At the time of this post I have $45,762.77 left to pay off towards my student loans. This has been a long journey coming considering just three years ago I had and exact total of $118,542.87 when I finally finished my MBA. I have broken through the physiological barrier of 50k and I hope to be completely debt free by this time next year. So what have I learned so far?
Re-learned the value of every dollar (and cent)
This sounds basic enough, right? Knowing the value of a dollar is a lesson that parents teach their eight-year-old kids, but somehow I went to school and promptly forgot this life lesson. Before enrolling in my program, I had carefully calculated exactly how much money I was going to need and how much my loan payment would be once I graduated. But there were still too many moments when the money felt like monopoly money. I was already going to have $120k in debt, so was spending an extra $50 or $100 really going to matter?
This reality didn’t hit me hard until I calculated the total interest paid on my student loans last year and the total came to over $7000. All I thought about was how many weeks I had worked during the year just to pay the interest. It was sickening and enough was enough. That was my true breaking point for me to get my student loan debt under control.
I learned that “good debt” can still keep you in a bad place
Once I settled into the rhythm of paying my debt and going to my new job, the loan repayment didn’t actually feel that horrible. It became a fact of life, like paying rent each month. And everyone kept referring to this as “good debt,” so why worry about paying it off?
That ambivalent feeling didn’t last long. I wanted to buy a few condos, travel, and start a business. Around the same time, my job situation changed and suddenly I found myself in a very unstable position. With each day that passed, I realized my good debt was actually keeping me in a very bad place. I felt chained to this high monthly payment, stuck in a job that was only getting worse, and insecure about holding me back financially from perusing other opportunities. The anxiety started keeping me up at night.
While I had been constantly reassured that my loans were good debt, I learned that this debt was going to keep me in a bad, anxiety-filled place if I didn’t do something about it. Once I acknowledged this and put aside the idea of this being good debt, it motivated me to put a plan in place to get rid of it as quickly as possible.
I learned the price of my procrastination (and it was expensive!)
The day I graduated, I started getting emails and letters about refinancing my loans. I had both federal and private loans with an average interest rate of 7% and refinancing lowered my rate to 5%. While not everyone should refinance (especially people who will benefit from government programs like income-based repayment and loan forgiveness, or people who don’t have a job), it was clear that refinancing would save me money. A lot of money.
But the process of refinancing felt complicated, time-consuming, and a little overwhelming. I was moving, starting a new job, and had a lot on my plate. I’d get around to refinancing… eventually.
I never got around to it while interest rates were still low. Now that I had paid off most of my larger interest debts there is no need for me to refinance as the average rate is now around 5%. Who knows how much money I could of saved if I had done it when I first graduated when I could of got a total refinance rate of around 5% at the time.
I learned how to make it less painful
Let’s be honest: there is nothing fun or exciting about digging yourself out of deep debt. I can’t pretend to be enjoying the process. Paying more to my loan repayment than my rent each month is completely depressing. No matter how much I tried, I couldn’t be positive or happy about my debt.
After a few months of being really bitter about the debt, I decided that I could either stay miserable or I could figure out how to make the repayment process more tolerable. I tried to remind myself to be more positive, but that positivity would quickly fade once I realized there was something I couldn’t do or buy because of my loan. This happened when I used my entire bonus check towards my student loan debt. Although I know my future self will thank me.
Walking through the grocery store one day, I finally realized how to make paying off my loan feel a little more like a game rather than a frustrating obligation. I had gone into the store on my lunch break to pick up something small, and was walking to the register with a few impulse buys (as one does). I looked down at the extra $30 I was about to spend on things I didn’t really need and decided the responsible thing to do would be to put back the extra items, which I did begrudgingly.
As I stood in line giving myself a mental pat on the back for doing the responsible thing, I realized that it would feel even better if I put that money directly toward my loan. I logged into my student loan account from my phone and made a quick $30 payment. It was such a small additional payment but I was honestly so excited by it.
This became a game that I continued through the entire repayment process: I could either spend money on something or I could immediately put it toward my loan. Should I grab that green juice or should I put $6 toward my loan? Should I package up some leftovers to bring to work for lunch and put another $10 toward my loan?
I didn’t always choose to forgo lunch out, but anytime I did make the decision to not spend money, I’d make an immediate loan payment for that amount. Seeing all of the little payments add up over the month made it encouraging to keep going.
I learned that I can handle more than I thought
This wasn’t something I realized until recently, but having tackled such a large debt makes me feel like I can take on any financial challenges that come my way. Just a few years ago I had a negative net worth. I had a six-figure loan balance that I felt like I’d never pay off. I felt horrible about my financial situation and I’d stay up some nights worried about how I’d ever dig myself out of this hole.
Now that I’m on the other side of that situation, I not only feel relieved that it’s almost gone, but also confident in my ability to handle any money issues that come my way. I can save, I can earn more, and I can get myself out of a tough situation.
That’s not to say I’m going to run out and take on debt willingly. But if I’m put in a tough money situation again, I feel a lot more confident in my ability to handle the ups and downs that come my way.