One of my favorite student loan repayment strategies uses creative problem-solving and flexibility to make sure you’re able to manage your student loan debt along with your other financial priorities. I call it Repay Your Way and I’m going to share with you what I did to pay down my over $200,000 student loan debt as well as other stories of lawyers successfully managing their student loan debt.

Who should consider a Repay Your Way strategy?

If you’ve decided repaying your loans ASAP and full forgiveness just aren’t in the cards for you, then you’re a great candidate for a Repay Your Way strategy. This type of plan take into account your financial situation and future goals, your feelings about student loan debt and other financial priorities, and allows a certain amount of flexibility over the course of your repayment journey.

Here’s a few people who may want to consider a strategy like this:

• Your income = total student loan debt - In this situation (or something close), repaying your loans ASAP may be prohibitively expensive, but participating in an IDR plan may actually pay off your student loan balance before you reach the 20-25 year forgiveness mark (see my post Student Loan Forgiveness Plans & Pitfalls for more info). In this instance, you’ll want to balance paying less than you would under IDR plans with how much you are actually able to pay monthly.

• Your income will greatly vary over your lifetime - For these folks, an IDR plan may make sense while their income is low, but as soon as their income increases significantly then, again, those payments may end up covering the full balance before they can qualify for forgiveness. So the total amount paid will be much greater than if they had refinanced early on.

• You have pressing financial obligations that will expire - Many young lawyers are also young parents and having the simultaneous financial burden of paying down enormous student loans while also paying for full-time childcare (apparently bringing infants into the office isn’t a thing quite yet) can leave little for living. The same may be true for anyone supporting family, carrying a large mortgage, or dealing with other large debts on their balance sheet. However, those financial obligations do fall away over time and so crafting a plan that allows you to pay less while you’re strapped and more as your life and career progress may be more feasible.

• You won’t complete the PSLF program - If you’re currently participating in the Public Service Loan Forgiveness program (see more info in my post Student Loan Forgiveness Plans & Pitfalls) but you know you won’t get to 120 qualifying payments, then it may not be a good idea to be making payments that allow your overall balance to increase month after month. If forgiveness isn’t in the cards, and you’re going to increase your income when you leave your PSLF eligible position, you may want to increase your payment amounts sooner rather than later.

• Your spouses’s income affects your IDR payments - Under many IDR plans, a spouse’s income may be taken into account when determining the monthly payment amount. Again. to the extent those payments end up covering the full balance before you can qualify for forgiveness, you’ll end up paying much more over the full life of the loans than if you had pursued a different strategy from the start.

• You have future financial goals that need to be addressed now - One of the things that is most frustrating as a law school graduate is the years of retirement savings that are lost to law school. Lawyers begin their income-earning careers much later than other college graduates and when it comes to long term savings, “time in the market” is often the biggest indicator of long term success. So the earlier you start putting away for retirement and other long term savings goals the more likely you are to hit them. If you delay saving for retirement in order to aggressively pay down student loan debt, then you’re losing even more time.

What factors should be considered in crafting a Repay Your Way strategy?

Beyond the non-numerical factors described above, there are a few financial considerations that should be taken into account when crafting the best Repay Your Way strategy for you:

• Interest rates - Generally speaking, you don’t want to aggressively pay down any student loan debt that sits at an interest rate lower than what you could earn from other investing activities. This is one way balancing retirement investments against aggressive student loan payments often tips toward retirement investing. Paying off your loans early is wonderful, but when you do it at the expense of a comfortable retirement, that may be too high a cost.

• Extra payments - To the extent you are able to make extra payments on your student loans, those payments will be applied toward the principal (make sure your lender actually does this!) and will cut down the time it takes to pay them off. Not only are you paying more than 12 times per year, but you are also lowering the amount of interest accrued each year by eating away at the principal balance more quickly. This strategy often works well when you are able to refinance for a longer-than-desired term (e.g., 30 years) but make extra payments to complete the payoff in a fraction of the time.

• Other income - Consider what future income sources and assets may be used to make bulk payments toward your student loans. If you own a rental property, any profit can be used to make your student loan payments. If you sell an investment property, the proceeds can be used to pay down (or pay off) your student loan balance. You don’t have to pay off your student loans over the course of hundreds of monthly payments, you can make big moves when the time is right and wipe them out completely.

Real life student loan repayment stories

My own student loan repayment journey began with my graduating from Columbia Law School with over $200,000 in student loans. This was in 2004, back before IDR and PSLF existed, so all of my loans ended up “private” loans even though they are still characterized as federal. Those “federal” loans were consolidated at 1.75% when I graduated, and they continue to accrue interest at that rate. Given my thoughts laid out above, you can probably guess that I’m still paying those off…and they will be the last debt I pay — after I pay off my house, my future vacation home, and whatever other financial goals I set for myself — because it’s practically free money.

My private loans were the majority of my debt and were refinanced at a variable rate that sat at around 2% for the majority of their life. I went straight into Biglaw and even with that salary, I wasn’t able to afford my 10-year standard repayment plan. So I was put in the Graduated Repayment plan which gave me 30 years of payments with slowly increasing monthly amounts due over the course of my career.

I was raising my twin boys alone, so I needed money for daycare, to manage our home, for their college education, and my own retirement. The decision to prioritize saving for retirement early in my career is one of my greatest financial accomplishments. It let me stop contributing to my retirement accounts completely before I turned 40, with an expectation that my retirement portfolio would still have over $1 million dollars in it when I die — believe me I’m working on upgrading my retirement lifestyle to account for that excess!

So I paid my monthly payment toward my student loans but I didn’t make paying them off a real priority until I was ready to leave the law. At the Securities and Exchange Commission, where I went after leaving my Biglaw job, the student loan repayment assistance program contributed $10,000 per year toward my federal loans. So while the SEC covered my federal loan monthly payments, I ramped up payments toward my private loans. I had a 10-year payoff timeline for myself in which all my loans would be completely paid off.

And then I met my husband, and my plans changed.

We accelerated our semi-retirement plan so I would leave the SEC five years earlier than anticipated. This meant I would leave the SEC with an outstanding balance on my private (and federal) student loans and I’d need a new payoff plan. So we turned to our real estate investment, living in the DC metro area does have its perks, and decided that if I still had student loan balances when we were ready to relocate, then we’d use profits from the home sale to finally crush any remaining balances.

Luck (and a long running bull market) would have it that we had other investments that we were able to use to knock out the remaining private student loan balance, so now it’s just those 1.75% federal student loans. We’ll see if I’m feeling sassy and want to pay them off when we sell the house — or I’ll have our renters cover the payments if we decide to keep the property. Either way, I feel good that my student loan debt hasn’t prevented us from living the lives we want.

Here’s a few more student loan repayment journeys:

Does this look like something that could work for you?

The Repay Your Way strategy is hard to define because it’s different for every person and for every financial situation. But if the typical advice of paying your loans off ASAP or seeking forgiveness doesn’t sit well with you, then consider some alternatives.

And if you need help thinking through how strategies like this could work in your own life, schedule a free 20-minute consult so we can start figuring it out together.