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Money has a funny way of making people emotional. We are elated when we earn a raise, achieve a promotion, or unexpectedly win the lottery. On the other hand, losing money lets the wind out of our sails in a hurry. Today, the ongoing escape from student loans is one such soul-crushing experience for millions of people.
In 2016, the average college graduate graduated owes $37,172 in student loan debt; No wonder many pundits believe the student loan bubble may be the next to burst!
Since April 2016, I have been free from the shackles of student loan debt. No longer sending hundreds of dollars to Sallie Mae each month is a great feeling. My wife and I are now able to invest more freely, increase our lifestyle spending, and stress less about money.
I wish our escape from student loan debt were nothing but rainbows and butterflies, but good things rarely come without a grind.
The Back Story
In May 2014, I graduated with an MA in School Leadership. When I entered repayment that November, I owed $19,724.96. My first statement revealed that a ten year repayment plan would cost a total of $27,178.23. In that moment, I was determined to ensure that my $18,000 educational investment would not become a $27,000 one!
The problem? I still owed over $5,000 on my undergraduate student loans. Yes, I was stupid. The kind of stupid with several zeros and even a comma involved. I took on additional student loan debt without paying off my existing student loans.
The Escape Begins
In the summer of 2015, I began a new job as an entry-level school administrator. In October 2015, we got down to business. That month we paid just over $4,300 toward my undergrad loans and tacked on an additional $829.00 in November to wipe out these loans for good! A three paycheck month, combined with extreme frugality, provided the funds for us to do so, even on two educator’s modest salaries.
Our momentum was halted a bit in December and January, but we paid an additional $2,338.79 on the grad school loans in February 2016. I don’t remember seeing the inside of a restaurant, Target, or Banana Republic during this time.
It was around this time that I truly began to hate my job. I realized my passion just wasn’t in this job, and I knew I had to get out. I didn’t get along well with my boss, to say the least, so the departure was going to be an easy one, even if it needed to wait a few months.
We paid minimum payments, an additional $1,100 in March and an additional $4,000 in April, thanks to another 3 paycheck month. It felt like we were on a roll in some respects, but the finish line still seemed like a faint mirage on the horizon; after all, we still owed $10,166.37 even after several months of living a scorched-earth lifestyle.
We reminded ourselves: slow and steady wins the race. I was content to push slowly and steadily toward the finish line and rest in the comfort of this phrase.
Sitting on Savings
A quick look at our emergency fund and sinking funds revealed that we could make a final payment of $10,166.37 without exposing ourselves to the unnecessary risk of an underfunded emergency fund. Upon realizing this, I told my wife that this monster payment would be the best early birthday present I could receive. Without hesitation, she gave me the green light, and just like that, our escape from student loans was complete!
Our Escape From Student Loans
If you were expecting a magical solution to student loan debt, I’m sorry – no such solution exists.
We tackled my student loans with major aggression. It was hard work. But we also made smart choices.
First, we recognized the problem and reviewed our budget. We scaled back almost every unnecessary expense: dining out, expensive groceries and toiletries, entertainment, and beer.
Next, we pressed pause on all spending other than what was necessary to survive. During those months, we paid our mortgage, utilities, required minimum payments. And we bought basic groceries. That’s it.
In addition, we stopped investing, other than our required pension contributions. This was a risk that worked for us, and fortunately, the markets were down overall during this brief time.
Finally, we bet on ourselves and utilized a large portion of our emergency savings. This money was sitting idly in an account while we were paying 6.5% interest. This gamble also paid off for us.
How You Can Escape From Student Loans
To be perfectly clear: nothing about our escape from student loans was special. We sacrificed, scratched, clawed, and busted our butts to do it.
You can do it, too!
It may take longer for you to knock out your student loans, or you may do it even faster. But don’t let student loans knock you down. If you worked hard to earn your degree, you deserve the chance to work for yourself now; the sooner you quit paying for that fancy piece of paper, the better!
I know many people who owe far more in student loan debt than I ever did. Maybe that’s where you find yourself. If so, accept that it’s going to take time, make a plan to break free, and also make sure you’re not overpaying on your interest rates.
If I still had student loans, I would absolutely refinance them with SoFi. For anyone paying ludicrous interest rates of 6.5% and above, a quick refinance will save you hundreds of dollars. And if you sign-up using any of the SoFi links on this page, SoFi will automatically sweeten the deal and give you back $100 cash. Currently, SoFi offers fixed rates at 3.375% and variable rates as low as 2.355% if you sign-up for Auto Pay. In a matter of minutes, they can help you refinance your federal or private student loans, consolidate multiple loans, and get on a quicker path toward freedom.
Click here to refinance your student loans with SoFi and receive $100 today!
Readers, have you experienced any recent triumphs over debt? What were the keys to your success? How did you stay motivated? If you are still in debt, when do you plan to eliminate student loans or other debt?
Financial Panther saysFebruary 7, 2017 at 9:02 AM
I love reading other student loan successes. I did the same thing when I was in the home stretch and ended up pulling out a bunch of cash in my emergency savings. Just wanted to get them done and felt that I’d feel much better using my emergency fund that way.
Hero saysFebruary 13, 2017 at 8:32 AM
I find a lot of others followed a similar strategy, FP. It may not be recommended by many money experts, but it just felt right for us.
Martin - Get FIRE'd asap saysFebruary 8, 2017 at 3:12 AM
Living without restaurant meals, fancy coffees, soap, shampoo and soap is quite do’able, but no beer!! How did you do it man? I don’t know about you but some some sacrifices are just too hard to make hehe.
Good on ya guys for doing what it took to kick this ball and chain into the past. Just apply the same strategy to a mortgage and you’ll have that paid off as soon as which leaves you pretty well set up for life.
It’s a good feeling seeing that zero balance on the loan statement isn’t it.
Hero saysFebruary 13, 2017 at 8:31 AM
Haha, it’s nice to know that someone understands my pain, Martin. It was totally worth the short-term sacrifice! 🙂
Mrs. Picky Pincher saysFebruary 13, 2017 at 8:26 AM
Ahh, congrats on paying off those loans! That’s no small feat. 🙂
We’re tackling our $65,000 of student loans in 18 months. It’s a whirlwind, but hot diggity, does it feel good to see those balances get lower each month.
Hero saysFebruary 13, 2017 at 8:30 AM
Thanks, Mrs. PP! Making those large extra payments was definitely my favorite part of the journey. You’ll have quite the post headline when you journey is complete!