Hi there /r/PersonalFinance!
I know we occasionally have weekly threads for good news like this, but one of my smaller goals over the past few years has been to self-post on here when I was all paid up, so I thought if I provided some details, a narrative, and advice related to my situation, I could perhaps make it worthwhile to anyone who might find my situation similar to their own.
Now I wish I could tell you I followed a strict payback schedule the entire 5 years of my journey, but the reality is that life happens and you can't always pay the same amount every month as planned. As long as you trend in the direction you set out, however, I personally think that's all that matters. So, let me break down some highlights over the past 5 years and explain how they affected the loan payback situation. Then at the end I may rant for a bit. Fair warning.
All of this took place in Minneapolis, MN, just to give you an idea of my average cost of living.
Late 2011. I graduated at the end of 2011 without a full time job and about $75k in student loans. I had a promising internship that was paying me a small stipend of $1400/month. I was hoping to get hired full-time by them within 6 months.
April 2012. Internship offered to hire me on full time salaried for $25k. I tried not to laugh. Luckily I had been interviewing around while they dragged their feet. Turns out a lot of people there made no more than $28k, which broke my heart.
May 2012. Accepted a full-time job offer at another company for $45k. Began paying back my loans with just minimum payments for the first few months as I created my budget and figured out what I could afford to put towards them. I also spent a few thousand on furniture plus a few other improvements for my soon to be bachelor pad (1 bedroom) after parting ways with a roommate and our 2 bedroom.
July 2012. Moved into my own place. My rent went from $820 ÷ 2 = $410/month to $650/month. Worth it to have my own place. If the 1 bedroom price still seems low to you, it’s because I lived in an apartment coop, which among other things means that rent is/was pretty below market. I decided that even if I could afford a better apartment later on, this one would serve my loan payback situation better, so I was staying put indefinitely.
August 2012. Finalized my payback plan and optimistic goals. I netted about $2800 per month from my $45k/year job, and my month-to-month living expenses only added up to about $975. This meant I had $1825 to put towards 401k, savings, and student loans. I did the minimum for 401k to get employer match and threw a piddly $50/month in savings leaving me with $1650/month to pay towards my loans (and my minimum payment was only about $500). If you do the math, that’s around 60% of my take home pay that I was putting towards my loans every month. Until…
February 2013. ...I met a guy on a dating site that eventually would become my first ever boyfriend. I quickly discovered that dating and actually having a social life (something I never really had throughout college) is expensive. He made significantly more than me (about $30k more to be exact), but I didn’t want nor expect him to pay all the time when we’d go out, so I helped too. This put a hindrance on my loan payback throughout 2013 and 2014, as my loan budget of $1650 was the largest and easiest pool of money to dip from when dating-related monthly expenses (eating out, movies, etc.) got higher than planned. I can’t give you concrete numbers as it varied from month to month, but based on my original projected payoff date and my actual payoff date, I’d say the expensive early days of our relationship set the loan payoff back maybe a year. But spoiler, he turned out to be the love of my life and we got married in 2016 so it was definitely worth it.
August 2014. Two years into my $45k/year job, I'd gotten fed up with being overworked and under-appreciated. So I left that job (doing what I went to school for) for a higher paying job doing a skill I’m self taught at. That's right, I was now making more for something I didn't even go to school for, making my $75k degree seem useless. (This is important later when I do my takeaway rant.) I was now being paid $60k/year. Oh, the boyfriend also moved in with me at this point since his lease was up, so my living expenses went down as my salary went up. Nice, huh? He had tried convincing me to move in with him and renewing his lease where he paid $1600/month for one of those new apartment buildings downtown but I just couldn’t justify it, even when he offered to pay more than half. He’s a smart man and quickly realized how much money we could both save if he moved in with me and our per-person rent costs were only $650 ÷ 2 = $325, so he was pretty easily convinced. We did get a parking spot at my apartment for his car which was another $60/month, but at $710/month total, still trivially low by comparison.
December 2014. I paid off my first loan! It was a private loan, originally taken out in 2008 for $14k with a 10.25% interest rate. Woof. I know. Oh, and it was unsubsidized, so it accrued $4000 in interest while I was in school. Good fucking riddance. Luckily this was the only loan anywhere close to that bad. I'm a little embarrassed to admit the origin of the loan, but this post is about transparency to my situation, so I will. It was taken out for living expenses for the 2008/2009 school year. I didn’t have anyone in my life smart enough to tell me that was a horrible idea. I figured it would make school easier, not having to work and allow me to focus on my studies 100%. Stupid, stupid reasoning. I ended up getting a part time job the rest of the time I was in school as a student worker and did freelance on the side, and my grades were just fine.
August 2015. Boyfriend and I got engaged. He asked, I said yes! Wedding planning didn’t start for a few months more, but after talking about what the wedding would be, we realized that we both wanted a somewhat big wedding. However, neither of us comes from families in any situation to help pay for a wedding, so we decided that provided we could pay for it all before the wedding – i.e. we didn’t want to owe on it after getting married – then we would have our somewhat not-so-modest wedding. Money would eventually be redirected from large student loan payments to help pay for the wedding. Not the best financial decision, but it was important to both of us so we made it happen.
January 2016. After a year and a half of living together handling our finances separately, we realized that if we were going to be getting married, we didn’t want to handle them separately any longer. We were one team afterall, and it would make paying for things like the wedding a lot less of a headache. Combining our incomes, we now jointly earned $150k/year. Student loan payment dropped to $900/month to set aside money for the wedding. Forgot to mention, he didn’t have any student loans himself, but he did have about $12k remaining on a $35k car loan. We would be tackling that together too. Oh, and our rent went up $30/month. Still amazingly affordable at $740/month.
June 2016. Fiancé got a new job for $105k/year. We now jointly earned $165k/year.
October 2016. We got married, and everything was perfect. We pinched pennies where we could and primarily spent money on things that were important to us – i.e. we spent nearly $3000 on a damn good videographer because we wanted to be able to relive that day for ever. But when it came to booze, we just bought some cases of Two Buck Chuck from Trader Joe's and got a keg of a good beer and a keg of good cider from a local liquor store on the cheap. No open bar and our guests were just as happy. All in all, the wedding probably cost us $25k, BUT a good majority of that was on things for us, like photographer, videographer, etc.
December 2016. I got a new job. New job paid $75k/year, and I'm still not doing what I went to school for. We now jointly earned $180k/year. With the wedding paid off and the holidays over, it was now time to boost loan payments into turbo.
January 2017. I did say turbo, right? This month we made a student loan payment of $3800. God damn that was satisfying.
February 2017. The next few months will be similar. This month it was $3500. I can see the finish line. Around this point there’s only $12k of the total left.
May 2017. Final payment for $4010.38 submitted over the phone (to verify it was actually paid off and that no $0.02 in interest would bear it's ugly head the following month.)
I'M FREE!
Okay. Let's give you some graphs.
- Here is a screenshot of my "Net Worth Over Time" graph from Mint. The point when everything first drops to the red is when I first added the bulk of my student loans to my Mint account. The previous 4-5 years I had been naïvely watching my "net worth" in Mint grow, quietly ignoring the fact that I hadn't added my student loans to the picture yet. After graduating and getting ready to be serious about paying these off, I couldn't fool myself any longer. The second big dip in the red is a few months later when I realized I had forgotten to add that private loan (mentioned earlier) that I had taken out the first year to live off of. If it wasn't clear, taking that loan out was probably the second stupidest decision I made in my higher education journey; the first being going to an insanely expensive for-profit college.
- Here is a screenshot of my payoff history of the primary chunk of loans. You can cross reference dates above to see what happened where if you want.
Takeaways and Words of "Wisdom"
- By far biggest thing that allowed me to payoff my loans at the rate I did was cheap rent and all-around low cost of living. I know finding super affordable (and decent) rental units simply isn't possible in some areas like Denver or San Francisco. That said, if you live in a place like that and you want to get rid of your loan debt FAST, you may have to consider moving somewhere cheaper while you tackle your loans. My brother, for example, who lived in LA after graduating, spent almost a year working remote in South Dakota in order to live dirt cheap while making an LA income. I know this isn't possible for everyone, but if you can make it happen, it will do wonders for your repayment schedule.
- Having paid back this giant debt that 2008 me decided to take out has kind of made me 1) skeptical; and 2) bitter regarding higher education as a whole. At this point, I honestly don't think a college degree is necessary for a good chunk of jobs out there. Unless you want to go into medicine or law, I honestly think you can learn what you need to learn online for free (or, at the very least far cheaper than college) via online courses or in trade school settings. This is especially true in the creative industry that I'm in. I wouldn't recommend ANYONE who wants to get into any sort of creative field (graphic design, web design, animation, photography, etc.) go to college for those things, even if the college tries selling you with compelling placement rates, likely post-grad incomes, etc. Seriously. You can get a Digital Tutors account for $50/month and learn way more than you will at those $20k per year colleges. Not to mention that design/advertising agencies don't give a crap where you went to school. All they care about is your portfolio – what you've done, who you've done it for, and what you can do for them.
- On the same note, I will not be one of those overbearing parents that insists to my future kids that they have to go to college if they want to be successful in life. These days, there are so many other ways to learn and build a profitable skill that I wouldn't dream of pushing college as the sole means to their future.
I didn't post this here to humble brag, and do know that I consider myself one of the lucky ones – actually being able to pay off my student loans 5 years out of college. And I know the student loan landscape is grim for a lot of people out there, as they realize they may never be able to afford a house as they deal with this overwhelming burden hanging over their heads. The best advice I can offer is to sit down, formulate a plan based on your current and projected income and see if it's possible. And if it is, do it! Duh! If it's not, play with the numbers. How much sooner could you pay them off if your rent was $100 cheaper per month? $200? Can you possibly move to a lower cost of living area?
Also. Careers. Don't fall into the trap of a "dream job." My dream job, or so I thought, was at that company that offered me $25k. At one point I was honestly running the numbers to see if I could make $30k work if I was even able to get them up that high. Screw that noise. I can't imagine how screwed I would be today if I had taken that job. On the same note of "dream job" traps, don't feel locked into the industry you went to school for. Part of the reason I left the field I went to school for was because it paid shit. It's a highly technical creative field and people here should be averaging at least $75-80k per year doing it – but they're not! Talking to friends in the field, it seems like the high is around $55-60k or so. It's ridiculous to me that they stay doing it. Yes, yes, passions and dreams jobs – but I say if you're that passionate about that kind of work, you'll find time to do it even if it's not at work. I'm not suggesting everyone get a shitty office 9-5 job that they're miserable at, but my point is that you should explore other fields that you may be good at if they pay more.
Okay, I think that about wraps it up. I didn't intend to write a full-length novel, and I'm kind of ranting here towards the end, but hopefully some people find the post as a whole somewhat useful or can at least relate to certain parts of it. Thank you for reading and hearing me out, and thank you all who've shared your stories with me over the years. It's been exciting putting myself in your shoes and finally building up to my own payoff story.
I'd be glad to answer any questions people might have as well, so let's hear them!
TL;DR: Paid off $75k in student loans in 5 years; degree was pointless; overall became bitter about higher education in the process.
Submitted May 15, 2017 at 10:05AM by xander-7-89 http://ift.tt/2qk8nuM
