. But there are also other approaches you can take that could help:
● Use the debt avalanche or debt snowball method to pay off multiple loans more quickly.
● Use the debt snowflake method and make multiple payments throughout the month when you receive extra cash. This can be especially helpful if you get a tax refund or performance bonuses at work.
● Make half a monthly payment every two weeks, so you end up with two extra payments each year.
● Look into student loan forgiveness and student loan repayment assistance programs.
● Use Purefy’s rate comparison tool to compare student loan refinance rates from multiple lenders in one place.
● If you can’t afford your monthly payments on federal student loans, look into income-driven repayment plans.
As you consider how to approach your student loans, consider Kullberg’s experience along with these tips to determine the right path for you.
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