How I Paid Off My Student Loans ($31K) in 4 Years!
First of all, I am in no way a financial expert or someone experienced enough to give financial advice. Rather, I think having a money conversation is something that shouldn't be intimidating. And talking about money shouldn't be taboo. So if you're interested hearing my story and my tips, keep reading.
Background
I went to a small private college in Madison, WI. Based on my GPA, I was eligible for the college's Presidential Scholarship ($21K a year). I also got around $10K worth out outside scholarships. I am also very lucky to say that my parents helped me while I was in college so I could focus on my studies. But once I graduated, I was on my own.
I graduated on time in May 2017 with a BSN in Nursing and with $31K worth of debt. I took my NCLEX in June and started working pretty much right away in July/August.
In the beginning, I didn't really know much. All I knew was (1) I'm auto enrolled to make minimum monthly payments and (2) eventually those automatic payments will pay off my student loans. That's all I needed to know because eventually they'll be paid off... right?
However, the math doesn't exactly add up the way you'd think... Even though my interest rate was less than 5% (and automatic payments lowered my interest rate ~slightly~), with that large of a loan the amount of interest I was accruing wouldn't be touched by my minimum payments. That's the thing with small interest on big loans. And the longer it takes you to pay them off, the more interest will accrue. That's why you hear of people paying off loans for years and still not touching the principle.
So I started my financial literacy journey. I started on YouTube, watching "Mistakes I made in my 20's" videos and Dave Ramsey podcasts. I took the Coursera course "Financial Planning for Young Adults" (I wish I would have taken this at the end of high school or beginning of college). And I began to talk to coworkers about money and money management. I watched the minimalism documentary and read Marie Kondo's book.
My mindset changed. I became more empowered about my money and finances and how I was living my life. So, I changed my autopayment to more than the minimum and threw extra money at my loans when I could.
Then in March 2020, Coronavirus hit. Federal payments were put on forbearance... and then put on forbearance again. During this time I did continue to make payments, although not as frequent. Then once Biden was announced President-Elect I stopped making payments hoping that there would be some sort of student loan forgiveness. At this time, I had less than $4000 in student loans and I had plenty saved up. But if that would be wiped clean (and considering no interest was accruing at the time) I figured not making payments was fine. And if no student loan aid was enacted, I would just resume payments once the forbearance period was over.
Eventually I realized student loan forgiveness wasn't in the cards for me (although hopefully somewhere in the future for you). So I continued to make infrequent payments throughout the rest of the forbearance period and I am proud to day I am student debt free! ($20K paid ahead.)
The Steps AKA What I Did
1. Cut back on spending... including living at home
Once I graduated college, I went and lived with my parents for about a year. I know, I know, that idea probably doesn't sound too appealing to some of you. Not to mention, you've probably heard it before. But here's my mentality to it. I knew that renting a place by myself would be expensive and that I would need some savings before moving out. And I'd rather live with my parents now then later down the road. I feel that if I had moved out right away and then had to move back because I couldn't afford it... that would've been harder.
When I moved out, there wasn't much to cut back on because I already hated spending money on frivolous items. When I would shop, I would check the sale section. And thrifting has always been good to me, I love finding things at a deal. The thing I spend the most money on by far is food - I've gotta eat!
I recently got a new car, but only because I drove my last one into the ground. At one point I was checking my tire pressure weekly just so I wouldn't have to get new tires. I hated the idea of having a car payment again. But as the repairs were getting more and more frequent, I knew it was time to upgrade.
2. Increase your income
This past spring/summer I worked as a tennis instructor. And before that, I tried my hand as a Pure Romance consultant. Increasing your income can look like anything. Ideally, if it's a side hustle, it would be something you find fun. And if it's a service you offer, raising rates to match the quality you're giving the costumer (ie. as you grow from novice to expert). If it's in a more traditional setting, it's advocating for yourself and asking for a raise.
3. Create a budget... kind of (have a vision)
A true budget isn't just knowing where your money goes. But delegating where your money is going. In that sense, I don't have a true budget. But I always check the status of my money at the end of the month. If at the end of the month, I haven't saved any money while making minimum payments on my car (and previously student loan), I knew I would have to make changes in the upcoming month.
A budget should be a tool, so if you create a budget but never use it - then that tool is failing you.
I hope what I talked about above is somewhat helpful and I look forward to next time.
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