I had them twice: first for my undergrad degree, then for my masters degree! My undergrad loan was about $20,000 and, my graduate loan about $35,000. Putting these number down remind me of how far I have come. When I took the loan, I thought, like many, that I will pay the minimum until I paid it off. I didn’t see the need to pay it off faster until I calculated the interest I will be paying if I take 20 years to pay it off.
There were some mixed emotions; on the one hand, I was grateful that someone would let me borrow that much money because I would not have been able to attend school otherwise. But on the other hand, I was angry that they would charge that much when a degree doesn’t even guarantee a job.
I’m happy to report that I’m debt-free now, with the last $26K paid within a year. It’s no hero move here, just sacrifices and intentionality. I had to do things differently to carve out that much in my disposable income.
Still in School?
If you are still in school, you might want to consider reducing the amount of loan you take out. The lower the loan is, the easier it will be to pay it off. If you can, paying cash would be even better. But most people don’t have that money saved by the time they start school.
You don’t NEED that much
First, take what you need only for tuition (and maybe room & board), don’t take everything they offer you. I know it’s tempting, especially as a broke college student, but your future self will thank you. This is not very popular, but live at home not on campus. I understand you want to be independent and “free” but you don’t have the means to do so.
The government can help
Second, take subsidies loans when possible. With subsidized loans, the government pays your interest while you are still in school. Unfortunately, graduate schools don’t offer those types of loans.
Get a job
Third, work while in school. It saved me a lot of money because I was able to pay other school expenses on my own (supplies, books, transportation), and I didn’t go to any “college parties/ games” since I had to work all the time.
I already took loans, now what?
If you already have the loans, it’s not too late to tackle them. You can use the same strategy that I used (which helped me pay off my loans aggressively).
- Put a hold on investing (just for a while) to free up money to put toward your student loans.
- Put a hold on any major expenses that are not urgent because it’s cheaper to pay the loan first and save on the interest expense.
- Throw any extra windfall to the debt. If there isn’t any, create one. I found a part-time job as a bookkeeper, and every dollar I earned went to paying off the debt. We all want to work smarter not harder, but sometimes, you need to work hard for a season.
- Stay focused and away from temptation. It’s discouraging when you have a huge debt and, you can’t see the progress as fast as you want to, but believe me, it’s just a matter of time before that mountain of debt starts shrinking!
You will get to the other side. And talking from the other side, the grass is a little greener here! Paying off debts freed up cash for saving and investing. I realized that if I can pay $26K in a year, I can save or invest $26K per year once the debt is gone! If you keep that same discipline after the debt is gone, that “extra” income becomes your bonus, your raise. You can’t always wait for your employer to give you raise; sometimes, you need to give yourself a raise, and this is a great way to do that.
Why do I call student loan “good debt” myth? Because there is no good debt. There is necessary debt; but debt is, and will always be a hinder to your financial success. You want to get rid off it as soon as possible or avoid it if you can.
“Student debt is a product that has been sold to us with such repetition and intensity that most people believe they can’t live without.” Unknown
