When I graduated from dental school in 2011, I remember thinking that my student loan debt of $180,000 seemed insurmountable. My wife also had law school loans of about $175,000. Between the two of us, that’s $355,000 of student debt we paid off in less than seven years. Believe me, I know there are circumstances that mathematically will not allow for “early” payoff of student loan debt.
Over 40 million Americans hold $1.4 trillion in student loan debt, according to the Federal Reserve Bank of New York. ASDA partner SoFi answers some commonly asked questions about student loan refinancing.
Why might you want to think twice about refinancing your student loans through a private lender? Here are some things to consider when determining if refinancing makes sense for you.
A lack of understanding regarding these two facets of student loans can have a significant impact on your wealth. Let’s start with interest capitalization. When you borrow money, you have to pay for the use of that money. It’s called interest. Interest is usually charged as a percentage of your outstanding principal.
Second is taxable forgiveness. When you get to year 20 (under the PAYE plan), any outstanding debt gets forgiven. Throw a party because that’s really great. But… there’s a catch. All of that debt forgiveness is considered taxable income.