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Over the course of three years in law school, Cindy Zuniga-Sanchez accrued nearly $215,000 of debt from student loans and credit cards. While she was diligent about making the $2,000 monthly minimum payment on her student loans, the $24,000 she had paid off in her first year had barely made a dent in her debt's principal. When she received a tax statement noting all of her monthly payments, she was shocked to find that $20,000 had gone towards interest while a measly $4,000 went towards the principal on her student loans.
It dawned on her that she would have to get more aggressive about paying off her student loans if she ever wanted to be debt-free.
"The sort of obsession with learning about money really stemmed from that moment when I realized that so much of my labor had not even gone to repaying the actual loan that I had taken out," says Zuniga-Sanchez.
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Zuniga-Sanchez began to seek out educational resources to help her learn about debt repayment and personal finance. Like many people new to the world of personal finance, she found herself drawn to the advice of Dave Ramsey who preached about the importance of budgeting and debt freedom. Yet for Zuniga, the figures that influenced her the most were other women of color, specifically Yanely Espinal's Miss Be Helpful YouTube channel and Jamila Souffrant's podcast 'Journey To Launch'.
"I was really seeking information from women, specifically women of color," says Zuniga-Sanchez. "Our money stories are very much shaped by our circumstances… And so I wanted to see if I could get an education from those types of 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 out financially. She was raised in a low-income community in the Bronx, the daughter of immigrants from Ecuador and Honduras.
"When you're the child of immigrants and you're put in a financial position that is much greater than what your parents have ever seen. You do have an obligation to help your parents financially," she says.
While she notes that many people brush off her comments by claiming that immigrant children don't have an obligation to financially fend for anyone but themselves, she says that in reality, many immigrant children end up taking on the responsibility of helping their parents or relatives back home. In the past she had paid off her parent's medical bills and provided money to them for monthly expenses and wanted to do so again.
At the beginning of 2017, she got serious about paying off her debt. 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 she was now responsible for paying SoFi. (Zuniga-Sanchez is currently a partner with SoFi. When she refinanced her loans with them in 2017, she was not partnered with the company.)
No origination fees to refinance
Federal, private, graduate and undergraduate loans, Parent PLUS loans, medical and dental residency loans
Variable and fixed
Variable rates (APR)
From 2.24%; from 2.37% for medical/dental residents (rates include a 0.25% autopay discount)
Fixed rates (APR)
From 2.99%; from 3.12% for medical/dental residents (rates include a 0.25% autopay discount)
5, 7, 10, 15, 20 years
From $5,000; over $10,000 for medical/dental residency loans
Minimum credit score
Allow for a co-signer
By refinancing her student loans, she cut her interest rate and repayment period in half, from ten years to five years. Her monthly payments increased to $3,000, but she was able to pay off all of her student loans by the end of 2019 and saved herself from paying an additional $40,000 in interest.
Now, Zuniga-Sanchez is debt-free and coaches others on how to navigate personal finance through her company Zero-Based Budget. When Select asked what advice she would give to those starting off on their debt repayment journey, she broke it down into three simple steps: know your numbers, create a budget and calculate your debt payments.
First off, you should know your outstanding balance, the interest rate and the value of your payments.
Second, you should create a zero-based budget, which means you should be able to account for all of your income, expenses and savings. With this method, when you subtract your expenses and savings from your income, you should get zero. There are a number of budgeting apps out there that can help with this, like Mint and You Need a Budget.
Lastly, you should use a debt repayment calculator to figure out how much more you can contribute towards your loans each month. Even if you can't allocate a large sum of money, any additional contributions can reduce the amount of interest you owe and the length of your repayment period.
While Zuniga-Sanchez saved money by refinancing her federal student loans, she recommends that people currently holding federal loans not refinance them because the current interest rate is 0%, and the Biden administration's current pause on student loan repayment (known as forbearance) lasts until Jan. 31, 2022. Since there is no interest accruing on federal student loans, you can save money by continuing to make your monthly debt repayments, which go directly towards the principal amount.
Furthermore, if you choose to refinance your federal loans with a private lender, you lose important benefits like income-driven repayment plans or forgiveness plans like Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness. So if there's a chance you might use either of these benefits in the future, you might not want to refinance.
It's also unclear if the administration will take other steps, such as widespread student loan forgiveness or an extension of the current repayment pause.
For people with private loans, Zuniga-Sanchez suggests that people look into refinancing because of how competitive interest rates are right now. You might be able to go from a loan with a 10% interest rate to a loan with a 2% or 3% interest rate, which could have a dramatic impact on how much you end up paying, she says.
Zuniga-Sanchez had to face the reality that it would take ten years to pay off her student loan debt if she continued with the interest rate she had on her federal loans.
While Zuniga-Sanchez was able to refinance her federal student loans and pay them off in less than five years, most people currently holding federal student loans should hold off on refinancing because of the forbearance period. And if they continue to make payments during this period they'll avoid paying more interest in the long-run.
If you have private loans consider refinancing to get a lower interest rate: This will lower the amount of money you owe and possibly shorten your repayment period.
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