You can add this to the unremitting list of “how I paid off my student loan” articles. I will admit right now that my story is more boring than most.
My secret is that there is no secret: I got paid a salary that made it possible to pay off the debt while living a reasonable lifestyle. There are no magical tricks herein. My story is completely mathematically realistic.
There were a few basic guidelines I followed that helped me pay off the debt.
1. I Reduced Debt Before Repayment
Part of the reason I was able to pay back my debt in such a short time was that a year and a half is not that long a time to sacrifice. Had I taken the maximum load of debt offered to me, it wouldn’t have been feasible to pay off the debt for several years, and I likely would have given up the fast-paying scheme.
The more interesting articles are why I only accumulated $112,000 in debt as opposed to upwards of $180,000, which is the full cost of tuition, fees and approximate living costs at my law school for three years, without interest:
How I Saved $65k in Four Years for Graduate School
How I Saved Tens of Thousands in Law School
It also helped that I was entering a profession that offered jobs that could be high enough to pay off this debt in a reasonable time period. I worry sometimes that these amazing debt paying stories may encourage people to accumulate huge debt while preparing to enter low-paying fields. Don’t accumulate so much debt that it becomes mathematically impossible to pay back!
2. I Used my Bonuses
I was lucky enough to get two bonuses during this time period, both of which I put completely towards my debt. I didn’t even consider using the money to buy anything else.
3. I Plowed All of My Money Towards Loans First
After bonuses, I paid about $5,000/month for 18 months to pay off my loans. I had an auto payment of approximately $3,000/month (which was 3 times my minimum loan payment) and then I would make periodic payments when it looked like my bank account was too flush. I could have made a higher automatic payment but I get paid every 2 weeks, making some of the accounting more difficult than getting paid twice a month, and I had already had one disaster where extra expenses left me without sufficient funds to pay my rent and credit cards on time. I figured I’d give myself a little more leeway on the monthly payment.
Instead, I would make extra payments when my bank account looked high. There’s something about having large balances in my bank account that encourages me to spend. Low balances, even if they are artificially low – like the money is in a separate bank account – subliminally encourage me to spend less. So the extra payments served both to pay down my debt and discourage spending. Still it was really difficult writing such large amounts to pay out of my bank, particularly after loan payments were already taken out. It was like ripping a bandaid off. You force yourself not to put it off and then when you get to it, you do it quickly and move on. If I had given myself the option, I would have left the money to wallow in my bank accounts. But I was determined to pay off my debt so I made sure that
4. I Knew the Value of Money
After maxing out my 401k, transportation, taxes and health benefits, and after rent and utilities, and paying off my loans, I was left with about $1,100/month. That covered the cost of my car, home goods, clothes, food, insurance – basically everything else. For a lot of new lawyers, $1,100/month is too low. (I knew a classmate that was renting a $7,000/month apartment after all).
But $1,100 was enough money for me and I knew it. When I was an entry level employee, I lived on just a little bit less disposable income, because I was maxing out my 401k. And I remember during that time wanting for nothing.
I was also used to living like a law student. Knowing that I could survive on less was invaluable knowledge to me; I wouldn’t have paid off such large chunks of debt so quickly had I thought I would have had to feel deprived.
5. Everyone was in the same boat
I knew I could live on less, but I also had more expenses in this time period than before. The most difficult parts during this time were moving into and furnishing my apartment, buying a professional wardrobe, and paying off some hospital bills. Also I was much older and I was in a much better-paid social sphere.
It helped that most of my friends were also paying back loans and lived similar lifestyles. I also had a lot of friends that were supporting their parents with their salaries. It also helped that we were all working such long hours our first year that we had very little time to blow through our money. (Some people though would take this as license to spend more).
I felt that I was able to maintain a fairly comfortable existence – just without any lifestyle inflation – and I knew that the time for watching my purchases was short. It was a small price to pay to be debt-free in 18 months.
So there you have it – I paid off my loans by reducing the loans I took out, making enough money to cover the loans I had and then just throwing money at the loans until they disappeared.
It was technically possible, and indeed my initial plan, to pay off the debt in one year. But I thought my life was becoming too Spartan. I had increasing visions of dying without having bought a sofa for my apartment. So I went on Craigslist and I bought a sofa and chair for $60. (frugal doesn’t change, natch).
Whatever your plan, being debt free is amazing. I don’t regret any part of it (even law school, which is rare among lawyers).
Do you have any debt repayment tips?