I must confess, the only debt I’ve had so far is student loans. While generally considered “good” debt because a degree generally leads to higher lifetime earnings, you still own somebody some money. Sometimes a lot of money.
I went to a small, private liberal arts (read: expensive) college. Total loans: about $20,000. I also went to back to get my master’s degree in Public Health at a larger private school (read: crazy expensive). Total: about $30,000. However, I was able to pay both off in about five years. (Sorry, this isn’t a “I paid of $100K in 2 weeks” article.) There was no magic bullet, but slowly and steady progress. I don’t have any regrets about attending either school, however there are some things I did might have done different if I had a time machine.
Side note: Mr. H&H had to good sense to attend state school (read: mad cheap). When we got married and he told me how much he owed, I laughed. We put that one away relatively quickly. Now back to my story.
What I Did Right
- I took out a reasonable amount
While no loans would have been ideal, I was conscience that I needed to keep my borrowing at a minimum. I often read author Liz Weston’s work on the used-to-be-awesome MSM Money site. She advised not taking out more than two-thirds of your starting salary in loans. At the time the starting salary for my field was around $30,000 so having $20,000 in loans was right at the cap.
- I lived cheaply
I was still living at home once I got a full-time job (with dental!). Like a good daughter, I wrote a check for my mom for a portion of the rent, but she refused to accept it. (Hey, I tried). But instead of spending it I socked it away and continue to save. When I moved out several months later, I shared an apartment with a couple of women from church instead of looking for my own place, just because I was “grown.” You can’t be grown and broke at the same time. Amen. Because I kept my housing costs low I was able to send more back to my overlords student loans.
- I wrote checks (i.e. I paid down the principal)
A good friend of my told me that she would send large checks of $500 and $1,000 to pay down her loans faster. Being the broke, newly minted graduate that I was, I initially just paid the minimums. However I remembered the wisdom of my girlfriend. After creating my budget and setting aside money in an emergency fund, I threw whatever extra money I had at the principal.
What I Would Have Done Differently
- Not taking a private loan with a variable interest rate
The summer before my senior year in college I did a summer study aboard program in Paris (Je ne regrette rien). To do so I need to take a $4,000 loan with an institution that I’ll affectionately refer to as “EvilBank” that needed a co-signer for. So I reluctantly asked the closest relative with the best credit and off I went. The loan was deferred until graduation, but had a variable interest rate that seemed to go up every month. In addition, since it was a private loan I couldn’t consolidate it. Ugh. Needless to say I threw any extra pennies at EvilBank first before my government loans so that I would be done with them and their ever-changing interest rates. Good riddance.
- Not continuing to pay off my undergrad loans while in grad school
When I started grad school my government loans went into automatic deferment. What I didn’t realize is that the interest continued to accrue during the three years (hey, I went part-time!) I was in school. I could have avoided paying the interest of I had only continued to send in payments. Alas.
The main point I hope you takeaway is that it can be done. The most important thing is the set up a reasonable budget so that you can find any extra money to pay down the loans.
How about you? Any other tips that helped you pay off your loans? Leave a comment below.