My College Experience and How We Eliminated $88,000 in Student Loan Debt
My college years were truly an amazing experience, filled with making new friends, learning to live independently, and, yes, some fun partying. Alongside these memorable moments, I also gained valuable knowledge from advanced engineering and management classes, which laid the foundation for my professional career.
However, the one downside to this incredible journey was the substantial price tag that came with it. With annual expenses of around $18,000, pursuing my degree was far from inexpensive. This was further exacerbated by my decision to pursue a Master’s degree, which added an extra year of costs.
On a side note: Is obtaining an advanced degree worth it? While I can’t speak for everyone, I can share that having a Master’s degree played a pivotal role in landing my first significant job and subsequent salary increase. If your education aligns with your career goals, it can be a wise investment in your financial future.
Accumulating $88,000 in Student Loans By the time my wife, Jane, and I completed our college education, we found ourselves facing a collective burden of over $88,000 in student loan debt. This sum was divided between us, with Jane shouldering $60,000, and myself carrying approximately $18,000.
I should mention that both of us attended a state university, benefiting from the lower in-state tuition rates. This decision helped us mitigate significant costs compared to attending a more expensive out-of-state institution.
I was fortunate enough to receive some financial assistance from my parents and grandparents, which helped reduce my loan burden. Additionally, I worked as a Resident Assistant for four years, granting me free housing, a stipend, and reduced food expenses. While I may have missed out on some of the partying, the substantial financial incentives made serving as a Resident Assistant a smart choice.
Jane, on the other hand, had to shoulder the majority of her student loans. She worked part-time throughout college at a local restaurant to help offset the costs. Nevertheless, she still graduated with a substantial $60,000 in student loan debt.
Income and Expenses After Graduation After graduating, Jane and I embarked on a job hunt, during which we moved back into our parents’ homes for approximately nine months to curtail our expenses. Once we secured our first jobs, Jane’s salary stood at $36,000, while mine was $55,000 annually. Although our combined income of $91,000 seemed promising, it dwindled to around $65,000 after factoring in taxes.
Living with our parents initially allowed us to keep our living expenses in check. However, this period was short-lived, as we got engaged and decided to move in together. We had now officially transitioned into adulthood, with full financial responsibilities.
In those early years, our expenses included apartment rent, which later transitioned to a mortgage; two car payments after our cars gave out simultaneously; the purchase of furniture and household items for our apartment; our wedding and honeymoon; and the standard costs of living, such as food, utilities, and entertainment. Despite juggling these additional expenses, we remained steadfast in our commitment to pay off our student loans. We directed all available spare funds toward this endeavor during the initial years.
Paying Off Our Student Loans Jane and I were united in our resolve to eliminate our student loans as swiftly as possible. To us, it made no sense to bear the burden of 6% to 9% in interest on our loans. Our goal was to reduce this cost by paying off our loans early, providing us with peace of mind and improved financial flexibility. We were determined to eradicate this financial obligation.
During the first few years, we had limited disposable income available for our student loans. We allocated a portion of this to our savings account while channeling the remainder toward our student debt.
Our primary rule was to consistently make on-time payments on our student loans and endeavor to exceed the minimum requirement. As our incomes increased, we raised our contribution rate accordingly. Whenever we received extra money from side gigs or birthday gifts, we funneled it toward our loans.
By remaining dedicated to our goal, we used every available resource to contribute as much as possible to our student loan debt. Remarkably, even as we purchased a house and two new cars during this period, we successfully paid off the entire $88,000 within five years.
Tips for Paying Off Student Loans In addition to paying as much as we could, we implemented several strategies to accelerate our debt repayment.
- Track Your Loans Our first step was to ensure we had a comprehensive understanding of the locations of all our student loans. While this might seem obvious, we each had five or six different loans spread across various lenders.
We made sure to have access to each lender’s website to monitor our balances, understand the associated interest rates, and manage our payments. This knowledge allowed us to formulate a strategic plan for tackling our loans.
- Consolidate Your Loans When possible, consider consolidating your loans to streamline account management. Loan consolidation might also result in lower interest rates, potentially saving you money. Contact your lender to inquire about loan consolidation options.
- Prioritize the Highest Interest Rates We initially focused on repaying loans with the highest interest rates. By eliminating the 9% interest loans first, we saved more money that could later be directed toward paying off the 6% loans. Paying less in interest allowed us to allocate more funds toward the loan principal.
- Utilize the Snowball Effect We harnessed the snowball effect, which entails paying off small loans first and then redirecting that money toward larger loans. This approach allows you to accumulate more funds for repaying the larger loans, which might otherwise take longer to eliminate.
We tackled smaller loans with lower interest rates but smaller balances in the beginning, allowing us to pay them off completely. This approach provided a sense of accomplishment and served as a motivator to continue our debt repayment journey.
By combining strategies of repaying smaller loans and focusing on the highest interest rates, we expedited the payoff of our entire loan balance.
- Pay More Than the Minimum We consistently made at least the minimum required payments to avoid additional fees. Whenever we had extra funds available, we applied them to the loans with the highest interest rates. We aimed to round up our payments to even amounts, even if only by a few dollars. Continuously paying extra toward the principal significantly shortened the overall loan term.
- Create a Budget After identifying the loans we wanted to prioritize, we devised a budget to determine the amount we could realistically contribute. This budget provided confidence in our ability to cover essential expenses while simultaneously paying down our loans.
- Pay Early and Often Whenever possible, we made early bi-weekly payments instead of monthly ones. This practice prevented late fees resulting from disorganization and allowed us to make an extra payment each year, keeping us ahead of schedule.
We didn’t wait for our grace period to expire after graduation; we initiated payments immediately to minimize interest expenses. As soon as our income permitted, we began reducing our debt.
- Balance Your Incomes as a Couple Working together as a couple was essential to achieving our financial goals. Since I initially had a lower loan balance and a larger monthly paycheck, I paid off my loans more quickly and shifted my focus to covering our living expenses, including rent, cars, and food.
This allowed Jane to dedicate almost her entire income to paying off her own loans. Without the additional financial burden of contributing to other expenses, she could allocate significant sums to her student loans.
- Live Below Your Means Since paying down our student debt was our top priority, we made every effort to reduce our living expenses. We cut back on discretionary spending, dining out less frequently, and even endured a chilly winter by minimizing heating usage. By saving in other areas, we were able to direct more funds toward our loans.
Our unwavering commitment to paying off our student loans enabled us to successfully achieve our goal within five years. Every individual’s financial situation is unique, but it is feasible to eliminate debt even with modest incomes.
