My first student loan bill arrived in January 2005, coincidentally with the same mail that included my University of Pittsburgh diploma. They wasted no time in asking for repayment. I was 22, unemployed, and staring at $23,000 in student loan debt. This may not seem like a ton today, but keep in mind this was 14 years ago — student loans have grown exponentially since. Staring at the payment and the amount due, what else could I think than “I’m never going to pay this off”?
Student loans will be a running theme in the blog. At $1.56 TRILLION they represent a serious economic threat. These are loans that can’t be extinguished with bankruptcy. If you don’t make payments, the government will garnish wages. Worse, according to Student Loan Hero, 11.5% of student loans are already 90 days or more delinquent or in default. So, it’s a problem.
Back to 2005. I had $23,000 to pay back. Luckily, I had consolidated and locked them into a low interest rate of 1.5%. I was ready to start paying back my obligation. So what did I do?
I deferred them.
I was unemployed so I technically could go into deferment. I didn’t have to make payments. So why not? Deal with it later. What I didn’t think about was, the juice is still running. And it compounds. Interest, even at 1.5%, isn’t anything to balk at on $23,000. Now it was running in the background and the amount due was growing because no payments were being made. Then I got a job, lost deferment status, and had to start making payments on the now more than $23,000. Then I missed a payment. The interest rate doubled to 3% as a penalty. The hole got deeper.
The first step in paying off the loans was making the conscious decision that I wanted to pay them off. Sounds simple, doesn’t it? But up until that point I always assumed I’d die with student loans, or inflation would ‘shrink’ them. But when I had my epiphany in April 2017 and was determined to get out of debt, student loans were put on my hit list. I would pay them off and be done with them forever.
Next, I got to work on my debt. This was 12 years after my first payment, so years of monthly payments had whittled the balance down to $12,000 and change. Because I had debts lower than that amount, I worked to clear those first. Student loans continued to get the monthly minimum until. One by one the credit cards were paid off. Then the car loan. I had finally gotten to my student loan. The debt snowball method makes it easy — line up your debts smallest to largest and work on the smallest until it’s gone. By the time I got to student loans, I had several LESS payments a month so I could spend more on bills. I attacked.
The holder of my student loans was NelNet. Under ‘Account Details’ it showed my student loans were actually TWO different loans, Group A and Group B. Group A was significantly smaller, so I concentrated on it (NelNet allows you to make extra payments to a specific Loan Group). Group A was paid off quickly. When it was gone, it actually lowered my monthly payment to NelNet as a whole. This allowed me to pay even more to Group B. I estimated I could have student loans gone in less than a year.
Then temptation began. When you’ve paid down over $20,000 in credit card and car loan debt, there’s a sense of fatigue. This is a lot of money that vaporized the minute a payment was made. Now I had thousands more to go to vaporize. Plus, the interest rate was pretty low and on less than $10,000 it wouldn’t amount to much. PLUS I could deduct the interest on my taxes… Other blog posts and online articles actually suggest leaving student loans open for the tax benefit and to use the money that would be used for payments to invest or save. I was deep in the desert and tempted to give up…let the loan be…make minimum payments and invest the rest…take the tax deduction. I wallowed every time I had a few hundred dollars — do I pay on my loan or invest it?
Eventually, I got fed up. I was tired of deliberating. It felt like I was spinning wheels and was tired of constantly trying to decide. If I just paid off the rest, there’d be no more deliberating. I didn’t want to wait a year to finish paying them off. I wanted them gone NOW. I began selling whatever I could find in the house on eBay. I sold collectables. I sold gold and silver coins I had that were part of my investment portfolio. I sold video games. I began to rack up decent money in my PayPal account from eBay sales. I sold shares of T-Mobile stock that were granted to employees. I purged it all, taking the money and making payments.
I was angry all over again, as I had been in April 2017 when I decided to get rid of my debt. I was full-force motivated. I made several payments a month. I tracked the interest daily — yes, student loans generate daily compounding interest. 60 cents a day interest. 50 cents…45 cents…still too much. The balance was beaten down weekly. I was Luke slamming my lightsaber down repeatedly on Darth who was on the floor. And then it was gone.
I made my last student loan payment of $2,000.32 on April 26, 2019 — 14 years and 3 months from my first bill. I was almost 10 years ahead of schedule. I had spared myself a decade of student loan payments. I had saved thousands of dollars in interest. And they were gone. That last payment was money I had made just selling stuff on eBay.
It’s still weird not having a student loan payment. I stick check NelNet occasionally, just to make sure some small amount doesn’t reappear or latent interest shows up. There was no parade or bouquet delivered to my door. No special event to mark this triumph. I did Tweet to NelNet, who responded that it’s a always “relief” when paying off debt.
I wasn’t relieved. I was victorious. I had found a way to win. I know a lot of people have that sense of hopelessness with student loans. Ignoring them does not make them go away. You can’t rely on the government to make them go away or for some Senator to bail you out. The best way to deal with them is to take them head on. Have a plan, don’t give up. Don’t give into temptation. Don’t feel beaten down. And most of all, don’t be a statistic!