How I beat my student loan debt / the 100K chronicles
In lieu of the current debates, policies, and media attention focusing on student loan debt in our country I felt compelled share my experience with debt. For the past few months I’ve been hearing NPR stories on the bills that both freshly graduated students and seasoned alumni are facing post graduation, when the comforts and safety of the college campus bubble finally pops and the reality of the first student loan payment kicks in. Yes, there is a six-month waiting period after you finalize your grades and grab your diploma where you can plan out (and hopefully get employed) just how you are going to manage that seemingly large bill. This is probably the largest IOU you have ever encountered up to this point in life. I spent that six months wondering from time to time just how much per month I was going to be asked to cough up while at the same time feeling out the experience of becoming a real world adult with real world responsibilities at the ripe young age of 23. It was an odd time in life with a balance of now having to wake up before 6 every morning because your livelihood depends on it while still holding on to the college social life scene that helped define and shape who you are and who you’ve become for the past 4-5 years.
But I remember that day in early June when that first white envelope came in the mail and the reality of all those digitally signed loans that I used to pay tuition, rent, books, food, travel/study abroad (I don’t regret that part), and for any other financial surprises started to set in. Don’t get me wrong, there were plenty of times where I could have toughed it out or done without the cash, but the system that was there was just too easy. All I had to do was fill out an online form, send it in, and presto! Two weeks later I had cash in my school account, at an interest rate that was hovering around 10% (my newfound understanding of percentage rates tells me this was not a good rate). The growing weight of my debt and ever increasing interest rates seemed almost laughable while I was still in school, like it is sort of a fictional character that you feel will disappear eventually allowing the story end on a pleasant note. But that character is actually sitting there and lurking, waiting for the opportune moment to step back into the light and make the story more interesting and less fun.
I was fortunate enough to land a job closely related to my field of study (B.S. in Geology) pretty much a month after I graduated. A staffing firm that found my resume online and set up with an interview within a few days. Before I knew it I was on the payroll for a small geotechnical consulting firm and making almost 16$ an hour. Hot dog! This kind of work is not for everyone and is about 95% outdoors all year-round in New England (think negative winter wind chills and sweltering 100+ degree dog days of summer outside, all day). Working nearly 12 hours a day 6 days a week, I was making more money than I ever had before and felt like I owned the world. So when the first bill came in and I saw what the minimum payment was ($575 a month) and compared it to what was going towards the actual principal balance (about $40) I became confused as to why on earth anyone would make just a minimum payment on a loan . . . besides the obvious reason of not having enough money to do otherwise. Paying the monster down by their method would take me 30 years, and would just about double what I originally borrowed, even after consolidation!
So right then and there I made an austere financial pact with myself and proclaimed that I will put as much money as humanly possible at this beast every month while still maintaining my personal and social happiness to the best of my abilities. I started off with a first payment of around $1500.00, and tried my best to make it $2000.00 a month from there on out. Any extra overtime I received, anytime I got a raise or even a Christmas bonus it usually went right to the loan. I ballooned the hell out of my payments, as I saw the trap that loan lenders thrive on for people who can’t pay more than the minimum. When my accountant (I hate doing taxes) saw what I was doing she was shocked. She asked how I was managing to live after doing the numbers. My only reply was “Pretty well actually”. I was working my ass off, but it didn’t seem like life was bad at all.
It’s about prioritizing wants versus needs on a budget. Sure, I didn’t go out on the town as much as I would have liked (living in Boston made this tricky) I didn’t travel as much as I could have (one of my only regrets), and I didn’t buy unnecessary luxuries for living. I didn’t have a flat screen TV, a new car, or the latest and greatest digital toys. I did eat well, and learned how to cook well. I did buy new things when I needed them. I did go out socially, usually by sneaking a flask into a bar (saves thousands, but don’t stiff the bartender on tips for sodas). I always lived with roommates instead of going on my own and paying twice the price in rent. I made myself meals routinely 3 times a day (pack a lunch, save a bunch). I made coffee instead of buying it on the way to work. I kept the thermostat at 62 in the winter and wore extra clothes instead. When times are tough, even if you are making them tough, adaptation is the best tried-and-true method to keep going. After 4.5 years I paid back roughly 100K with loans and interest while putting away about 25K (half of which the stock market decided it needed more than I did) and investing elsewhere too. There are a hundred ways you can cut back on every day costs that can go directly into your savings or (in my case) towards debts. For example, I currently rent my place out on the weekends just to pocket extra dough. Opportunities are out there. You just have to be willing and able to find them.
I do realize that I was fortunate enough to land a great job as a consultant and had great perks that made this seemingly nutty goal possible (salary + hours for anything over 40, gas mileage, Per Diem for jobs away from home). For graduates of today finding a job is turning into a fiasco that I would not want to be a part of. It’s a different world today than it was 4.5 years ago and I hear the nightmares of 1-2 year job hunts that would wither me down to my wits ends if I was in their shoes, I’m certain. The rates at which these private lenders (ahem, Sallie Mae) are loaning out money are appalling. It is almost a comparable to putting it all on plastic instead. Private lending should is an untamed area that I think should have some sort of cap or regulations. I do realize that goes against capitalism and the free market system but goddamn the system is lob sided for the borrower. I feel we are kind of being sold on the idea that college is the only way to make a suitable living and it kind of perpetuates this process. Don’t take this last sentence as patronizing pontification; college opened the doors for me that I would have never been able to even stand in front of without my degree. That is the whole idea behind it. The feasibility of it got lost along the way somewhere.
I also believe that more information should be considered and discussed through the financial aid offices at your institution. I vaguely remember going into the financial aid office during my first days at college and being explained the award that I had been offered. 50 thousand dollars seemed like a hell of a lot of money that a school was betting on me to succeed. I then learned that 50K was the total award (at 38-44K yearly tuition with room and board from start to finish) and that the rest was on me. I also did not fully understand that I would be charged interest from the date the loan was signed. I looked at my first bill in horror realizing I had compounded 11K in interest already before I even knew I had the chance to send in money. Again, it was probably all in the fine print but as an 18 year old trying to figure out a whole new world away from the comforts of home it was a misleading and somewhat desensitized process of giving a young adult keys to the debt candy shop.
My best advice is to throw as much money as comfortably possible at these loans while you are young and not tied into more complex fiscal situations. Take it on the chin, so to speak, before you are responsible for more than just yourself, your house, car, etc. With outstanding student loan debt nearly breaching 1 Trillion dollars (I can’t even count that high) surpassing total US credit card debt (holy smokes) I believe that there should be a change in the system. I wish I had a solution other than lower the cost, which we all know is not going to happen. The cost of college has been ballooning at an insane rate (up 437% from 1982 to 2008) and it doesn’t seem plausible to keep this up. Young Americans today are considering the cost of college versus the debt they will accrue (coupled with the forecasted salary they receive after graduating) and for the first time seeing it might not pay off. I am certain I want to further my education with an advanced degree but am very hesitant for these reasons and the pangs of close memories of my repayment process. Something is wrong here.