student loan

Student loans are almost a given for individuals trying to pursue higher education to follow their dreams. Massage therapists fall into this category.

Even with savings, scholarships, grants and financial aid, massage therapists may be forced to take out student debts to cover education costs.

It is not uncommon for massage therapists to graduate school with sizeable student loan debts. These loans can carry higher rates of interest when compared to loans for vehicles and mortgages. Interest rates and payment terms (length of loan repayment) are significant factors that increase borrowing costs. 

How and why does this happen? Depending on your type of loan, as soon as you sign the student loan papers and the money is disbursed to the massage school, interest will begin to accrue on the amount borrowed. This interest will continue to accrue on the total amount due until the loan is paid off.

What is the meaning of accrued interest? Accrue means the interest gets added to the principal amount borrowed, which creates a new payment amount. Daily interest calculation is applied to the new balance amount. Whether or not you make monthly payments on your loan, interest will continue to grow until the loan is paid in full. Therefore, not being diligent about paying back your loan allows the lender to make more money off the accrued interest while making it very difficult for you to achieve a zero balance in a timely fashion.

Many massage therapists struggle with enjoying the success of graduating from school while dealing with the stress of paying back their student debt. This stress can lessen if you take the following suggestions:

Create a Budget and Stick to It

The first step is to include your school loan debt into your monthly budget and begin to pay immediately after graduation.

Include a line in your budget that states, “Student loan,” making it visible to keep your focus on your repayment plan. Paying back your student loan should be as urgent as paying any other obligation.

Once you graduate, you can select your repayment plan, or it will be sent to you from your lender. The repayment plan will include a monthly fixed loan payment amount. A fixed loan amount means the loan amount does not change over the length of the loan if there are no changes with the repayment plan.

The lender will also include an amortization schedule that shows the number of payments that should be made, the principal amount, interest amount, and balance after each payment.

Example of Student Loan Amortization Schedule

Amount borrowed: $15,000

Term (length of loan repayment): 3 years/36 months

Interest rate: 5.25%

First loan payment: July 2020

Total month payment: $452

DateInterestPrincipalBalance
Jul, 2020$66$386$14,614
Aug, 2020$64$387$14,227
Sep, 2020$62$389$13,838
Oct, 2020$61$391$13,447
Nov, 2020$59$392$13,055
Dec, 2020$57$394$12,661

Notice how the principal amount increases as the interest amount decreases. As you make monthly payments, more money is applied to the principal and less to the interest. The interest accrued is applied to the new balance (a lower balance), which is slowly decreasing.

The student loan amortization table is an excellent tool, as it shows the amount due after each payment and where the money is being applied.

Once you implement the monthly payment amount into your budget, it is crucial to stick with it. Staying consistent allows you to see the progress in decreasing your debt.

 Lenders will allow you to set up an automatic payment from your bank each month. Make sure you have the money in the bank, so you don’t run into any late or reprocessing fees.

Be Financially Responsible

Paying the monthly agreed-upon amount by the due date not only decreases your debt, but also shows you are financially responsible. I always tell my clients that being financially accountable today will be a benefit when you are ready to open up your own massage practice. Future funding depends on past financial patterns.

When you miss a monthly payment or pay the amount late, you will be charged a missed or late fee, which is applied to your balance due. The accrued interest will be based on the new balance, which includes these applicable fees. These fees will be added to your debt, which can change your monthly payment or extend your payment terms.

Make Extra Payments

Although clients are not required to give tips, it is a great feeling when you receive them. It is a notable feeling when you apply your tip money to your student debt. Making extra payments is a great way to rapidly reduce your student debt.

Call your lender to make sure the extra payment is applied to your principal amount. By pairing these additional payments with your monthly payments, your total balance will be paid before the payoff date listed on your amortization schedule.

Cut Expenses

Sometimes it is necessary to give up luxury items to keep to your financial plan of paying off your student debt. If you are serious about paying off your debt faster, you may need to look at your lifestyle and be willing to make adjustments.

Do you really need to eat out every weekend? Can you take one vacation this year instead of two? Can you hold off on buying a new car?

By saving the money that would be spent on the above items and redirecting it to your student loan debt, you will save tons of money, as your accrued interest will be less. The longer it takes to pay off your debt, the more money you spend on the debt. I suggest you create a list of items you are temporarily comfortable with giving up, so you stay true to your repayment schedule.

Remember, the balance due amount changes due to the applied daily accrued interest. The lower the new balance states, the lower the accrued interest amount.

Keep What You Earn

Don’t allow the burden of student debt to rob you of your joy of becoming a massage therapist. With a concrete budget and a little sacrifice, you can say goodbye to student debt and hello to enjoying all the money you earned.

About the author

Lozelle Mathai

Lozelle Mathai, CFEI, is an accountant with more than 18 years of experience in the field of financial management and accounting. She is the owner of Closing Your Books LLC, as well as The Body of Accounting, a virtual educational accounting consultancy firm that teaches massage and bodywork business owners how to manage, maintain and understand their business finances. Her articles for MASSAGE Magazine include “When it Comes to Reporting Gratuities, Here’s What Massage Therapists Need to Know” and “Create a Massage Business Budget: 4 Steps to Financial Power.”