You read it right. My husband and I paid off a $64,500 student loan in 1 year and 10 months. And I’ve never felt so free.
For the past 9 years, my life has been about how much student loan debt I was either wracking up or paying down. When you start college, and take out loans to do so…you make a deal with the devil. You tell yourself, “I will graduate with an everlasting career and I will pay back my loans x 3 (interest).” For most of us who don’t have parental financial support (which I wouldn’t have wanted anyway), scholarships or any other college fund assistance… it’s inevitable. But what is not inevitable is you tapping to the choke hold debt puts on you the moment you graduate. Lets talk. These are the rules:
If you can guarantee yourself that your graduating annual salary will be MORE than your sum of student loans… then you’re “OKAY.” I stole this one from Clark Howard. He’s the man. When in undergrad I heard this as I geeked out on his radio station and I told myself that that was my goal. When I graduated from undergrad with $9,000 student debt but only making $13.50/hour, I was still right side up but felt upside down. I laid out my options. I reallllllly wanted to go to Graduate School to be a Pathologists’ Assistant. But, would I graduate with the annual salary being more or less than the two years of additional school debt I’d wrack up? And is this a pretty promising career path? I did the math and research. I submitted my application right away!
Once you have saved (in liquid cash) 6 months of emergency fund… every single additional dollar should go toward your student loan. After obsessing over the podcast Radical Personal Finance with Joshua Sheats, I realized how important it was to KNOW what you’re actually spending money on every month. So for three months time we told ourselves we would track every single penny that went out. You may have thought we then became tight asses – but that’s not true. We spent the way anyone else would but we just kept a record of it. Trust me, it’s a pain in the ass. Entirely. But it was so worth it. All along we thought we spent $300-ish on groceries, but it was more like $450. You get the point. A real eye opener this was. But here’s the take away. Even if you don’t want to adjust your life or make a budget… you should know at the end of tracking for a few months exactly how much money is “left over” at the end of the month. This money does not belong to you – it belongs to the student loan. If you don’t have extra money at the end of the month – you’re doing something wrong. Maybe you need a budget.
Finding supporting ways of income WHILE going to school. This can be drudging but in the long run, you’ll be glad you made the sacrifice. I was so lucky to have grown up in a small town. But the only real way out was the military or college. I decided to look into the Air National Guard unit because I wasn’t sure as to which one I wanted to pursue. It turned out I could do BOTH!! And the Guard would pay 80% tuition for the private college (100% state school tuition) I wanted to attend. Sweet. During school, I opted to deploy a couple of times. With two boluses of money earned on these deployments I didn’t bat an eye to toss it toward the 20% I was owing on school. I used what was left for living expenses. I remember coming home from deployment the first time and I had $15,000 saved up. I sat staring at the computer screen getting ready to push the “pay” button with $13,000 going toward my student loan and I felt so nauseous. I was a Junior in college with just a couple thousand to my name… had spent the last 7 months doing some of the most intense work I had experienced in my lifetime… and I was about to send it off to the bank. It hurt. When you have the guts to do that – give yourself a pat on the back.
DO NOT defer your student loans. Are you willing to increase the total amount you owe? In the case of deferment of unsubsidized loans and for all forbearance, any unpaid accrued interest is added to the capital (source). Also, private loans usually have a fee for deferment. You have to really read the fine print. Because where you may have the option to defer for a full year, you may end up more indebted in the long run. At the very least, the minimum payment should be priority and you should shape the rest of your lifestyle around it. So unless you are having some serious medical health issue or have been laid off… you have no excuse to not make that minimum payment. Or else you’re literally “buying” time.
Stop being a consumer and start being a contributor. Think back to the American homestead. Our homes, our backyards, our belongings were all assets. They used to work for US. You planted gardens, your home was paid off/passed down. Not until recent decades did we start making granite and hard wood floors a MUST have item in our homes and stopped planting gardens. We have truly gone so far away from what is necessary and what used to provide us with something to what we need to “dish out” to even live with all of our belongings. Example: People don’t keep cars after they’ve paid them off. We trade them in while still owing on them, only to begin a new payment schedule on a newer car. Therefore, your vehicle isn’t working for you. You’re working for it. Nowadays the things we collect or have bring us down. If what you’re buying isn’t an investment on your life in some way, shape or form… you’re just another consumer. How lame. Self investment example: Maybe a new pair of shoes WILL help you get through your day in comfort. Maybe you love to hike every weekend and you need a backpack to hold your snacks, water and gear. THOSE can be called investments. Buying a dress in 3 different colors….not an investment. Hopefully you get the point. Find ways in which you can contribute or make a difference in your life or in those around you instead of focusing on all that material crap that will drag your ass down the debt hole.
Be a bit radical – it’s only temporary. I have to give my husband a TON of credit. He had his nest egg. But he was onboard with tackling this student debt of mine (since he didn’t have any himself) and it was his chunk of money we tossed at it that got it down to a good manageable amount. But that didn’t happen until we hit about $45,000. Once he decided it was time to toss his nest egg at it, we started to see the light and it was time to play dirty. It was our common enemy. The sooner we could pay this off.. the sooner all that income was OURS! Mwuah hah hah haaaaaa! Throughout the two years of repayment we dumped our entire tax returns on the sum, a lot of random bonus checks, ect. We would literally earn a chunk of money and never even focus on the total, in knowing that it wasn’t actually “ours.” It worked! The more and more you make the debt something fun you’re destroying together the easier it is to make those radical and sometimes risky moves!
So those are my tips! Don’t get yourself down about it. If it’s a gigantic monster of a number, just plug away at it a little bit at a time. Always make the minimum payment and figure out how much at the end of the month you have in free floating money that you can use to destroy it. Don’t go buy yourself a blue shade of the same shoes you have in gray – put it toward your loan. You don’t deserve that sort of play money just yet. Then a couple of years from now you will look back and thank yourself each and every day.
P.s. We saved almost $80,000 in loan interest by paying early. How’s that for motivation?