Episode 21: Liz & Melissa Talk Best Student Debt Tips for Grads

May 7, 2018

Quick Recap:

  • Student Loan Facts
  • What is Income Driven Repayment?
  • What do you recommend for people who don't know what their options are
  • What does it mean to consolidate loans?
  • Why Liz refinanced her bar loan
  • Do research and talk to HR
  • Liz & Melissa's top post graduation tips


The Show:

Happy May everyone! Hopefully spring has finally settled in where you are, this episode we are talking about graduating and dealing with student debt. 

First, CONGRATULATIONS! It's a super exciting time in your life, where you can celebrate and reflect truly accomplishing something great.....right before reality slaps you in the face.

Did you take out student loans?

Because we should probably talk about that. 

If you took out student loans, which most people do, so no shame, you probably hopefully remember your exit interview and being told that you have to actually pay those loans back. 

Whether or not you paid attention, the student loans will come due, and you will have to pay them...generally 6 months after you graduate is when your grace period ends.

So today we're going to be covering post graduation tips from "old ladies" aka us, and how you can prepare for student loan repayment hell, aka after your grace period ends. 

And we say old ladies because it's been 10 years since Liz graduated from college and 9 years since Melissa graduated college.

Student Loan Facts

According to Student Loan Hero for the class of 2016, the average student loan debt for graduates was over $36,000.

Melissa graduated from undergrad in 2009, with $25,000 of student loan debt. By the time she finished grad school in 2012 it was $80,000 and has also grown due to Income-driven repayment plans.

Liz graduated from undergrad, in 2008, with around $15,000, and by the time I finished law school, I had $193,000 in student loan debt. And it's gone up since then because of income based repayment.

The average monthly payment is $351.

For Melissa, when she graduated from undergrad, her payments were around $150/month.

For Liz, she didn't make payments between undergrad and law school because she went straight to law school. She's always been on an income driven repayment plan. When she first graduated it was $0, at the height of income, her monthly payments were $400-$500/month. If it were standard repayment it would be over $2,200 a month. 

What is Income Driven Repayment?

For federal student loans, there are lots of income-driven repayment plans. But they all boil down to, instead of paying the standard amount, you make a payment that is calculated based on your income. 

There is:

  • Income Based Repayment (IBR)
  • Income Contingent Repayment (ICR)
  • Pay as You Earn (PAYE)
  • RePAYE

They all vary depending on if the loans were for undergraduate or graduate, when you took the loans out, what types of loans they are, it can vary from your payment being 10-20% of your income and there are some differences in how that is calculated as well. 

When it comes to income driven repayment plans, generally speaking you pay that calculated amount for 20-25 years and at the end the rest is forgiven. HOWEVER, that forgiven amount is considered taxable income.

At some point you're probably going to want to move off of the income driven repayment plan, especially if your payment isn't even covering the interest, meaning your balance is growing as you make payments. 

What do you recommend for people who don't know what their options are?

If you go to the Federal Student loan website has a calculator to help you determine what your payments would be under different repayment plans. 

Before your grace period is up, you need to contact your student loan servicer and apply for an income driven repayment plan. It's a 4 page form that is really simple to complete. You can literally check a box that says, pick the plan for me that would have the lowest monthly payment.

You'll also need to include proof of your income, so that could be the previous year's taxes, or a months worth of pay stubs, or if you're self-employed a self-certifying letter. 

To stay on an income-driven repayment plan, you have to recertify every year, with each of your loan servicers.

For Liz, she has three different loan servicers that all require her to recertify at different times of year. So she literally does this 3 times a year, every year. 

If multiple loan services worries you, you can consolidate your federal loans into a Federal Direct Consolidation Loan

What does it mean to consolidate federal student loans?

It simplifies your finances so you have just one payment to worry about each month. It takes the weighted average of your interest rates to determine the interest rate on your new consolidation loan.

NOTE: If you've made any payments toward Public Service Loan Forgiveness or Income Driven Repayment forgiveness, you could lose credit for those payments.

There is no application fee for the Federal Direct Consolidation Loan.

However, if you refinance and consolidate/combine private and federal loans into a new private loan, you are giving up the benefits of federal student loans, such as income-driven repayment plans.

Why Liz Refinanced a Loan:

Liz refinanced her bar loan, which is a loan taken out to help cover the costs associated with studying for the bar exam. A bar prep class is $4,000-$5,000, plus travel to the bar, living expenses, etc.

The reason she refinanced is because the original bar loan was a variable interest rate loan and the interest rate had gone up 3 times in 6 months. She was getting really tired of it and it was getting close to 9%. 

Fortunately, at this point she had already paid off her credit card debt so she had a good credit score. Another reason she wanted to refinance that loan was because originally her parents had co-signed the loan, so refinancing took them off the hook if for some reason Liz couldn't pay it back.

Liz refinanced with SoFi (Social Finance) and had a great experience, it was easy to do, it was all online and she had lots of loan options. She ended up going with a fixed rate of 7%, that wasn't that much lower than what she was paying, but knowing it wouldn't change, put her mind at ease. 

They did offer variable rates as low as 2.6%, but variable rates can change and go up, which is why she decided to refinance in the first place, so she chose the fixed but higher rate.

Do Your Research & Talk to HR

In addition to federal student loan forgiveness programs, states also have forgiveness programs.

Additionally, your company may offer student loan repayment assistance, or help paying for additional education.

Like Accio Debt Freedom? Be sure to share with your friends!

Evil vs Awesome: Student Loan


  • Too Expensive
  • Difficult to pay off
  • Confusing repayment programs


  • Allow you to get a higher education

Overall: Evil

Announcement: May episodes with be the last of season 1, but season 2 will be kicking off in August!

Post Graduation Tips:

Liz: I recommend figuring out how much your payment is going to be and practice making that payment, then put that money into a savings account. So you're used to being without that money and in the mean time, you've built an emergency fund.

Melissa: Try to make travel a reality as much as possible. Even if you think you can’t afford it, even if you think you’ll hate it, just do it.

If you’re afraid, go with a friend!

Take a road trip around the US.


 Do things outside of your comfort zone and meet new people.

I worked the first year out of college and saved up $2k to travel in the summer. I stayed in a hostel in London that was so gross, someone pooped in the shower. I, needless to say, didn’t shower at that hostel. I had a drunk dude in Ireland sleep in my hostel bed because he was too drunk to find his own bed.

Was it weird and uncomfortable? Yeah. Did I get over it and adapt? Yeah! When weird stuff happens to me now, I always tell myself, at least it’s not poop in your shower, Melissa.

Travel makes you more resilient. Just try it once. If you really hate it, you can at least say you did it. And you don’t need a ton of money to do it.

Evil vs Awesome: Books vs Movies, should you read the book first?


  • Always disappointed, because there is always stuff that doesn't make it into the movie
  • Could be disappointed with who get's cast, vs how you imagined the character


  • meh

Overall: Watching the movie/show first leads to more satisfaction with both the movie and book.

What do you think?

Thanks for joining us!

Create Your Own Financial Magic!

Graduation is a very exciting time but is also precedes reality and your student loans slapping you in the face. Find out the best way to handle that time from Liz and Melissa of the Accio Debt Freedom Podcast
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