YOU GUYS. I DID IT.
After my May spending report, that “student loans” line item is going to disappear and I’m incredibly, incredibly happy about that.
See ya, student loans (and almost exactly four years after I graduated college, too)! 🎉 pic.twitter.com/C6iIeu8kvv
— Erin | Reaching for FI (@reachingforfi) May 8, 2018
I did it and that’s fucking awesome.
But my first and primary instinct after saying that is to immediately downplay the significance of that accomplishment. Because I didn’t pay off $50,000 or $30,000 or even $15,000 worth of student loan debt four years after graduation. In fact, I had less than five figures of student loan debt—my total loan amount came to about $7,000.
Thankfully not a huge burden for me
I had lots of help paying for my
useless liberal arts degree. My school offered me a massive merit scholarship that covered the bulk of my tuition and was the only reason I could even think about going to a private university in DC. I had a few other small scholarships, including a Girl Scout one for one of my semesters abroad.
Because my mom’s been with her employer so long, she was grandfathered in for a generous tuition benefit that we used for some of my later semesters, especially when I was no longer their only kid in college. One of my grandparents chipped in to help cover my room and board since unfortunately scholarships are often only for tuition. My parents paid for the rest.
My dad lost his job halfway through my freshman year and it took over two years for him to find another one (age discrimination is so real, y’all. He couldn’t even get temporary manual labor jobs because who wants to hire a guy that’s nearing 50? 🙃).
Talk about financial anxiety. I cannot describe the amount of guilt I felt going back to school after winter break (this happened right at the beginning of January. Happy new year!) for costing my parents so much money, even though they said not to worry about it. That horrible, horrible feeling I felt in the pit of my stomach for the entire next semester and beyond was a huge contributing factor to why I still feel so much money anxiety to this day, even though I’ve been working on getting my financial shit together for more than a year and I’m doing well.
My FAFSA was already in for sophomore year and the financial aid office declined to adjust my financial aid package retroactively even after appealing it (thanks, you jerks!),[*] which added guilt on top of guilt that I couldn’t even get my sophomore year to cost less. After that the numbers finally reflected our financial situation, so I had both a Pell grant and work-study my junior and senior years.
So I graduated with “only” about $7,000 in loans. Compared to people’s stories about paying down $10,000-$20,000 of debt a year, taking multiple years to pay mine off seems laughably insignificant. And I got a massive $1,500 gift a few months after graduation. So really it was more like $5,500, which makes my pace even more embarrassingly glacial.
I did it wrong
Y’all have seen my spending reports. I don’t exactly have a spare $10,000 (or rather $7,000) laying around to just throw at my debt; I never have. That’s no excuse for not having hustled to bring in an extra few thousand dollars so I could pay it off years ago, but it wasn’t enough of an emergency to feel like I needed to bring in an extra few thousand dollars. Because let’s be real, my excuse is that I’m exhausted enough as it is working one (and now two) jobs. And since I’m in the fortunate position of making more than enough to cover the basics, I believe life is for occasionally living, not for constantly thinking and stressing about and working to bring in more money.
Plus, let’s not forget, I was completely clueless about anything to do with personal finance until a year and a half ago. When I graduated, I was under the impression that even if it took me the full eight or ten years to pay off my loans (I’ve honestly forgotten my repayment terms by this point especially since I was always on track to pay them off early), that was fine. After all, everyone has student loans and it takes them years to get rid of them. It’s just normal. I could afford my monthly payments and was paying extra every month, so ostensibly nothing was wrong with that situation. 🤷♀️
And yes, my highest interest rate was 4.25%, which means paying down my debt on an accelerated pace was suboptimal when I could’ve invested that money instead and enjoyed a way higher rate of return in the market the past few years. Hindsight is always 20/20. What’s not suboptimal is the fact that that debt is gone and from here on out that’s $110+ that’s now mine every month.
However you look at this, according to someone else I did this wrong.
Good thing personal finance is personal and how I paid off my own loans was my choice!
Credit where credit’s due
I’ve always been thankful for every penny my parents and grandfather paid for my college education; I knew that having $7k in loans put me in a much better position than the many, many others who graduated with significantly more debt (and why do you think I’ve never seriously considered grad school when I don’t know what degree I’d get, even when my mom was pushing me to go straight into another program after I left undergrad?).
I’ve never made a ton of money. I spent two months unemployed and spending down my savings after I graduated, so when I got my first official job I was essentially starting from zero (and a negative net worth thanks to my loans). That’s not an easy place to start from when you don’t make more than a moderate income.
What that screenshot above helpfully tells me is how much I paid on my loans (plus some of that amount was origination fees, sigh) and how much I ended up paying in interest. Really I paid off $8,000 once you factor in interest.
But what it also shows is that when I could afford to (or remembered to), I was making payments on my loans even before I graduated. With the grace period I didn’t have to start making payments until 2015, but aside from the payment at the top there, which must’ve been my first auto payment, every single other one of those payments happened before then. A few of my loans were unsubsidized and accruing interest while I was still in school, so I was attempting to alleviate that by sending some money over every now and then. I couldn’t pay much and I wasn’t doing it regularly, but at least I was trying.
And I always, always paid more than my minimum payments. I chose $100 at first because it was a nice, round number (which at some point my loan provider decided should be $100 + a random $10.25 each month because why not?!). That wasn’t too much over the minimum when I was first starting out. But it was still some extra, and as I paid off more, that $100 went farther each month.
I think part of the reason this doesn’t feel as big to me as it should is because at this current moment I don’t have $0 of debt. I didn’t plan well enough to pay off the month’s spending on my credit cards to coincide with my last student loan payment, so I don’t have a neat little picture of my assets/liabilities ratio with no liabilities. Oh well.
Plus I just opened a new card for the points (#babytravelhacker) that also happens to have a 0% interest rate for the first year. So I’ll be floating my car insurance payment and some of the rest of my minimum spend. It won’t be for very long, just a few months, but yes, I’m briefly going back into a bit of debt because floating just a few thousand feels better to me than gutting my emergency fund (and my cash flow isn’t yet where I’d like it to be). Besides, I accidentally paid a few hundred extra on my student loans in April, which I was planning on using for my car insurance instead. I wasn’t actually planning to pay off my loans for another few months so this post is ahead of schedule.
Debt is debt so it’s really not different, but that very deliberate move does feel very different (and a lot better) than the consumer debt that I’d been carrying for the last few years and paid off a few months ago. Plus wanting to finally be debt-free for real is going to be motivation for me to get rid of that float sooner.
It’s not a sexy story, but it’s mine
So no, I don’t have a sexy debt payoff story at all. I didn’t save half of my income right out of college so I could pay off my debt right away. I didn’t pay off truly intimidating and inspiring amounts of debt in a single year.
But my story isn’t anyone else’s story, and I’ve written here multiple times that comparing your journey to someone else’s is counterproductive (especially since we’re all freaks who think saving only 30% of your income means you’re not doing well—OKAY, IT’S ME. I’ve thought that multiple times—when for people outside of the FI community that’s unthinkable). Plus I’m sincerely grateful I’ve never needed to pay off so much debt in a short amount of time; I’d much rather have only paid $8,000 total when all was said and done instead of significantly more. So for once I’m going to take my own advice and quash the knee-jerk reaction to downplay the significance here.
I just paid off my student loans and that’s totally badass.
[*]Actually, that’s not quite true. I think they adjusted it so I was eligible to take out an additional $1,000 in loans. 🤦♀️