Consolidating and Refinancing Student Loans

By the time I graduated, I had a number of private and federal student loans with varying interest rates that ranged from 3% to 7%. Some of my loans came from my accelerated nursing program while the remaining came from my graduate education in nurse anesthesia. In sum, I acquired ~$140,000 in student loans, which is no joke. Unfortunately, I didn’t grow up in a household where my parents were able to help me finance my education. Ah well, that’s the luck of the draw. I’m sure some of you can relate to my situation and I’m sure many of you are cringing at how ridiculously large my loan balance became.

What can I say? I made a decision to go to a well known private university in a large metropolitan city in the northeast for my nursing education. Was it worth it? In all honesty, hard to say. I certainly paid for the experience of living in a large cosmopolitan city, but as far as the education is concerned? I’d have probably have been better off obtaining that education at a fraction of that price at a state school. Luckily, I happen to be in a job where paying this loan off can be done while also being able to save up for retirement. Again, I digress.

When I left school, I had multiple loans to pay back with varying interest rates. Of course, the prevailing thought is why not just focus on paying down the loans with the highest interest rates and then deducting whatever interest you pay over the course of the year from your gross income? Or better yet, what about the Public Service Loan Forgiveness Program (PSLF)? Can’t I apply for loan forgiveness? Let me quickly answer the latter before moving to the former. In a nutshell, it would not have made any difference for me to apply to the PSLF program because I’ll have paid A LOT of interest by the end of the loan period. Back to the former question, which was why not focus on paying down the loans with the highest interest rates and then deducting the interest paid on those loans from my taxes?


 

The IRS states that the income limit to deduct student loan interest is $80,000 for singles and $160,000 for married persons filing jointly.


 

Great question! Because I was slated to make $180,000 as newly minted CRNA, I knew that I would no longer be able to deduct my student loan interest. The IRS states that the income limit to deduct student loan interest is $80,000 for singles and $160,000 for married persons filing jointly. So, for all of you who are or will be in my position, just know that for the rest of your life, no one is going to care about how large your student loan payments are or how much interest you have to pay to get your debt load down to zero. There’s very little sympathy for people who make 6 figures! Don’t forget that.

As far as paying down loans with the highest interest rates first, well, I just didn’t want to have to deal with different loans from several different providers. It’s such a hassle having to log in to several sites and making several payments every single month. But more importantly, I developed a spreadsheet and ran some numbers on my student loan debt and found that by the end of the loan period, I would be on the hook for over $20,000 in interest payments alone!

Naturally, I wondered, how can I minimize my interest payments on multiple loans of varying interest rates? Seeing as how my credit score has consistently been north of 800 for several years, I felt that consolidating my loans and refinancing them to a lower rate, I would save money in the long run.


 

If you have great credit, the interest rates on your federal loans are above 5%, and the Public Service Loan Forgiveness program doesn’t benefit you, you ought to consider consolidating and refinancing your loans.


 

As of 2016, my student loan portfolio is as follows:

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