Paying down student debt: Where to start

For the past few months, I have written about my debilitating student debt (We started with $538,000 with $36,000 already accrued interest at 6.7% interest rate) and the reasons I have for tackling it mercilessly and quickly. What I have learned (by the sheer number of people who have approached me and asked me how I was doing the impossible), is that there is a huge interest in the community of recently graduated students (or even people who have graduated 5-10 years ago who still have student debt) to do the exact same thing. It’s crazy to me that no one ever tells us just how. I remember taking an exit course in dental school and meeting with “financial counselors” about how I can pay back the debt fastest, and they told me that it will be best if I just leave the debt, pay the minimum payment under a loan forgiveness program, let the interest (and overall total) accrue for 25 years, and then have the loan forgiven and pay the taxes on your now-over-a-million-dollars debt. It’s alright if you end up prolonging the debt longer and paying more in the long run, because by then, you’d have saved up money and be super rich. Yeah, super rich in debt. I’m a numbers kind of gal, and their approach towards paying down student loans would probably appeal to a more emotionally inclined person. The numbers just didn’t add up for me. So I kept pursuing and pursuing, until I found a way. Current update: still pursuing a faster way. Never giving up.

Firstly, I would like to say that I tend to avoid writing how-to blogs, mostly because I don’t like telling people what to do, which is mostly because I don’t like people telling me what to do. Treat others the way you want to be treated, they say. But I’ve been getting enough questions that I think it would be more efficient to just write about it.

Second, there is not one way to go about paying down student debt, just as there is not one right way to deal with finances. You must take into account your ideal lifestyle, your life mission, your personality, and your current life situation as well. I am not writing this how-to in any definitive sort of way. I am just walking you through to how I got here, with some actionable tips that have been helpful to me, and may be helpful to you.

  1. Find a purpose. There has to be a reason why you want to pay down the student debt, but you need much more than the purpose behind paying down the loans. Obviously, that would be easy to determine. Reasons such as, to get rid of debt, to owe no money, to be financially free, to be rich, are all easily identifiable purposes behind paying down a debt. As an extremist, I had to go a hundred times deeper than that. I identified my life purpose, or what some people would call their mission statement. I realized that I wanted to have freedom from everything (hence the dislike for people telling me what to do, ever). In order to get the freedom to do whatever it is that I wanted, I had to not be tied down by material goods, jobs, or anything related to money, including student loans. I want to be creative, to have the ability to drop whatever I am doing to pursue a passion. Whether that is ridding myself of all my belongings and traveling the world with just a backpack, to creating art or side projects, or opening something as mundane as a coffee shop with my husband, or the ultimate dream, which is to be a temp and to do all these things and more, I needed to be free. Finding a purpose such as this is way more powerful that any of the reasons I listed to pay down student debt. It will provide you with the long-term motivation and inspiration that you need to tackle something as massive as half a million dollars, or in my case, more. When money is the reason for your actions, it is very easy for money to take over your life. I needed something much more substantial than money, much more positive than money, much more inspiring and uplifting. And it’s been working so far. We have been on track for 6 months (we started in May 2017), and things are looking up. We went from 25 years to 10 years to 9 years, and my goal is to get that even further down to 7 years. How awesome would that be?! $574,000 with 6.7% interest paid down in 7 years.
  2. Overcome emotional intelligence, and think long-term. With regards to student loans, it is very easy for people to opt for loan forgiveness. Many “financial advisors” will actually promote this option, and they successfully convince you to do so by appealing to your emotional intelligence. They tell you that with student loan forgiveness, you end up paying less than you would for the ten year plan, and then you just have to pay taxes on the forgiven amount at the end of 25 years. When you point out that adding the taxes at the end of the 25 years causes it to be way more than the ten year plan, they say one of the following things: “Yes, but by then you’ve earned so much money that it wouldn’t be a problem” or “Then you wouldn’t have to deal with the stress of making your payments for ten years” or my absolute favorite, “Yes, but for most people, it isn’t possible to pay it off in ten years”. Translation: Putting it off to deal with later is way easier than dealing with the problem now. Hence they are only trying to convince you that emotionally, this is the best way. It’s this idea of instant gratification versus delayed gratification. Off course this appeals to a lot of people because it gives them instant gratification. They can spend their 20’s, 30’s, and 40’s applying only a small percent of their income towards their loans and using a majority of it for themselves, to buy homes, to travel, to acquire all the social status symbols of wealth that tell the world, “Hey! Look at me! I am a successful and rich person capable of acquiring all of these But let’s just ignore that growing pile of debt that I owe. Keep looking at all the things I’m spending to show you how rich I am.” Which, hey, works for some people. Like I said in step number one, you need to figure out your life mission and if that’s your life mission, then keep doing what you’re doing. No judgments passed here. Just a different perspective. Also, it makes me think back to the published Marshmallow test, where they put a bunch of kindergarteners in a room with a marshmallow. You are either given the choice of instant gratification (eating the marshmallow right away), or delayed gratification (waiting for one hour, which in the case of a five year old is eternity, and receiving a second marshmallow if you survive). Those who choose delayed gratification end up with 2 marshmallows, and I think they measured future success as well, but you’d have to go and read it for yourself. This isn’t to say that delayed gratificators WILL be guaranteed more success in the long run. We don’t talk in absolutes here, and success is defined in so many different ways that the area starts to turn gray. But don’t let emotional intelligence be your deciding factor as to which path to choose. Run the numbers. Run the numbers in all sorts of possible future scenarios, and then find the excel sheet that most closely matches the life you want to lead. After all, you got a college education. You’re smart enough to do that, I know it. It’s just a matter of grit, and a little bit of common sense. And if you do find that waiting out on the loan repayment in exchange for heavy savings now is a good trade off, then all the more power to you! But I’m fighting for my freedom, not for the riches.
  3. Find a team of supporters. When I was about to graduate, I reached out to the aforementioned financial advisors and had one-on-one meetings with them. When I wasn’t satisfied with their answer, I brought Mike with me to some of those meetings to see if he could see any way to pay it off in ten years. He came to the same conclusion as the counselors, which is to pay off the debt in 25 years. I still wasn’t happy with that so I sought out a financial advisor. Who also initially looked at our current savings and income (this was right when I started working) and said it wasn’t possible. I sought and sought and sought, and I think I convinced myself so much that I started to convince others around me too. In April of 2017, less than one year after I graduated, my financial counselor said, “Oh my god. I think you guys can do this.” And then Mikey started saying, “Oh my god. I think we can do this.” And I started saying, “Off course we can. I knew we can do this!” Okay, so the honest truth is, it wasn’t just my convincing that did the trick. I owe a lot of our successes to our financial advisor and to Mikey. I must stop and say that yes, a financial advisor is the way I chose to go with, but it is NOT the only way. This is still perfectly doable without hiring a financial advisor. Likewise, hiring a financial advisor does not guarantee you will get it done either. It will require a lot of hard work on your part, because at the end of the day, you are responsible for your own finances. Lastly, there are many types of financial advisors out there. Some of them are affiliated with third parties and have a hidden agenda or interest. Beware of those ones. Others just tell you what to do, without going through the whys, and even others do not even bother to follow up. Beware of those too. I honestly got lucky in finding one who has no third party affiliations and who is more interested in the whys of finances rather than the whats. He helps educate us about finances and he has been very accessible and thorough in teaching us how to better manage money. I’ve recommended him to so many people and even those who have had financial planners before or are skeptical about paying someone to help handle their money (I know, counter-intuitive on paper, but really it isn’t), have reached out to him, and have found that there is a way. He and Mike are my two strongest support systems for paying off the student debt. I think everyone needs a support system. 10 years of loan repayment is equivalent to 120 recurring monthly payments of large sums of your hard-earned income. There is a point where you will wonder if you chose the right path. Once you choose paying your loans down, it wouldn’t make financial sense to turn around and go back to loan forgiveness. You just end up losing money that way, especially if you turn around near the beginning, where most people give up. Which is why having a purpose will really help you to push through. And when it feels hopeless and the purpose isn’t enough, then you will need your support. So make sure to pick a good one.
  4. Run numbers again and again. This commitment will take a lot of hard work. You can’t just put in a number on your auto-pay and leave it there for 10 years. Things change. Opportunities arise, and life happens. I am constantly re-assessing my situation. I run numbers day in and day out, multiple times a day if possible. I track all of our spending on YNAB, which is an online budgeting tool that our advisor set up for us at the beginning to get a feel for how money comes and goes in our household. You can use any budgeting tool you want, or just create an excel sheet and track transactions. I find that an online budgeting tool cuts the work in half by automatically downloading all transactions. What you find by tracking all of this and by constantly re-assessing is that you continually improve on being in control of your assets. I ask for spreadsheets and spreadsheets of extrapolations of our future earnings and spending and loan payments when any change in our current situation comes up. Mike got a new job, how does this affect us? I just got a raise, how does this affect us? We want to leave the country for two weeks, how does this affect us? Everything is budgeted, calculated, and accounted for. And what I’ve found is that the more you do it, the more it becomes second nature. The thought-process is almost intuitive and you start to apply it to every life decision you make. And the decisions get easier and easier. You no longer think, “Okay, should I be spending money on this?” but rather, “If I spend money on this, this will be what happens, and if I don’t, that will be what happens.” And then you just choose the outcome you want, and there is your answer. The decisions become very technical rather than emotional, which makes them easier to make. I’ve always loved numbers. I think it comes down to the math, and if the math says there is a way, then there is a way. And I will find that way, no matter what.
  5. Accountability. This is my last and final point. I share a lot of my life decisions and my biggest goals via Instagram or my blog, or by just sharing it with everyone I know in my daily interactions. It is not because I want attention or I want to boast. I am actually a very introverted and shy person. When I was younger, I had difficulty sharing anything, because I was afraid of being judged. Now I share everything because I want to be judged if I don’t follow through. It holds me accountable for my crazy ideas and statements. And because I still fear judgment to some extent, once I tell somebody I am doing something, I try my absolute best to get it done. To prove to the world that I can do what I set out to do. If I fail, well, I am no longer embarrassed of judgments due to failure as long as I tried my damndest. I’m more embarrassed of not trying hard enough, and not following through. So yes, I share it all. And I think something as big as this, you’ll want to share too. Hopefully it will garner you a whole community of supporters, people rooting for you to reach the end. You’ve got at least one standing right here. But if anything, share it in order to solidify your reserve to do what everyone says is impossible. Because I can tell you right now, it is not as impossible as they want you to believe.

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