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Debt Freedom! My experience of smashing my student loans.
Debt and Taxes
Student debt. As a student, we think of it the way everyone thinks of Death--inevitable, but surely so far in the future there's no need worrying about it now. But just like Death, for those in college, Student Debt visits us all and no one can seem to avoid it (especially these days). So you might as well prepare for it now.
When I graduated from high school, I looked forward, eyes glistening with expectation, to being immersed in the great academic buffet of college. I wasn't sure what I wanted to do with my life or what I really wanted to major in, but my nerdy appetite for learning salivated as I perused all the glorious descriptions of classes and degree programs in the glossy university catalogs and pamphlets. I couldn't wait to jump into college life and become the grand intellectual I so deeply wanted to be.
First, tiny reality check: university is expensive, said my parents. Sure, yeah, yeah, yeah...and the sun is yellow and grass is green. The concept was something I knew but didn't hold much consequence to a young kid who'd never paid a bill in her life yet. They encouraged me to use my A+ scholarship I'd earned earlier in high school that would get me 2 years free tuition and books at any public community college in our state. Ugh, do I have to be so practical? Community college is lame, right? It's full of grown-ups with kids trying to get boring, non-intellectual jobs like medical transcription and welding--and there's definitely no cool classes like "Dead Sexuality: The Politics of Feminism in Zombie Fiction." And anyway, paying for two extra years of college couldn't be that bad, could it? I mean, I won't have to pay it back until I'm done with college, and I'll probably have a really high paying job by then, it will be easy...right?
Well, I somewhat reluctantly elected to use my A+ scholarship at the local community college. The "practical choice" was supposedly a smart move on my part, but I couldn't help feeling left out of the full college experience I thought so many of my peers were having. There weren't a lot of "cool" electives at the community college, but I was getting all the credits I needed and after 2 years I had my Associates degree. As I transferred to the big university in the city, I still felt like I had missed out on something, but something told me I'd still made a good choice. My sister and friends had gone directly to the university and I was glad I missed out on their horror stories of dorm living and was lucky enough to live in my grandparents' old house for free for the first part of college. I also started to hear about their student debt--they talked about all the thousands they already owed I realized I was half-done with college and I owed nothing. Wow, that's pretty cool, I guess. I started taking out loans to pay for the next two years at university and started to realize just how fast the costs added up; I was paying for books for the first time and couldn't believe the hundreds of dollars I was charging against my loan just for those! Still, it didn't hurt too much since none of this was coming out of my pocket directly just yet; paying back the loans was still a distant concept. It wasn't until I graduated the reality really set in.
Final total: $16,000; so many people told me that was nothing! Plus, I had six months "grace" until I had to start paying the loans back, so I didn't worry about it at first. However, December rolled around quick and suddenly I had my first payment due. It wasn't so bad...I had a part time job and upon suggestion of my loan adviser, I had the payments withdrawn from my bank account automatically (she told me with a year of on-time payments, my interest rate would drop 1/2%). So far, so good. However, after a couple of years, I started getting tired of those payments! Month after month I watched nearly $200 leave my bank account, money I wished I could use for others things. I moved to the big city and even though I got a full time job, I still needed that money more than ever each month. The years droned on and I really began to resent my student loans. I began to realize what a hassle a 10-year loan meant. And I finally started to wise up and do something about it.
What are you in for?
Are you still paying off your student debt?
The Smartest Move
For some reason, it never occurred to me until I was over 6 years into my 10-year note that I could pay MORE than the minimum payment, or that it would be worth my while. As the itch to be done with these seemingly eternal payments increased, I realized so could my payment each month! While I wasn't rolling in cash, my salary was higher than it had ever been in my life, so there was no reason I couldn't afford to ramp up my payments. I started doing some rough calculations of my monthly expenses and discovered I could afford to pay TWICE the minimum payment each month! So I did exactly that. Suddenly, debt repayment got exciting.
I began logging in to my online loan account almost daily and checking the balance, the interest accrued and watching the expected payoff date get closer and closer. I began running hypothetical calculations of cutting back expenses on this or that to gain more cash to throw at my debt constantly. I decided in advance how much of expected bonuses or other small windfalls I wanted to put towards my debt and ran different scenarios of how much closer different amounts would get me to complete payoff. Paying off debt was an obsession!
As time went on, my loan payments increased even more. By the end I was so anxious to be done with it, I was throwing large chunks of several hundred dollars to finish it off. I set a goal to be done with it by a certain date and every spare penny I had went towards that. Finally, the great day came when I clicked "send" on my last student loan payment; I was free at last and two and half years ahead of schedule at that!
I never felt so free as that day! Suddenly I had a huge amount of money totally uncommitted each month going forward from that point. I felt like I'd won the lottery! One may think I became a spendthrift after this, using my newly freed funds to satisfy every material desire I'd been suppressing all those months as a reward for my long term dedication to frugality. On the contrary; all those months of saving had given me a greater joy than any short-term purchase ever could. I'd been bitten by the financial independence bug.
I saw the power of savings and what it could do in my life. By being completely dedicated to paying off debt, I had gained a large degree of power over my financial life. Now saving money has become an addiction. I have trimmed my expenses as low as I can now try to create as much excess cash each month as possible, all of which I place in savings. What will I use all this money for? What will I NOT use it for?! I've realized that having a large amount of savings will give me even more power over my circumstances. Savings will give me options like going back to school or being trained for a new career, moving to another area, buying a house, etc.
Take a look at your own financial life and dare to dream what a little discipline might get you. I'm willing to bet there's plenty of things in your life you could get rid of like cable TV, daily coffee shop visits, etc. that bring you less joy and satisfaction than having power over your finances. Student debt is a big problem in our country, but you are not helpless against it. Just believe that you can take control and take any steps you can to getting yourself out of the hole. You may surprise yourself!