Today I had the honor (or maybe dishonor) of paying off yet another student loan. We had the last $250 of a $4,500 student loan sitting there so I scraped together $250 in our different accounts and paid it off. Seriously, it is the best and worst feeling ever. If you have been following along we have taken a short break from our house renovations to dial in on paying off our debt and are taking all of you along for the ride. As of today, we have paid off $63,820.84. We have around $71k left to go which includes my student loans as well as my husbands and our car loan. You can check out the plan we are following some tips to get started here.
As I scrolled through our shared spreadsheet my mind wandered back to the actual time we took them out. I decided to total them all up and divide them for the entire time we were in school. It was around $800/month for each of us. Talk about a kick-in-the-gut.Both of us could have easily buckled down at our different part-time jobs and came up with at least part of that.
If you are in your late-mid twenties you might be in the same boat. JR and I were raised in very different households but we both ended up with a ton of student loan debt. That was just the way it was. 18-year-old you went to the FAFSA site, signed up, went to school, didn’t think about it, graduated and got the bill. This probably sounds super naive but neither of us ever really thought about it. We both knew we had student loans but didn’t everyone?There was a lot more on our minds with school, classes, and our newfound college freedom.
I’m sure there were others that managed it quite a bit better than we did but I’m sure there were quite a few more that managed it worse. And lots more who have neglected to manage it at all. We decided a little over 18 months ago that we didn’t want this debt to loom over us forever so we made a plan and are chipping away little by little. If you have student loans and aren’t sure how to make a dent, then this post is for you. If you are in college or about to go to college, check out the tips at the bottom of this post on how to avoid student loan debt and graduate leaps and bounds ahead of where we were after getting our diplomas.
FIGURE OUT WHAT YOU OWE
This may seem super obvious but as noted in a previous post odds are you are underestimating your debt by up to 40%! If you have been avoiding eye contact with Sally Mae’s mail updates your loans could be significantly higher than you think. Log in to Credit Karmaand find all the accounts that you have under “student loans.” If you are married be sure to both login and do this together. If you are just starting out check out our post on tallying up all your debt. Once you figure out what you owe add it to your debt payoff spreadsheet. Make sure to keep each account separate – don’t consolidate them all together – and list them smallest to largest.
Odd’s are you might have just had a heart attack looking at those interest rates. I would highly suggest skipping consolidating them. If you have a very high balance loan with a high-interest rate maybe see if you can get a better rate. Our three highest loans were around $8,500 and figured out that consolidating would only save us a few hundred dollars. Definitely don’t consolidate them all together. Keeping them separate will make them a million times easier to tackle and you will get momentum each time you pay one off.
MAKE ADDITIONAL PAYMENTS
There is no get-rich-quick way out of these (unless you won the Natural Light student loan contest!) Getting them paid off will require diligence and sacrifice. Figure out what your minimum payment is and add that to your household spreadsheet if you are using our forms. Next, log on to your accounts and figure out how to pay extra on specific loans on the principal balance. Our accounts are through myfedloan.org and you can click on payments and enter in a specific amount for each loan. We are able to throw almost $1,200 a month in extra payments toward our loans and hope to be done in the next 18 months.
FORGIVENESS OR FORGET
From listening to Dave’s podcast there are usually two different “solutions” people call in with on how they are going to get out of paying for their student loans. The first is student loan forgiveness. These are usually programs offered in the public sector that require you to work in the position or department for 10+ years. I would suggest you do your homework when it comes to programs like this. Are you maximizing your salary by working in this position? Could you be making more somewhere else? Is this job the best choice for your career path? Do you want to work for this company for the required length of time? Can this program be changed by legislation? I’m not saying these programs are bad but they are a gamble and you could most likely pay them off sooner than the forgiveness program timeline.
The second suggestions is usually bankruptcy. Some people call in having already filed and don’t realize that it is almost impossible to discharge student loans through bankruptcy. They are federally insured loans. Filing bankruptcy is not a matter to be taken lightly. It is a huge decision that has serious ramifications for your future. I would not toss around this idea lightly and especially not as a solution for student loan debt.
MAKE A PLAN AND BUCKLE DOWN
Your best bet is to confront them head-on and make a plan to start tackling them today. You can check out all our resources and stories from our debt payoff journey on our finance and budgeting page. We also highly suggest any of Dave Ramsey’s resources, especially his podcast and the FPU program. If you are having a hard time or just need a shoulder to lean on feel free to send me a note (Facebook messenger works the quickest!)
TIPS FOR THOSE IN COLLEGE
If you are in college or about to go off to school here are a few tips I wish I would have known before signing up for a ton of debt!
- Check yourself before you wreck yourself. Do not, I repeat, do not sign up for a major without knowing it’s income potential after you get out of school. You don’t want to get a degree in underwater bb stacking with $100,000+ in student loans and find out you can’t get a job. Passion and interest are important but make sure the amount you are paying will offset your future income.
- Look at your current student loans. Find out how much you have taken out already and see if you can take out less or skip financial aid for a semester and pay with cash. If you are aware of how much you owe it might affect your lifestyle choices after graduation as well. You might realize you can’t afford a new graduation car or that nice apartment downtown.
- Get a job. My sister is currently in PA school so I am well aware there are programs that require much more dedication than others. JR and I both had jobs in college and if you are going to school for business I highly suggest getting a relevant part-time job. This isn’t blow money – really challenge yourself to pay in cash for your tuition or books. Future you will be glad you did.
- Compare schools. JR went to Northwest Missouri State University and I went to the University of Nebraska. I could have easily gone to a state school for much cheaper but decided I wanted the UNL “experience.” Sure it was fun, but paying $1200 a month for almost as long as I went there sure isn’t. See if you can take general education classes through a community college or find grants or scholarships to offset the cost. And don’t believe the hype when they say degrees from certain universities are worth more than others. Maybe if you are going to Harvard…which we clearly did not. 😛