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.
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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.
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.
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.
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.
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.