An avalanche and snow on mountain tops underneath a blue sky, representing the avalanche and snowball student loan repayment methods.
Avalanches, Snowballs, and Student Loans.

The so called “avalanche method” of paying down loans gets a lot of attention in personal finance blogs. The method is nothing more than distributing monthly payments to highest interest loans first, before paying down lower interest loans. The reasoning is obvious; a dollar at higher interest earns more interest (duh) than a dollar at lower interest.

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A confident doctor standing in a doctor's office representing doctors optimally repaying their student loans
Student Loan Case Study: Graduating medical school, aspiring cardiologist, in a serious relationship.

This is a real case – the names and minor details were changed to anonymize person’s identity. Michael is graduating from medical school this May and will start a residency in Internal Medicine soon after. He expects his residency to last 3 years, but it could be 4 if he stays on as Chief Resident. After residency, he expects to complete a 3-year fellowship in Cardiology and then become an Attending Cardiologist, likely at a hospital.

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Boat heading out to sea into a storm representing blog post on hidden dangers of student loan consolidation
The hidden dangers of student loan consolidation.

Most student loan borrowers leave school with multiple loans with differing interest rates, loan balances, and sometimes with different loan servicers. To simplify repayments, extend the repayment term under the standard repayment plan, and to convert FFEL loans to Direct loans for income-driven repayment plans or Public Service Loan Forgiveness (PSLF), many financial blog writers suggest consolidating all the borrower’s federal loans into one federal consolidation loan. Before going into that, let’s clarify the difference between a federal consolidation and private refinancing.

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Walkway out to a pier on a beach overlooking the horizon representing blog post on maximizing savings related to student loans and taxes in 2019
Student loans and taxes: how to maximize your savings in 2019.

Student loans and taxes are two topics that can trigger stress and anxiety from their mere mention. Taken together, they can really overwhelm the most financially savvy and cost-conscious among us. Team Gradaway always wants to help our readers and users maximize their savings, so we’ve tried to make things as simple as possible to ensure you don’t overpay this tax season!

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With student loans, smaller interest is not always better.

It is incorrectly assumed by most borrowers that a loan with lower interest is always better than higher one with higher interest. If I can pay less in interest, why wouldn’t I want that, one might say. However, a financially literate borrower (i.e. a regular reader of Gradaway’s blog) knows that loans come with a variety of terms, features, and covenants, and that the loan needs to be viewed in the totality of its terms and conditions. It is this lack of knowledge and the common reflex that lower interest is better that is often exploited by private student loan lenders who advertise lower interest rate but neglect to mention the forfeited consumer friendly features of a federal student loan. Refinancing is a good choice for a borrower only when the interest rate is lower AND the borrower is making an informed choice to forgo the benefits offered by federal student loans.

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In front of books, scrabble die spelling out TEACH representing blog post on student loan forgiveness options for teachers
Teachers with student loans have several debt forgiveness options available.

The average starting salary for teachers is $39,000 which after taxes and living expenses can leave hardly enough money to cover the interest on those monthly student loan payments, never mind the principal. It may seem like teachers will be paying off their loans through their entire career and beyond. However, a closer look at federal repayment options as well as federal and state loan forgiveness programs reveals that maybe the teacher’s debt burden may not actually be as bleak as it seems.

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