My Journey to Tackling $29k in Student Loan Debt in 1 Year
Last May I graduated college with a student loan balance of $29,000. Being an individual who was always mindful of my spending, this number was daunting. I had never even left a balance on my credit card.
Yet, I could still find relief in knowing that I was below the national average. 2017 graduates average nearly $40,000 in student loan debt. The United States altogether holds $1.48 Trillion in student loan debt. Talk about monstrous. And honestly, I don’t see it declining in the near future.
Even though $29,000 seemed immense, I knew that if I made smart decisions and planned accordingly I could make it work. Fast forward to June of 2018 and I’m officially free of student loan debt.
With graduates taking on increasingly more debt each year, I thought I’d share my story.
Understand your student loans.
I’ve always been conscientious of my financial position. As my senior year of college approached, I knew I needed to start planning to face the balance of my student loans. I began taking the necessary steps to find the answers to all my questions.
To start, I got in touch with my counselor at the school. She gave me all the necessary information I needed to uncover the nitty gritty details about what I owed. To my surprise, this was somewhat of an investigative task. It was almost as if I was trying to find the time capsule I buried 3 years back. Except this time capsule only contained more responsibility.
Once I knew who my loan provider was, I started digging for the details on the promise I made as a 17-year-old child. The more information I could find, the better. I wanted to know what exactly was going to be expected of me, so I could set attainable goals. I made sure to note the following:
The number of loans I needed to pay off.
The current balance of each of those loans.
The individual interest rate of each of those loans.
The length of the grace period until I had to start paying.
What the minimum required payment was after the grace period was over.
The importance of a buffer year.
Moving home after school was never the move I envisioned after graduation. Since I lived away all four years of college, why would I consider going back now? I had to reconsider this idea when I was offered a position near my family. At the end of the day, it was a position I couldn’t pass up.
Once I calculated just how much money I would be saving each month, I swallowed my pride and moved back home. Admittedly, I’m extremely lucky that my parents had a room for me. I can’t thank them enough.
After the year living with my parents came to an end, I began to refer to the time spent with them as my “buffer year”. Buffer years can be different for everyone, depending on their circumstances. Aside from saving an absurd amount of money, my buffer year was a great opportunity to reflect on my purpose and what it is that I want out of life.
Money Tip: At the very least, consider taking a buffer year. Even a couple months can help. Moving back home, trying a new hobby, or taking a break from school can do wonders for your outlook. Do you really need to get that graduate degree? Or are you simply at a loss for what step to take next? Take some time to reflect and figure out what you want before you begin digging yourself deeper in student loan debt.
Create a sticky plan and budget.
For me, a plan is necessary for me to stick to my end goals. This couldn’t be truer for finance.
The first step I took was to begin paying off my student loans before my grace period was finished, putting me 6 months ahead of schedule. I decided that I would pay off my highest interest rate loan first and work my way in descending order. The first action step I took was shoveling as much of my savings as I could into my loans, leaving just enough for emergencies.
Money Tip: If you aren’t financially driven, it might be easiest to pay off the smallest loan first. However, you’ll end up paying more in interest in the end. Go for whatever keeps you moving in a positive direction.
A budget is vital for properly allocating funds, especially when there isn’t much of them. My next step was creating a budget for myself. Starting with my take-home salary after deductions, I subtracted my expenses for each pay period.
With a lofty commute time to work, I knew gas would be an essential cost to factor in my budget. I began by tracking how many miles my car would go off of one tank of gas. I then divided it by the total amount of miles I drive to and from work. This gave me the number of times I needed to fill up in between pay periods. I ended up allocating $100 for gas each paycheck.
Another significant cost I needed to consider was entertainment or “fun money." I decided I’d allow myself to spend $200 each pay period for the movies, drinks with friends, clothes, etc. Anything that fell under “wants” was budgeted into this sum.
If I didn’t spend it all, the leftover funds would not roll over to the next month. If I underspent, the leftover cash would get passed onto my loan provider.
During my buffer year I celebrated a birthday, various holidays, and a graduation party. Any extra cash I received as a birthday present or selling an item on Craigslist would get funneled directly to my student loans. But my biggest influence was my tax return.
Adapt your lifestyle to fit your budget.
For some, living on $200 worth of fun money between pay periods is considered a lot. For others, not so much. Regardless of how hard I was cracking down, I knew it was important to still have fun and enjoy life—within the means of my budget of course. $200 twice a month allowed me to do just that.
Since I was used to spending beyond that, I had to adapt my preference of entertainment. Instead of hitting the bars every weekend, I took on free hobbies, like hiking and spending more time outdoors. Various deal sites allowed me to live life more adventurous by scoring cheap concert tickets, snowboard passes, and much more, while staying on track.
Beyond entertainment, I was constantly on the hunt for cheaper gas—frequently using my parents Costco membership. Instead of eating out at lunch with co-workers twice a week, I became accustomed to the habit of making my lunch.
Be prepared for plans to change.
Along my journey, life decided to sour my plans. One of the most detrimental instances was when my car’s air conditioning decided to shut down, costing me $1,600 to repair. After a routine oil check a few months later, I was told that my car needed another $2,500 in repairs that were critical for vehicle safety.
My car at the time was worth just as much as the repairs needed. So instead of saving money, I began planning to buy a car. Since I was still in my grace period, I withheld a couple payments towards my loans and saved up for a down payment. I then began evaluating what I could afford while working towards paying off my student loans. Because of my current credit score, I knew I could plan for taking on a loan of 2.5% or less.
Ultimately, I decided on a subcompact SUV so I could upgrade my current cargo capacity while maintaining my gas mileage. This also allowed me to keep a $100 pay period budget on gas. I then readjusted my budget to take my new car payments into account.
No matter how perfect your plans are, life will continue to function outside of them. I learned to bite the lemons life handed me and adapted to every curveball set on disrupting my plans to become debt free. Thankfully, my small emergency savings also allowed me to bounce back without stressing too much.
Celebrate success: small and large.
At the end of the day, celebrating each success towards my end goal resulted in remaining efficient and level-headed. In the beginning stages, I created a chart with squares I would fill in every time I paid down $1,000 towards my balance. Each square resulted in a celebratory lap around the house. (You’re never too old to celebrate small wins.)
There you have it: Hopefully, my journey to paying off $29,000 in student loan debt in one year will inspire you to make your own debt-deleting plans. Feel free to share your student loan stories in the comments below!
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