Why My Favorite Student Loan Debt Payoff Stories are Boring

pexels-photo-765228.jpegI’m sure you’ve seen the clickbait headlines – student pays off $100,000, $200,000 in debt in a ridiculously short time.

Heck that’s me too: How I Paid Off $112,000 in Debt in 18 Months

Awhile ago, I was interviewed for Learnvest regarding my debt payoff story. I remember one of the comments said something to the effect of:

Well of course she could pay off her debt with her high salary. Why can’t we have stories of people who quickly pay off large sums of debt on low salaries?

Bitter much?

There are many reasons why we don’t have large debt payoff stories from the low-income. First, the math doesn’t add up. Yes, people side hustle and get salary increases, but usually that takes some time to get started and you’re not making the big bucks immediately. So the people who can do this, are rare.

Second, and most importantly, people shouldn’t get into big student loan debt and have a low salary job.

There are the stories of people who graduate with hundreds of thousands of dollars of debt who work at the poverty line. Yeah, that’d be a great story if someone succeeded given those odds. And it’s possible that someone can graduate with six figures in student loan debt and eventually pay it off on an entry level salary.  Yes, this makes for the start of a great story but the vast majority of these stories are not going to end well. This is not something to aspire to. Most of these stories are not told in articles because they’re not going to end well, and people don’t want to read those articles. They want the inspiration.

 Yes we can congratulate someone and admire someone for having the fortitude to pay off an insurmountable mountain of debt. But let’s not forget that it was probably a mistake somewhere along the line first to get into such large debt and have a low-paying job. That’s a failure of the system if you graduate with a lot of debt and only work a low-paying job.

And yes, we should and need to talk about out-of-control higher education costs and how easy it is to get into ridiculous amounts of debt for low-paying degrees. We should talk about how low-income people are caught in a catch-22 because they want to get better jobs, are required to get college or graduate degrees in order to get ahead. And we don’t have to blame the person for making this mistake because it’s a hard place to be in, but we also need not make it seem normal to graduate with way too much debt and pay it off on a low salary.
It’s great that there are inspirational student loan debt payoff stories. But let’s not forget the fundamentals – first, don’t take out too much debt. The rule of thumb is not to have higher total debt than your median first year salary. Also generally don’t to go to NYU. Or get an MFA.
So yes, I had six figures of debt and six figures of income. My debt payoff story is  really boring. It’s meant to be boring. I’m proud that it’s boring. I don’t want to encourage anyone to have an exciting debt payoff story where they pay off a crazy sum of money in a short period of time on a low salary because that’s a recipe for a very stressful life. Boring is good when it comes to  money. Prevention is most of the battle.
Was your debt payoff story exciting or boring?

How I Paid off $112,000 in Student Loan Debt in 18 Months

How I paid off $112,000 in student loan debt in 18 months

I was fortunate enough to graduate from college debt free. Then I had to go and attend law school where I racked up $112,000 in student loan debt and credit card debt. So you can add this to the unremitting list of “student loan debt payoff” stories. I will admit 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.

The high income was the most important key to paying off my debt. Still, there were a few basic guidelines I followed that helped me pay off the debt.

1. I Reduced Student Loan Debt Before Repayment

Part of the reason I was able to pay back my student loan and credit card 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. My favorite debt payoff stories are boring because it’s a bad situation to end up with a lot of debt and a low income. 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. What motivated me was that I wanted to be debt-free more than I wanted any more stuff or experiences.

3. I Plowed All of My Money Towards Student Loan Debt 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 (3 times my minimum loan payment). Then I would make periodic extra payments. I could have made a higher automatic payment but 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. 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 sending such large amounts 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.

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 had $1,100/month left. 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 the value of this amount of money. 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 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. I knew the value of money so I knew how to be happy with less.

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 ever before. I had medical expenses, a new wardrobe, a drastically increased rent. During this time, It helped that most of my friends were also paying back loans and lived similar lifestyles. A lot of my friends were supporting their parents with their salaries.  It also helped that we worked 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?