This Woman Paid off $215k in Student Loans, Saved $40k by Refinancing

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During her three year law degree, Cindy Zuniga-Sanchez amassed nearly $ 215,000 in student loan and credit card debt. While she was eager to make the minimum monthly payment of $ 2,000 on her student loans, the $ 24,000 she’d paid off in her freshman year had barely encumbered her debt. When she received a tax return listing all of her monthly payments, she was shocked to find that $ 20,000 was spent on interest, while a measly $ 4,000 was used on her student loans.

It dawned on her that if she was ever to be debt free, she would have to become more aggressive about paying off her student loans.

“The kind of obsession with learning about money really came from the moment I realized that so much of my work wasn’t even going to pay off the actual loan I took out,” says Zuniga-Sanchez.

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Zuniga-Sanchez began looking for educational resources to help her learn more about debt settlement and personal finance. Like many newcomers to the world of personal finance, she was drawn to the advice of Dave Ramsey, who preached the importance of budgeting and debt freedom. For Zuniga, however, the characters she most influenced were other women of color, notably Yanely Espinal’s Miss Be Helpful YouTube channel and Jamila Souffrant’s Journey To Launch podcast.

“I was really looking for information from women, especially women of color,” says Zuniga-Sanchez. “Our money stories are very much shaped by our circumstances … And that’s why I wanted to see if I could get an education from such creators.”

Zuniga’s desire to pay off her student loan debt as quickly as possible was also motivated by her desire to help her parents financially. She grew up in a low-income community in the Bronx, the daughter of immigrants from Ecuador and Honduras.

“When you are a child of immigrants in a much greater financial situation than your parents ever experienced. You have a duty to help your parents financially,” she says.

She notes that many people dismiss their comments by claiming that immigrant children have no one to support financially but themselves, but the reality is that many immigrant children take on the responsibility of helping their parents or relatives back home. In the past, she had paid her parents’ medical bills and provided them with monthly expenses and wanted to do so again.

At the beginning of 2017, she set about paying off her debts in earnest. Her first step was to refinance her federal student loans with a private lender, SoFi. SoFi paid off her student loans with the federal government, which meant that she was now responsible for paying SoFi. (Zuniga-Sanchez is currently a partner with SoFi. When she refinanced her loans with SoFi in 2017, she was not a partner with the company.)

Refinancing the SoFi student loan

  • costs

    No origination fees for refinancing

  • Eligible Loans

    Federal, personal, graduate and graduate loans, Parent PLUS loans, doctor and dentist loans

  • Loan types

  • Variable rates (APR)

    From 2.24%; from 2.37% for doctors / dentists (prices include 0.25% autopay discount)

  • Fixed prices (APR)

    From 2.99%; from 3.12% for doctors / dentists (prices include 0.25% Autopay discount)

  • Credit terms

  • Loan amounts

    Starting at $ 5,000; over $ 10,000 for medical / dental residence loans

  • Minimum creditworthiness

  • Minimum income

  • Allow a co-signer

By refinancing her student loan, she halved the interest rate and the term from ten to five years. Her monthly payments rose to $ 3,000, but she was able to pay off all of her student loans by the end of 2019 and saved an additional $ 40,000 in interest.

How to create a student loan debt settlement plan

Now, Zuniga-Sanchez is debt free, coaching others on how to manage their personal finances through their business Zero-based budget. When Select asked what advice she would give to those starting their debt payments, she split it into three simple steps: know your numbers, create a budget, and calculate your debt payments.

First of all, you should know your outstanding balance, interest rate, and the value of your payments.

Second, you should create a zero-based budget, which means you should be able to take into account all of your income, expenses, and savings. With this method, if you subtract your expenses and savings from your income, you should get zero. There are a number of budgeting apps that can help out, such as Mint and You Need a Budget.

Finally, you should use a debt settlement calculator to find out how much more you can add to your credit each month. Even if you cannot provide a large amount of money, additional contributions can reduce your interest debt and the length of your repayment period.

While Zuniga-Sanchez has saved money by refinancing her federal student loans, she recommends that people currently holding federal loans not refinance them as the current interest rate is 0% and the Biden government’s current hiatus on student loan repayment (known as a forbearance) lasts until January 31, 2022. Because the federal student loans don’t pay interest, you can save money by further paying back your monthly debt, which goes straight into the principal.

Additionally, if you choose to refinance your federal loan with a private lender, you lose key benefits like income-oriented repayment plans or forgiveness plans like Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness. So if you have the opportunity to take advantage of any of these benefits in the future, you may not want to refinance.

It is also unclear whether the administration will take further steps, such as a widespread waiver of student loans or an extension of the current repayment break.

For people with personal loans, Zuniga-Sanchez suggests that people consider refinancing because of the competitive interest rates currently available. You can potentially switch from a 10% loan to a 2% or 3% loan, which could have a dramatic impact on how much you end up paying, she says.

Bottom line

Note to editors: The opinions, analysis, reviews or recommendations expressed in this article are solely those of the Select editors and have not been reviewed, approved or otherwise endorsed by third parties.


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