This past Friday marked the end of a very challenging phase of my life. I finally finished paying off my student loans. I wanted to write about the experience while it’s still fresh and I wanted to keep it honest. I’ve read posts on paying off debt before and they typically follow a trend that can be summed up as follows: We cut back on our spending for a few years, made a budget, and now we’re debt free. It’s great!
Personally, the reaction for me is not, it’s great! Yes, I’m extremely relieved to finally no longer have that burden hanging over my head. There is a sense of accomplishment and financial freedom now that it’s finally over. But getting to this point wasn’t easy. The best way to describe how I feel is, I won the war but took quite the beating in the process.
In the beginning I saw momentum as the large balance slowly started to get smaller and smaller in nice increments. As time went on and I stayed dedicated to the cause, the instant disappearing act of every pay check, every disbursement from the rental properties, all the profit from my internet business, began to wear on me. Living paycheck to paycheck, taking the minimal money to live off of, and dumping the rest onto the student loans lost it’s thrill.
On top of paying down the debt, I also purchased and paid off an engagement ring, started paying for a wedding, invested in another income property, and got hit pretty hard with income taxes when I filed my return. Just because you’re paying off debt doesn’t mean life gets put on hold to accommodate you.
The pattern basically went like this. All the excess income and money in savings went towards student loans. I decided to purchase the engagement ring. All the excess money towards paying off the ring for a few months. Then back to all the money towards the student loans. Then an investment opportunity came up with strong income potential and not too large of an investment up front so I scrambled to make that happen. Then back to putting everything towards the loans. This went on for 17 months.
17 months of all your money spent before it shows up is quite the experience. If you haven’t lived it, you really can’t understand it, especially because of the length of time endured. I feel like all those people who finance the brand new car would NEVER consider making that decision if they paid off that price tag amount on anything over a year or two, and had first hand reference experience of what that sum of money really feels like.
As I said, in the beginning, the first 6 months I really enjoyed the progress. After that it started to lose it’s thrill. The law of diminishing returns kicked in. After a year, the endless lack of saving money, and the feeling that I could never make any major purchases began to wear on my psychologically.
I was doing the best I ever have financially, but yet I felt like I was at an all time low, simply because there was never enough to get the job done and I just couldn’t wait for it to be over. That day finally came. $47,992.07 later and I am student loan debt free. Of that amount $33,963.13 was paid off between January 1, 2015 – April 29, 2016. Imagine what that money could have gone towards and been used for… But again, the odds of me having the job I do without that investment are slim.
Prior to January 2015 I was making minimum payments on an income adjusted plan, beginning in June 2011 for some of the loans and January 2012 for the rest. From the time I started paying to the time I paid them off it was just under 5 years. There was also 6 months of leaving the loans in deferment after finishing grad school which resulted in some capitalized interest.
My fiance and I decided we wanted to put the student loan debt behind us and move on with life in a better financial position. She actually paid off all her student loans first while I carried the burden of the living expenses to expedite the process. Then when it was my turn, she carried the burden of the living expenses for the amount of time that I had for her. The numbers discussed here are strictly my loans.
As mentioned, the grand total of principal and interest was $47,992.07. This was based upon an original aggregate loan balance of $39,166.97. The table below details all my loans broken out between the two servicing companies, the original balances, interest rates, and the total amounts of principal and interest paid. The reason that the small balanced loans with the lower interest rate seem to have a disproportionate amount of interest is because I was hit pretty hard with capitalized interest since those loans were from earlier on in undergrad and they sat in deferment through grad school.
What this debt purchased was a Bachelors degree from a State University along with an MBA from a private University. Luckily for me, I was still somewhat money conscious when I begun college and decided against the additional expense of dorming. Add that to my debt pile and I would have been too intimidated by the balance to even set out to pay it off.
I will say, compared to most, I did get a lot for my money. There was some scholarship money that came my way, not anything life changing but every little bit helps. Also, I was able to get a lot of credit hours waived in the MBA program based on GPA in similar undergrad courses. For those who have significantly worse student loan debt, I couldn’t be more empathetic.
The plus side to my student loan debt burden was that it really motivated me to work hard to advance my career, and also find more ways to make money on my own, outside of just the day job. I realized it was going to be a massive undertaking to pay off the loans, but I also had had enough, watching so much money go out the door, mostly just paying interest on these loans. If you have student loans of your own, take a look at how much interest accumulates each day.
I have a problem with the way that college is presented as the only way to have a future to everyone just turning 18 in this country. I feel like a lot of the whole academic business is based upon a “get them while they’re young” approach and playing off of young kids tendencies to disregard the financial repercussions of their decision while following the crowd. “My friends are all dorming so I will too.” “Private school seems nice so I’ll go there.” ” Where do I sign for these loans?”
My advice is, think about the sum of money you’re going to be borrowing. Think about the interest you’ll be paying on those loans years to come. Up to $2,500 a year is tax deductible but trust me when I say, you’ll most likely be paying far more than that in the first few years with no additional tax benefit. Every year tuition and interest rates on these loans seem to continue to rise.
Also, what kind of income potential will you have with that degree once you get out? What are your life plans? Do you plan on starting a family? If so, when? Do you want to have to support a child, or children, pay for daycare, buy a house or pay rent, buy a car, pay for medical insurance (which is also insanely expensive and always on the rise) and still make large student loan payments on top of it all? That’s a bit of a reality check. Large sums of debt and the interest expense attached are no joke.
Part of my motive for paying them off was simply on principle. I was aggravated by the system that encouraged the decision to partake in the academics that I had. After all, that’s what lead to me being so far in debt to begin with. Everyone is conditioned to value academics and all parents place massive emphasis on the importance of getting a degree. To me, academics have some value but are definitely not the answer to living a successful, fulfilling life. If you’ve read my other content you’ll know that academics never come up as a way to improve your finances.
On a lower level, yes, you can gain a basic knowledge to obtain a job that pays better income than simple labor that typical does not require a degree, however academics will never be the key to someone becoming wealthy. How many people are pumped out of colleges each year, and of them, how many become millionaires? A very low percentage. Academics are not the answer to obtaining financial abundance. At best, they train you to gain an entry level position to be enslaved by some hideous corporation as you happen upon a preexisting bureaucratic power structure which has massive influence over your career advancement. The reality is, for some people the decision to take on loads of debt at the beginning of their adult life ruins their future all together.
Furthermore, of all the things I’ve learned in my adult life, the most valuable lessons came from reading, researching, getting out to experience things first hand, and interacting with highly ambitious, hardworking people in the real world. On a grading scale, I’d give my formal education a 2.0. Yes, I learned some things and came across a few interesting professors, but for the most part I was just reading and regurgitating information, which comes easy to me, and doing what I had to do to get the grades, so I could have the degree, in order to get a better paying job.
I don’t want to totally discredit the experience. Grad school was also a great networking opportunity to meet people that were able to open doors. And maybe I learned a bit more than I’m leading to believe, but I do know a very large percentage of what I learned was fluff that I could have done without. If college didn’t monopolize so much of my time I could have done more independent reading, or attempted to build some type of business which in my opinion would have been of more value to my life. An opportunity cost of getting the degrees I suppose.
Bringing it back to the process of paying off the loans, as advice to anyone who plans on doing the same I would say this. Above all else, be patient. You’re only going to get paid every two weeks from your job on average. If you have side incomes, they’ll only pay out every so often as well. You’ll get your paycheck, make a payment, and then that’s it for a few weeks. You see the progress and you want to hit that balance again, but you can’t until you get paid again! Wash, rinse, repeat for a very long time. You have to realize that paying them off in full will require a lot of paychecks which will take time. Don’t get anxious. Be accepting of this fact and just do the best you can until you get to the end.
I’ll never pay another dime for student loans as long as I live. It’s over. I took my beating, learned a few lessons, and paid my dues. It is what it is. Ironically enough, the day I submitted my last payment for the lower interest rate loans I received a notice in the mail saying that the rate was increasing. Paid them off just in time. I wouldn’t want the dirt bag banks to milk another dime out of me.
Since the loans were fragmented my approach was, take out the highest interest rate, with the lowest outstanding balance first, then work my way towards larger balances, and eventually to the ones with the lower interest rates. This way I was attacking the ones that were accumulating the highest percentage of interest first, and also gaining momentum early on, seeing some of the loans being paid in full. Reflecting on this strategy, this also may have been part of the reason that things really did start to feel awful towards the end. As the larger balance loans become my focus, there wasn’t that milestone of paying another one off as frequently as there was in the beginning.
In the end, it really does feel great to reflect on what I’ve accomplished and to know that going forward I’ll never have to make those thousands of dollars in biweekly payments ever again. It’s a fresh start and an added layer of financial freedom. Now it’s time to reward myself a bit and indulge in some spending before I start saving up money to invest in real estate, day trading, maybe even paying to advertise the content on this blog for the first time. Time will tell. Thanks for reading and good luck on your journey eliminating parasitic debt from your life.by