It seems like there are free calculators online for just about everything these days: estimate a car loan, mortgage, or even student loan payments. What these free calculators fail to advertise, however, is that they usually only give you one possible, very limited picture. If you’ve bought a house and compared the numbers that an online calculator spat out to what your mortgage lender ultimately gave you, you already know. There’s always more to the picture than what the free calculator can give you—you get what you pay for. Fortunately, borrowers have other options to help them explore repayment possibilities.
There’s a big difference to be found when comparing professional loan advice with that of a free calculator, even ones that seem official. A good example is the FSA Loan Simulator. Free on studentaid.gov, it can give you a bird’s eye view of what some of your options may be, but it doesn’t give you the full picture. When you use the Loan Simulator, you’re given a number of possible checkboxes. Failing to click on all of the ones that may apply to you (both now and in the future), the calculator won’t show all the payment possibilities that may be relevant. The questions it asks can also be somewhat misleading. For example, it asks, “What is your yearly salary?” When your monthly payments are calculated, however, it’s last year’s income—taken from the Adjusted Gross Income (AGI) reported on your most recent taxes—that’s used, which can often make a huge difference, like when you’re transitioning from residency into being an attending physician.
Paying for something as expensive and important as your education can be a scary thing to navigate alone. We see it all the time! When you’re making big financial decisions, you want to have all the facts and be sure that your numbers are solid. We recently worked with Dr. Demarra, who had just gotten her first big job offer after finishing her residency. She called us in a panic, worried that—even with her new attending’s salary—she wouldn’t be able to afford her student loan payments on top of all the expenses of moving and establishing herself in a new city. It turned out that she had used the FSA Loan Simulator and thought that her loan payment was going to quadruple overnight! After paying about $440/month as a resident with a $75k salary, she feared that her payment would go up to $1900/month on her new $250k attending salary. She forgot that her loan payment would be based on last year’s income, not her new salary. Even the following year, it still wouldn’t jump as much, because she’s starting her new job mid-year. Always remember: you don’t have to recertify your income every time your salary goes up—only once per year when prompted, using last year’s taxes.
Thankfully, we were able to help Dr. Demarra get everything sorted out quickly and soothe her fears when she realized that her payments weren’t going to change at all yet. We could also give her close estimates on exactly how her payment would rise as her yearly AGI increased, including as her pay grows further on. We can even estimate her payments as other changes occur, such as choosing to get married, or switching to a new payment plan as IDR shifts to IBR over the next several years.
If you have questions about your student loan repayment, especially as things evolve under new regulations that will roll out over the next 3 years, get in touch. We’re always here to make sure that you have the whole picture, and can crunch the numbers as situations change. Your student loan pros are only a phone call or email away.
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