6 Things I Learned From Paying Off $120k in Student Loan Debt

I know the fact that I had student debt is not unique: 70 percent of college graduates leave school with debt. Even having six figures of student loan debt isn’t that uncommon, especially when it’s graduate school debt.

When I was deciding to take on this debt so I could go back to school for my MBA, I knew exactly how much I would need to borrow. Before I applied to schools, I calculated what my post graduation loan payments would be. I felt completely informed about the big financial decision I was about to take on.

According to my spreadsheet and financial life plan, I was in a great situation, despite the six figures of debt. I went to a stellar school and came out with a high paying job. Even though my loan payment took up 25% of my take-home pay, with some lifestyle adjustments I could still get by.

I thought I knew it all.

What I neglected to realize is that there is a strong, emotional side to paying off debt: what it would feel like to have my career options limited, how it could affect my relationship, and how I would think about it nearly every time I paid for something.

It was my first real adult lesson with money, and it has completely shaped for the better how I think about and handle financial decisions today.

 

I re-learned the value of every dollar

This sounds basic enough, right? Knowing the value of a dollar is a lesson that parents teach their eight-year-old kids, but somehow I went to school and promptly forgot this life lesson. Before enrolling in my program, I had carefully calculated exactly how much money I was going to need and how much my loan payment would be once I graduated. But there were still too many moments when the money felt like monopoly money. I was already going to have $120k in debt, so was spending an extra $50 or $100 really going to matter?

Toward the end of my first year, there was a school-sponsored two-week trip to China that it felt like everyone was going on. I was ready to sign up, despite the $4,000 price tag. The FOMO was intense, and on a loan balance of $120k, another $4,000 almost felt like a rounding error. Almost.

Thankfully, I took a minute to pause and figure out how much that trip would really cost me over my 10-year loan repayment period. With my interest rate of 7.9%, that trip would end up costing over $8,000! Was this trip really worth $8,000 to me? Was it even worth $4,000, or was I caught up in not wanting to be left out?

Seeing that number brought back into perspective how much each dollar I spent was going to affect paying off my loan. I skipped the trip without regret and had a newfound appreciation for just how much my extra spending would dig me into deeper debt.

 

Source: @homeyohmy

 

I learned that “good debt” can still keep you in a bad place

Once I settled into the rhythm of paying my debt and going to my new job, the loan repayment didn’t actually feel that horrible. It became a fact of life, like paying rent each month. And everyone kept referring to this as “good debt,” so why worry about paying it off?

That ambivalent feeling didn’t last long. I got married to my debt-free husband who wanted to buy a house, travel, and take advantage of amazing life opportunities like moving abroad. Around the same time, my job situation changed and suddenly I found myself in a very unstable and unpleasant role. With each day that passed, I realized my good debt was actually keeping me in a very bad place. I felt chained to this high monthly payment, stuck in a job that was only getting worse, and insecure about holding back my husband financially. The anxiety started keeping me up at night.

While I had been constantly reassured that my loans were good debt, I learned that this debt was going to keep me in a bad, anxiety-filled place if I didn’t do something about it. Once I acknowledged this and put aside the idea of this being good debt, it motivated me to put a plan in place to get rid of it as quickly as possible.

 

Source: @oliviarink

 

I learned the price of my procrastination (and it was expensive!)

The day I graduated, I started getting emails and letters about refinancing my loans. I had both federal and private loans with an average interest rate of 7.6% and refinancing lowered my rate to 5%. While not everyone should refinance (especially people who will benefit from government programs like income-based repayment and loan forgiveness, or people who don’t have a job), it was clear that refinancing would save me money. A lot of money.

But the process of refinancing felt complicated, time-consuming, and a little overwhelming. I was moving, starting a new job, and had a lot on my plate. I’d get around to refinancing… eventually.

I put off refinancing for 18 months before I finally applied. After taking 30 minutes to complete the application and a few days to see if I was approved, my loan payment decreased by $180/mo. During the 18 months that I procrastinated, I spent $3,240 on interest that I wouldn’t have had to pay had I refinanced immediately.

Seeing that the cost of my procrastination was equivalent to the price of a fabulous vacation somewhere made me stop dragging my feet on other financial to-do list items, like contributing to retirement.

 

I learned how to make it less painful

Let’s be honest: there is nothing fun or exciting about digging yourself out of deep debt. I can’t pretend to have enjoyed the process. Paying more to my loan repayment than my rent each month was completely depressing. No matter how much I tried, I couldn’t be positive or happy about my debt.

After a few months of being really bitter about the debt, I decided that I could either stay miserable or I could figure out how to make the repayment process more tolerable. I tried to remind myself to be more positive, but that positivity would quickly fade once I realized there was something I couldn’t do or buy because of my loan.

Walking through Target one day, I finally realized how to make paying off my loan feel a little more like a game rather than a frustrating obligation. I had gone into the store on my lunch break to pick up something small, and was walking to the register with a few impulse buys (as one does). I looked down at the extra $30 I was about to spend on things I didn’t really need and decided the responsible thing to do would be to put back the extra items, which I did begrudgingly.

As I stood in line giving myself a mental pat on the back for doing the responsible thing, I realized that it would feel even better if I put that money directly toward my loan. I logged into my student loan account from my phone and made a quick $30 payment. It was such a small additional payment but I was honestly so excited by it.

This became a game that I continued through the entire repayment process: I could either spend money on something or I could immediately put it toward my loan. Should I grab that green juice or should I put $6 toward my loan? Should I package up some leftovers to bring to work for lunch and put another $10 toward my loan?

I didn’t always choose to forgo lunch out, but anytime I did make the decision to not spend money, I’d make an immediate loan payment for that amount. Seeing all of the little payments add up over the month made it encouraging to keep going.

 

Source: @flipajackson

 

I learned to negotiate

Even though I took a negotiation class in business school, I was terrible at negotiating. Thinking about asking someone for money made me turn beet red and get queasy. I hated it.

While I was repaying my loan, there were two instances where I had an opportunity to negotiate. In one instance, I’d received a job offer that was too low. In another, I was being underpaid. Because I hated negotiating so much, I probably would’ve ignored both of these situations if it wasn’t for my massive debt. But I knew that negotiating for fair pay would allow me to put even more money to my loans.

I read all the negotiation books I could and asked friends for advice. While these two negotiations were far from perfect (I was still red, flustered, and queasy), in both situations I ended up being paid more. With this extra money, I was able to pay off 20% of my original loan balance.

Now that I’ve learned this skill and I know that it’s not difficult, I never shy away from negotiating anything: contracts with clients, my rent, and even my internet bill.

 

Source: @tourdelust

 

I learned that I can handle more than I thought

This wasn’t something I realized until recently, but having tackled such a large debt makes me feel like I can take on any financial challenges that come my way. Just a few years ago I had a negative net worth. I had a six-figure loan balance that I felt like I’d never pay off. I felt horrible about my financial situation and I’d stay up some nights worried about how I’d ever dig myself out of this hole.

Now that I’m on the other side of that situation, I not only feel relieved that it’s gone, but also confident in my ability to handle any money issues that come my way. I can save, I can earn more, and I can get myself out of a tough situation.

That’s not to say I’m going to run out and take on debt willingly. But if I’m put in a tough money situation again, I feel a lot more confident in my ability to handle the ups and downs that come my way.

If you find yourself wading your way out of student loan debt and frustrated by your progress, I can tell you that on the other side of that debt is the confidence that you can handle anything.

 

Is there anything surprising you’ve learned from paying off your student loan debt?

 

This article was originally published on February 27,2018.

  • This was such an honest article about the emotional toll of debt. I admire your determination in paying it off, and the tip about not spending money and immediately putting it toward your loan is a good one!

  • Daryl Lindsey

    Amazing, informative, personal article!!

  • Michelle Sabourin

    I’d love to know which negotiation books you recommend? I need to negotiate for a pay increase at my current job and I’ve been procrastinating.. Love the financial articles EG posts <3

    • There are some great ones out there, but the one that helped me the most was Ask For It by Linda Babcock and Sara Laschever. It had really practical information and broke things down so it wasn’t overwhelming.

  • Melissa Thompson

    I could definitely take on the payments like a game of sorts. I am terrible with miscellaneous spending and impulse buying. I’d say that’s my biggest downfall, but having that $ go toward debt would feel amazing! Thanks for the tip!

    Melissa

  • ….>_< I haven't been paying off my student loan debt. I can't afford to right now. At all, so I've been deferring. Maybe if I win the lottery some day I'll just pay it off….

  • Gina Malito Pierce

    I took on significant student loan debt from law school, but with discipline and determination, I ended up paying off the balance in 7 years! Like most, my interest rate was high (8.9%) for the bulk of my loan and it compounded faster than I could have ever imagined. In 7 years, I ended up paying $30,000 in interest plus the original loan amount. My starting point was rough and I initially opted for the 25-year repayment plan to keep my monthly payment low, which I would not recommend. After 4 years, I switched to the 10-year repayment plan and would challenge myself to make double or triple times my monthly payment in one month. Despite going to law school, I did not become an attorney, and opted for a sales role, which presented commission/bonus opportunities. I would dedicate 50% of my take home pay from my monthly/quarterly commissions to paying down my student loan debt. The rest I would divide evenly between savings and “slush” fund. One tip I learned later on: you can make “principal only” payments beyond your standard monthly payment, which I would highly recommend as it lowers the balance that interest is calculated from. Another trick I do with almost every single loan/bill, such as mortgage, car payment, or student loan is “round up.” If my calculated payment was $526.18, I set my budget and plan for a $550.00 or $600.00 payment. By using this method, I have been able to pay a car note off 1 year earlier than projected, my student loan 3 years early, and our current 15-year mortgage would be paid off 1-2 years early. Lastly, a newer method I tried was paying 1/2 of my monthly budgeted payment every 2 weeks because most of us are paid bi-weekly. It prevents you from spending the money you need to dedicate and does end up lowering the total amount of interest that accumulates.

    • That is really impressive! I also went to law school and decided not to be an attorney. I like your idea of making “principal only” payments beyond the minimum. I’m going to look into that — thanks!

  • Alyssa Clausen

    Thank you for this!

  • This was an insightful article. It gave me a different perspective on tackling my own debt. Hopefully I can apply this way of thinking towards paying off my stupid credit card. Student loans and salary discussions will be next! Lol

  • seminegar

    I’m right there with you. Last November, we started paper work to put a bid on our first home but in a moment of clarity paused and decided to pay off my high interest student loans first. They were losing more than my retirement was gaining. It was heartbreaking at first but I’m experiencing a lot of what I read here. We set super strict spending limits but aren’t unreasonable. I dropped my Dunkin, Target, and Madewell habits but if I truly need something, I get it. We started aggressively paying it off. Like using our down payment aggressive and I’m debt free in April. So our debt to income ratio will be better soon and we’ll be all set to switch aggressive loan paying gears to home ownership saving again. Some unexpected side effects… I’m overall less stressed. I didn’t realize how many ‘stuff’ and purchase choices I made daily or how I solved problems with my credit card. Believe it or not, when I stopped the rapid influx of stuff in my life and had time to examine what I had, I found I had too much already. I’ve been purging tons of things and NOT bringing new things in. This lifestyle change is even impacting my ability to not waste food (I was a chronic fridge stocker and veggie waster). I’m pretty confident my saving binge is helping me become a more mindful person. 🙂

  • Glad there were valuable lessons learned from paying off your student loan! Props to you for powering through 120k! Hope readers in similar situations can find some good tips out of this post :).

    I was fortunate enough to save up enough money before my grace period ended and paid off everything in one sweep. One thing’s for sure, one loan repaid means one less headache!

    exquisitely.me

  • Sarah Campos

    I currently have ~130,000 in debt from medical school and it stresses me out daily. I am still a medical resident so feel like I am not making enough to pay off much of my principal, which I am not forced to do (just the insane amount of interest) in my current loan agreement. I’m wondering now if that is really true. If anyone has any advice/articles/books about how to set a plan for repayment, I’d love any recommendations.

    • Marcella

      Right now I owe about $70,000 from undergrad, and it’s pretty soul-sucking. I got really mad in January and realized my payments for the last year were only going to interest, and nothing towards principal. It felt like I was in a hamster wheel. SO I made a big $4,000 payment (my monthly payments are $383) and lo and behold it FINALLY was going towards principal!! Only $20, but it made me so happy. I would recommend trying to knock out the interest as much as you can in a lump sum (if your payments are the same as mine).

    • Magdalena

      Sarah, there are many great websites for physicians, a good starting point would be http://www.thewhitecoatinvestor.com. If you have an option to moonlight, this can help bring in extra income that you could apply to your loans. After completing residency/fellowship training, living on your resident’s income while applying the extra income to your loans for at least 3-5 years will help you make a huge dent in your medical school loans. Even one extra year of living below your means (ie not spending all your attending salary) will help! In addition, keep in mind female physicians are paid at least 20-25% less than their male counterparts. Do not be afraid to negotiate your starting salary aggressively. Do not accept the first salary offer. Good luck to you!

  • Megan Gessel

    Great article Erica! Fellow MBA here (current student). I’m feeling so fortunate that I’m in a program where I’ll be able to pay for my schooling upfront (no debt, thanks to a top 25 program at 1/5 of other school prices). But this is still very relevant to my relationship since my spouse has heavy loans from medical school! We share a similar perspective that money is a tool to use to enjoy your life and serve others. I’m excited to check out your site!

    • That’s amazing, Megan! An MBA with no debt – good for you! Good luck with the medical school debt – it sounds like you have a great foundation and mindset to pay those off.

  • This was a really great post, truly, and I think a lot of people will find it very helpful. For me personally, though, I don’t understand how students accumulate so much debt. I put myself through college and university by working whilst studying. I never had to apply for student loans – or ANY kind of loan for that matter – because I always made sure I had a job to support myself and pay for my tuition. Do students not work anymore?!

    • Daryl Lindsey

      Great conversation happening below. And let’s also not forget that grad school debt (like the author encountered) is where it can really get sticky, because tuition can double/triple/more above undergraduate tuition, and oftentimes students are not even permitted to have a job. I have a friend who had to very-sneakily start driving Uber during her MBA program so she didn’t have to live completely off loans.

  • Yes, I’m Canadian. Don’t be fooled, though … although Canadian college and university tuition isn’t as expensive as the US may be, it’s still really high. When I was in school (which was 10-15 years ago), I remember having to pay about $10,000 per year on tuition, parking, and textbooks. College was a little less expensive. College cost me about $5-7,000 a year. The cost of your tuition also depends a lot of the type of course you’re taking. More specialized courses like law and medicine cost a fortune!

  • Throughout my school years I worked part time and full time in the retail sector. Let’s put it this way – whenever I wasn’t in school, I was at work.

    • Yes, a lot of students work while in school, but not all universities or schools charge in-state tuition. For many private schools (I attended 1 myself and have worked at 2), there isn’t enough to even come close to paying all of the tuition, books, room and board. I also don’t suggest students work part time and full time. They need to study and focus on school, which is the whole point of the degree. Students rely heavily on loans, but I will say, not all understand the commitment they’ve made. It’s my job to inform them so they make the best decision. What scares me is the willingness to get into debt on the parent’s part, when their child already has a full ride at another school. Or some parents are so low-income they say they don’t anticipate paying off the loan, but their child wants to go there so they’ll do it. Debt is such a serious thing and I say as long as your exhausting all other measures, it can be a lifesaver!

  • Casey

    This was in incredibly inspiring post for me! I too have a TON of student loan debt, both federal and private. And the monthly payments are incredibly high for both. Talk about putting off consolidating/refinancing.. it has been four years and I am finally realizing how crazy I am for not looking into this already. But there are so many companies out there.. do you have any recommendations?

    • Hi Casey! There are so many companies out there and I’ve heard great things about a lot of them. I used Sofi and loved them. There’s a post about them here: http://theeverygirl.com/how-to-go-about-repaying-your-student-loans/
      I also have a refinance guide and more about the process I went through (+ a review) here: http://theworthproject.co/student-loan-refinancing-guide/

  • Keep in mind, though, that the figures I listed were from 10-15 years ago when I was in school. Prices have probably doubled by now surely. I *do* get it, though, not everyone can afford to go to school and further their education (which is a real shame), but I’ve also heard many stories about kids going to school and not having jobs because “they couldn’t possibly handle both.” My younger cousins fall into that category and I just don’t understand it. So, because they can’t study and work at the same time, they expect Mommy and Daddy or student loans to pay for everything. I know I’ve gone off on a tangent here, but I think a lot of students are relying solely on student loans to pay for their schooling when they could very easily start working to help support themselves too.

  • Kaleena Weber

    Thank you for this article! I also started with about 120k in student loan debt and my husband to be has some too. It’s definitely been a struggle with my loan payments being about 40% of my take home pay. It’s even more emotionally draining because I live in an area where many people don’t have that debt. They’re in their mid twenties buying houses and having kids and that’s just not an option for us right now.

  • Kelly Forbes

    This is so helpful! I’m from Australia and we are fortunate to have the HELP loan scheme through the Government. Last week felt really overwhelmed with my debt but after reading this I am inspired to make voluntary payments to get rid of it faster! Thanks for the inspiration!

  • Jasmyn Elliott

    This gives me so much hope. I’m in school now working to aggressively pay down my credit card debt in preparation to tackle my student loans, and it can get very stressful. Thankfully, this piece is a major boost to keep fighting the good fight.

  • T. Seals

    Hi Erica! Do you have any tips on negotiating rent, bills and salaries? Thanks for sharing!

  • Rachel B

    This was a refreshing take on paying off student debt. I’m aggressively paying down my undergrad loans so that I can also go back for my MBA. So, luckily I’ve already learned (the hard way) a lot of these lessons, but still wonder: was the payoff worth the debt struggle? Is the additional degree worth doing it all over again? Also, I’m def going to start using your strategy of “rewarding” myself with an immediate equivalent payment when I don’t make purchases.

  • Gabrielle Nuna Hicks

    I LOVED this article. Especially the part about turning it into a fun game. I’m going to try that and follow up. That’s awesome! Congrats on getting it all paid off. I know it has to be an amazing feeling.