The Last of My Debt: Student Loans
December 5, 2009 6 Comments
Contractually I am under no obligation to begin repaying my Student Loan debt. I could care less about contracts. I want this debt gone and I want it gone as quickly as possible. That means I must create a plan.
My Student Loan balance is currently at $29,241.94, not including accrued interest which is $1,735.50 for a grand total of $30,977.44. Owing this much money does not make me feel good and I have a burning need to eliminate this debt. The good news is that now that I have paid off my car loan, I have an extra $328 a month to apply towards my Student Loans without making any changes to my lifestyle.
The problem with only paying $328 a month means that I won’t be out of debt until 10 years from today. That is too long. The thought of paying down debt for the next ten years is overwhelming. I don’t want to hand my paycheck over to some faceless company for “the rest of my life.” Instead of feeling overwhelmed, I have decided to focus my attention on the “most important” portion of the loan, the $15,102.94 in Unsubsidized loans at 6.8% interest. I hope to be able to eliminate this debt by the time I graduate in May 2011. That gives me 18 months and a challenging, yet possible, goal to work towards for a short period of time.
In order to accomplish this task, I have to come up with $839 a month. That is going to be hard but I hope it will not be impossible. The budget that I have drafted up allows $619.50 a month for debt repayment. My budget currently includes saving 10% of my Gross Income for my Emergency Fund because I drained that account in order to pay off my car. Now it is time to build that back up to a reasonable amount. I probably won’t reach my goal of saving $5,000 since I’d rather put my money towards debt repayment. I’ll boost my EF to an amount that will equal 3 months of living expenses after which I will begin using the money that had been going into savings for debt repayment.
During this period of debt reduction I will adjust my budget on occasion to allow for discretionary spending such as travel expenses and unexpected costs such as clothing. I know that this is not an ideal situation in terms of “proper” budgeting however, since I rarely buy clothing (I finally broke down and bought a new pair of jeans after the butt on my favorite pair of jeans literally fell apart) and I don’t usually plan very far in the advance for travel, these expenses are too random to plan for effectively in the long term. Still, by the end of 18 months, I want the Unsubsidized Loans gone and that is my goal.
This begins today and to prove that I’m serious, I sold one of my most prized possessions, my 5-string bass guitar and the amplifier that went with it. Once I put the check in the bank, that money is going directly to paying off my Student Loans. I sacrifice today so that I won’t have to sacrifice later. Selling that guitar was one of the most difficult things I have had to do. I focused on the emotions attached to it, how hard I worked washing dishes for $5 an hour in order to earn enough money to pay for it and how much I loved playing it back in the day. The reality of the situation was that I hadn’t played it in years and having it sitting in the closet wasn’t doing me any good.
Debt sucks!
Steven,
I’m proud of you. I know selling that guitar was hard, but if your meant to have one it WILL come back to you in a more appropriate time of your life. I look back on the material possessions and dreams I let go of for the right reasons eons ago and some of them came back to me in the right season. The ones that didn’t are inconsequential at this time in my life.
Our goal right now is to purchase a 2nd home in cash. We are looking at at $250,000 purchase. We have almost half of that saved & if we sell our current house when the market improves that will give us $160,000 replacement savings (after fees) when the time is right. Reading “The Millionaire Next Door” & “Cheapskate Gazette” years ago inspired us & we used some of the ideas from them to achieve our current financial goals. Here are some ways that have helped us work towards that goal.
1. Vigilant saving, was a #1 priority after debt elimination.
Paying off our first mortgage & then continuing to send
that amount + every single month as if we still had a
mortgage. (Just as your doing w/ your car pmt amount.)
2. Shopping at Thrift Stores 1st for clothing, books, etc.
before going to the mall. Buy used, save the difference.
It’s surprising the name brands we find there.
3. Most of our meals are homemade by me.
4. It goes against my grain to pay “retail” for anything. if
it’s not on sale it won’t be purchased.
5. Simplify,simplify, simplify. Things are just things. We
do have a beautiful, nicely appointed modest home,
travel & eat out too, ever mindful of our goal. It takes
vigilance to keep the materialistic “monster” in us
in check. The hardest thing to do is to tell yourself no,
but after a while it becomes an ingrained habit to
overlook frivolous unnecessary purchases in order to
reach those important goals.
6. Once in a while we go on a “Budget Diet” where we
challenge ourselves not to spend a single cent for 7days.
We used to play this “game” more often years ago. We
found we could only practice restraint for short periods
of time. ;-)
7. Being financially benevolent long before we could afford
to. When we mindfully & intentionally made this choice,
a dramatic cosmic shift took place. It changed our
hearts, our attitudes & our finances inexplicably. We see
an abundance and contentment we never experienced
and never believed we would ever experience in this
lifetime. Our only regret is that we didn’t learn & practice
this sooner
Just a few tips, I know your smart and on the right path and I know you will reach your goal. I’m excited for you to experience the indescribable liberation from the bondage of debt and I just wanted to encourage you in your efforts. Your going to be so very much farther ahead of us financially by the time your our age. :) Sandi
Thanks for taking the time to write out such a thoughtful comment, it really means a lot to me for people to show interest in what I am trying to accomplish. My girlfriend and I want to also be able to pay cash for our first home, which I would also like to think will also be our last. We are both interested in a modestly sized home where instead of a large floorplan, our focus can be on the details of having exactly the features we desire (which of course include functional features such as alternative energy sources like solar and geothermal as well as cosmetic details like native stone work and interior design). This will be many years away only because we have other plans at the moment.
What I think has been the most important realization that I have come to through this entire journey of getting out of debt is actually really simple; find enjoyment in what is already a part of your life and reduce/eliminate anything that doesn’t in some way bring joy to your life. In doing this I have almost entirely curbed my frivolous spending without dramatically changing my lifestyle. I no longer feel a desire to purchase things like DVDs or CDs, which used to be a major area of spending. When I buy clothes, I do shop retail but my purchases are very infrequent. In the last year and (almost) a half, I have bought 2 pairs of jeans and one t-shirt when before it was not uncommon that I would buy 2 pairs of jeans and a t-shirt every single week. I haven’t died yet!
What money I do spend goes directly towards things that I value deeply, such as travel. I do not smoke or drink (at all, ever) which I think many people have at least some habit that prevents them from saving money; gambling, pornography, comic books, drugs/alcohol…shoes. I’m not perfect, I still spend money on eating out on a fairly regular basis and I’m not saving nearly enough money for long-term goals because all of my energy is focused on debt elimination but I’m doing what I can while still allowing myself some sense of freedom to pursue things that I enjoy or am interested in. I try to restrict making financial decisions on impulse by considering whether what I am doing or spending will lead to some specific goal that I value.
One thing that I really hope to be able to do in the future is to avoid lifestyle inflation once I begin to earn “real” money (if that is the direction my life takes). I want a house and a parcel of land but by no means do I want a McMansion or beachfront property. I don’t need (or even really desire) the latest electronic gadgets and technology. I prefer living modestly and simply, as peacefully and in tune with my personal values as possible. I want to earn a solid income without sacrificing family or freedom as I’d like to adopt a child someday and being there to be a father and raise my child firsthand is more important than being able to buy plastic trinkets for them while I am slaving away at my job.
Yes, this is my ideal outlook on my future but who looks at their future and says they want to work at a job they hate to be able to pay the bills and take a Staycation once a year? :)
I really went on a tangent! Thanks for your support!!!
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Wow! How do you possibly have that much debt for an associates/bach degree? I graduated with $22K in debt (including accrued interest) and that was for 3 undergrad degrees, one master’s degree and a semester abroad that I choose to borrow $6K for. (I could have saved the cash and not studied abroad)
I worked 3 jobs all through my school and graduated from a #1 program in my area with a 3.9 GPA and a 3.85 Grad GPA! I don’t understand how a community college degree could cost more than my master’s and undergrad combined! Can you explain a little more? I’ve read through your archives but I can’t seem to find the answers I am looking for…
It really boils down to trying to finance a lifestyle I wasn’t able to afford on borrowed money. My actual tuition costs were not near what I owe. I consistently took as many loans as I possibly could and that put me in the situation I am in today. Although I was working fulltime, because I didn’t have control over my finances and my spending was out of control, I never saved a dime…it was literally money in, money out. My debt has zero to do with the cost of my education and all to do with my stupidity.
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