I always worried about them but the first time I cried over them was when my girlfriend and I started talking about our money situation. For the first time I discussed my debt, in details, with someone. She knew I had student loans to pay, I had just never pondered too long about how much it will affect my future, perhaps it was my way of keeping it from turning into a bigger anxiety than it already was. Early on I decided I would pay them as fast as my bank account and my common sense allowed me to. I had read this article about a person that paid 75k worth of student loans in 5 years, so I thought to myself “I own 65k, I probably can do the same.” A little naive, but not too crazy of a thought. I also made the choice to not let it take over my life, like the person in the article did. I didn’t want to make ramen noodles cups part of my regular diet or have no savings after 5 years of working as a so called “adult.” Yet there I was, three years into my debt, crying over my debt while my girlfriend tries to console me.
It crushed me how different our situations were just because I had student loans and she didn’t. Her parents and her grandfather had invested in a 529 College Saving Plan and a CD to cover for her tuition. What paid for my tuition was three different kinds of Federal Student Loans, a private loan from a credit union bank, and 2 thousands dollars my dad gave me one year he got money back from his taxes. I remember how I started crying at my girlfriend’s suggestion to ask a rich relative for help. “I don’t have a rich relative” I remember saying in a defensive and defeated tone, all my family probably think I am the the rich relative just because I live in the U.S.
That was the first and last time I cried over my student loans, I wish I can say the same about my worries over them. There were countless of times I let that number rob me from my sleep. That’s why I’ll stop the sob story here and talk about the advice I wish I got while I searched on google things like “How to pay my student loans.”
The advice I, typically, came across on the internet or heard from people was of two types, One practical; things like live a frugal life; like I had a choice–frugal was the only way I knew how to live. In my desperate search for answers I even remember stumbling upon this article that profiled Americans that moved to Europe and left their debt behind. The other type was also practical but this one came with a tone that made me feel like I was being scolded for having a debt. Of course not all was bad, things like pay the high interest loans first was a good advice, but they all had that tone that said “Damn–how you got yourself in that mess?” Which unfortunately was the same tone I remember a close family friend had when he once told me “those loans will follow you until you’re old.”–Thanks Javier! that would help me feel better, I remember thinking.
So here it is, some sound practical advice next to an emotional one that says “you are doing ok” keep at it.
|PRACTICAL ADVICE||EMOTIONAL ADVICE|
|Always sign up for that 401(K) account|
Here is the one thing I never saw in advice articles. Probably you can’t save right now because you are in paying mode, but what you can do is have your employer pitch in. Lot of places offer 401(K) accounts, but they make it optional. They match a percentage of your contribution, don’t be afraid it will make your check smaller, the contributions are before taxes so in most cases you won’t even feel it. I suggest signing up for that 401(K) even when you know you are going to be at a job only for 1 year. Consider contributing at least as much as the percentage your job will match. Here is an example of why I think it matters: One year of contributing 5% from a 30K/yr income, plus the percentage your employer matches, can yield about $3000 at the end of a year. So do it!, you’ll be paying your loans and saving for your retirement at the same time.
|Don’t stress too much:|
This is something I would have loved to hear, either on the internet or from people I talked to. The worrying many times was unnecessary. You already made the choice to take care of your loans, now please breathe and stick to your plan. Know that with time you’ll make more money, right now the predicament of wanting to save while not having enough to do so seems like an oxymoron but you’ll get there. With time you’ll get a better job, you’ll gain experience. You will get paid more. So, don’t stress about this moment in your life too much.
|Pay more than the minimum|
Event if this means $10 more, interest is the worst and the more you pay the less it adds to your principal. An extra $10 can translate to thousands of dollars you didn’t have to pay at the end.
|Add “Treat yourself” to your budget|
As practical as this may seem I wish someone told me that budgets can also help you know how much you can spend on yourself, after debt pain-ments of course. Knowing how much you can “treat yourself” can help you not feel guilty about your spending.
|Open an IRA|
This would be the smartest financial move you can make. Any contribution you make there can be deducted on your taxes. Now If you can’t contribute anything right now, at least you can rollover your 401(K) money there when you change jobs.
|Take care of your mental health|
Also another advice I never heard while searching for help on the internet. Don’t let this debt stress you out more than it should. Celebrate the milestones, treat yourself when you can. Continue with your life as best as you can.
|Pay High interest Loans first|
The higher the interest the more money you are going to pay at the end, so if you can pay that high interest loan first do it. Now, if you have multiple loans pay a bit more on those with the highest interest.
|Don’t feel shame about your debt|
Why feel shame about the first adult decision you made, you decided to invest in yourself. Even if you didn’t fully understand the commitment, it is good you did it. The failure, if any, is not on your parents or yourself, is in our government for letting higher education be a luxury only a few can afford instead of a basic human right.
|Forbearance or deferment|
None, if you have the option none would be the best, but if you have to–Deferment will stop interest so it is the better option of the two. Forbearance it stops payments but it continues collecting interest.
|Money can come back, time can not|
If you wish to take a vacation, do it. Now that you are young, you’ll learn so much about yourself and the world it would be like another school. Don’t deprive yourself from it just because you are in debt. Of course save for it or make it part of you budget.
|Learn a thing or two about Money|
This was just a failure from our education system, why leave such a crucial part of everyday life out of the classrooms. I heard kids now are getting some financial education–good for them. What I did to fill this knowledge gap was to read few books, the most practical book I picked up was the The Elements of Investing by Burton G. Malkiel, this short book taught me basics things like interest, savings, planning for retirement, all in digestible sizes of information. I recommend it.
In either big or small ways, helping others will do wonders for your well-being. Volunteer for a non-profit that you like or offer your time and/or expertise to a good cause, you would leave feeling better about yourself and others. It may sound selfish to help for your own benefit, but in this case there is a win-win situation no matter how you see it.
Hope that was of some help. After 5 years of graduating from college I can say I didn’t do all I planned; I don’t have a real savings account or rainy day money (as today), but that is ok. In the bright side, I paid my loans in 5 years, I always signed up for the 401(k) benefit at my jobs and put couple bucks on my IRA so, as-today, I have about $40,000 in my retirement accounts. Now, after paying all that debt I wish I took better care of my mental health or celebrated my milestones like paying off my first loan, or the second, I was too hard on myself. My goal now that I am debt free is to save money and start therapy.
To show you what a masochist I am, I put together this timeline of my debt. By the way, when I finished it I realized I paid an extra $10,406.36 on interest so in reality my education costed me about $75,662.92. Interest is absolutely the worst. Enjoy, or cringe.
🎓 May 2015 | $65,256.56
Federal Perkins Loan – $11,130.00
Stafford Loans – $27,176.23
Parent-Plus Loan – $13,897.67
Credit Union (Private Loan) – $13,052.66
$870/month (29% of month’s income)
Oct 2016 | $ 58,385.41
Federal Perkins Loan – $9,703.28
Stafford Loans – $26,082.09
Parent-Plus – $12,523.80
Credit Union (Private Loan) – $10,076.24
$870/month (33% of month’s income)
Dec 2017 | $ 52,248.11
Federal Perkins Loan – $8,525.63
Stafford Loans – $25,939.41
Parent-Plus – $10,875.39
Credit Union (Private Loan) – $6,907.68
$870/month (35% of month’s income)
Aug 2018 | $ 43,800.15
Federal Perkins Loan – $8,466.28
Stafford Loans – $25,426.94
Parent-Plus Loan – $9,906.93
$621/month (14% of month’s income)
Aug. 2019 | $37,165.04
Federal Perkins Loan – $6,260.48
Stafford Loans – $22,966.02
Parent-Plus Loan – $7,938.54
$900/month (17% of month’s income)
Feb 2020 | $30,422.59
Consolidated: Federal Perkins + Stafford
$3000/month (57% of month’s income)
💸 Oct 2020 | Debt Free
$3000 last pain-ment