Student Loans Archives - Page 6 of 9

I Just Paid Off A $25,000 Student Loan!

Remarkably, over the course of this year, I’ve completely changed my budget — both in spending and income. The aim is simple: I want to destroy my student loan debt as rapidly as possible while in graduate school. Over the last few months, I’ve deposited more than ever into the federal government’s coffers by paying everything off early.

In August, one of my student loans — the unsubsidized at 6.8% — was actively gaining interest and sat around $25,000. My debt had metastasized and was snowballing into a serious concern. I thought I was doomed to this reality until I started Frugaling, found more ways to make money, and prioritized debt reduction. Then, it all clicked, and debt started disappearing.

Today, I’m shocked and proud to announce that I’ve paid off the biggest hurdle. The $25,000 loan in August now sits at $0 — completely paid off. Instead of losing thousands of dollars over the years and struggling to pay it all back, I have shortened everything. Now, it’s gone!

Unsubsidized Student Loan Chart Debt Question — *My unsubsidized student loans were going crazy. In August 2013, they reached $25,000. Now, they’re completely paid off!*

I know this is shorter than normal, but I just wanted to share this little achievement with all of you. Trying to keep personal finance… Well, personal!

Thank you everyone for your support and help thus far. I have a ways to go, but this is the biggest mountain to climb.

Would You Honestly Answer This Debt Question?

By Frugaling 11 Comments

Fork in the road flickr creative commons debt question — *Photo: flickr/sacks08*

The first-year anniversary of Frugaling.org is right around the corner. It’s been over 11 months since I started this journey and a tremendous amount has changed. Today, I’m taking time to reflect on what started it all.

How much debt do you have?

When I was asked this debt question, it seemed invasive and prosecutorial. The consequences were unfathomable and unknown. I remember feeling awkward, heavy, and embarrassed. I knew the number right off the top of my head, but saying it aloud made the situation more real. The answer to that question was personal and private. I was almost ready to react in defense of my debt!

I briefly thought, “I’m a student, I need this debt! It’s necessary! Look at other people! Hell, it’s an investment in my future career!” Can’t you read and feel the dripping indignation?

The question appeared to be an oxymoron, too. Frankly, I had less than nothing. How could I have less than nothing?! Nearly $40,000 in debt between credit cards, student loans, and a car loan, I didn’t own anything. Instead, banks owned me and all my stuff. With student loans, you either pay them back, enter a special governmental program for forgiveness, or you die. There’s no option to reduce your interest for good grades or make it magically disappear — not even bankruptcy can save you.

Despite the internal pressures to keep quiet or lash out against the person asking this loaded question, I decided to follow down a different path. I responded hesitantly — not knowing the response I’d receive — but also with combination of authenticity, genuineness, honesty, and openness.

Sharing the big, scary number

I plopped out this turd of a number: “I have about $38,000 in debt right now.”

The heft of that number and all the social pressures surrounding it seemed to be lifted. The veil of privacy and secrecy around my debt disappeared. Suddenly, I felt freer. Over the coming months, I began to tell more people about my problem. Some people reacted in shock. Others shrugged their shoulders and admitted they had more than me. Seemingly, my vulnerability and authenticity encouraged others to share their honest reactions and their own debt stories.

I wasn’t alone anymore with this staggering number. I wouldn’t be kept up at night anymore. Being able to share my story enabled me to take responsibility for errors and realize how I could improve. The two combined in perfect harmony into Frugaling.org.

The pressures of society are powerful

I was worried about the stigma of debt. I noticed in popular media and casual conversations that debt was comparable to ill morals. Poorer people are vilified for making mistakes and not working hard enough. I was told that if I share my bank statements and my debt load openly that that was tantamount to indecent exposure. Maybe they’re right, but by facing my problem head on and sharing freely, something beautiful happened.

After I started Frugaling.org, I began to pack more lunches, choose more affordable clothing stores (haven’t purchased anything in 8 months), make a budget I could actually follow, and radically reduce my debt. I made more money and paid my loans off in huge chunks.

Being honest and risking rejection was one of the most difficult things I’ve done. But I’m certain now that this openness is the strongest method and pressure to fixing a bloated, dangerous debt course. Changing the path can seem difficult — you’re going to want people supporting you. By admitting your debt load, you’ll be making your first step towards zero and have a team of people cheering you on.

Have you shared your total debt with other people? What was it like sharing your story? How do you find support in your journey back to zero debt?

Find A Roommate And Financial Freedom

By Frugaling 4 Comments

As a student, I feel like a pinball getting smacked around from location to location. I’ve moved about 9 times in my adult life. I’ve lived with significant others, friends, acquaintances, and even by myself. I trekked across campuses, cities, and the country. After two years living alone, I found a roommate and will make my tenth move this summer. Today, I wanted to spend some time reviewing my current and future living situations, a hesitancy regarding roommates, and the effect on my budget.

My Man Cave

Two years ago, when I received my admission to graduate school and decided to move to the Midwest, I was ecstatic, but clueless about housing. I didn’t need much – just a roof over my head and basic utilities. I jumped at an opportunity to live in the university apartments. I hadn’t seen the outside or inside of them, but the price ($435 a month for a one bedroom) was unbeatable.

*Look at these digs! Perfect for a window air conditioner.*

What I found was both decrepit and lovable. The apartments bubble with rust. A perma-dirty linoleum floor greets my toes when I slide out of bed each morning – you never get used to the cold. The faucets run a yellow/red when they’re not run regularly. My circular thermostat doesn’t account for certain parts of the apartment, which seem to be unprotected from the harsh, Midwestern cold. Cinder blocks are stacked high on the walls, painted over in what can only be assumed to be lead paint. A thick coating of asbestos lines the ceilings.

Despite misgivings, it’s my home, and I love it. Actually, I find it comical how much I don’t want to leave my current apartment, and I’m only leaving because the university is demolishing them.

Forced to move again, while balling on a serious budget with severe time constraints, seemed impossibly difficult. Then, the university notified everyone that new apartments were being built in time for my departure from the old ones. I could just move right into them!

Luxury Living At A Price

Over the last decade or so, the university considered a construction project to repair and rebuild the flood-damaged, aged, asbestos-filled apartments. Year after year seemed to pass without resolution. When I moved in summer 2012, I heard the whisper of change – a private bidder on public lands.

Then, a resolution quickly swept over the university apartment system. New buildings, contractors, and contracts would be drawn. The private company would revitalize this community with opportunity, design, and (supposedly) affordability. Tenants would see a brightened exterior and feature-filled interior. The costs would unfortunately need to increase, but we were assured they’d be manageable.

Something seemed askew about allowing private bidders onto public, university property, but the messages seemed positive. A few months later I found out the price: $875 per month for a one bedroom. In other words, more than 100% what I paid when I first moved!

Despite balling on a budget, I resigned to the fact that my 60-70 hour workweek wouldn’t enable me to tour many places. I would accept whatever they required. I signed a lease last year, much to my dismay and confusion. How could the university charge $875 per month for student housing?

Wake Up And Smell The Budget

Even though the price of rent was steep, I relished my independence, at the expense of my budget. I wanted to be frugal, but not that frugal. This new rent would decimate everything I worked towards over the last 10 months. I balanced my budget and created a tiny surplus for each month. But paying $875 a month would mean losing about $3000-4000 per year, plus student loans with at least 6.8% interest APR. I can’t even calculate the true cost of this decision.

Over the course of this semester, I’ve been working hard at not working. Essentially, I reached burnout, and to counteract these notoriously awful feelings, I decided to spend more time going out with people. Being able to socialize and meet new people has been one of the best experiences of my life. It’s kept me sane amidst my crazy-busy life.

Thankfully, meeting people also meant finding those in similar situations: looking for roommates. Over time I found someone that was excited about living together and could afford to split a two-bedroom apartment. The mental math was easy: rent would be $550 per month.

The challenge for me was realizing my prejudices towards having roommates. In the end, I realized that opting for the expensive rent was a cop-out to finding a roommate and managing my delicate budget. The reality was that I didn’t have independence until I was free from debt. I’m looking forward to having a new roommate, paying off even more student loan debt, and freeing myself from the burden of an unbalanced budget.

What have you done to save on rent, housing, etc.? What do you think about living with roommates? Any recommendations for me?

5 Essentials For Paying Student Loans

By Frugaling 9 Comments

Student loans net work Mint.com account — *My student loans were careening out of control. Now, I’m looking at the finish line: zero debt.*

Today, I paid off more student loans than ever before: $4,000, to be exact. This hefty deposit was made directly to my loan servicer, which will pay off federal aid debts. In May 2013, I had nearly $40,000 in debt. I was careening out of control, and my only solution was to take out more student loans. Instead, I started Frugaling and changed my entire financial future.

Even though I’m making more money than ever, it’s important to safely and smartly pay off debts. While it’s best to prevent excess debt via proactive budgeting, paying it off can be dangerous, too. In my situation, I paid off this huge chunk of debt by following the proceeding five essentials. Hopefully these will help you to safely pay off more student loans than ever!

1. Pay Off Active, High Interest Student Loans

Okay, I’m going to get a little technical here. I have two types of federal aid: A and B. My “A” loans are subsidized (no interest gaining) until I graduate from school. Unfortunately, my “B” loans are a running taxicab of interest and piling debt.

The first goal needs to be paying off high interest student loans that are active. My “A” loans are not active, and as such, do not need to be the focal point. Meanwhile, my “B” loans are ticking along at about 6.7% APR. All my energy and funds are going towards these second, active interest loans right now.

2. Pay Off As Much As Your Budget Can Bear

It’s tempting to start taking some of my newfound money and buy things. Somewhere between things I don’t need and things I’ve long wanted – oh, how wonderful that would be to buy the unnecessary but awesome!

To prevent this human reaction, I’m digging deep and paying off an uncomfortable amount of student loans every month. It hurts to pay this much because I feel uncomfortable having this little in my savings/checking accounts. Conversely, it helps me pay off more each month, and prevents needless purchases while my budget is being corrected. The less access to money you have, the less you’ll spend!

3. Subsidized Loans Are Free Money While In School

The “B” portion of my loans are my enemy, while “A” is a friendly sort. My student loans started out as a subsidized group, when the country cared about educating the masses affordably and fairly. That’s sort of changed.

I have $8,500 in subsidized loans that are protected from gaining interest until I graduate. Phew! This mass is scary and will be a priority at some point. While I’m in graduate school, I’ll aim to stock up my bank account, build an investment portfolio, and diligently follow my budget. Later, after I graduate and the interest becomes active, I’ll redirect this built up liquidity to quickly pay off the rest of my loans.

4. Keep Some Handy For Emergencies/Tax Season

This might seem contradictory, but part 2 says pay as much as you can possibly bear. Does that mean you should scrap any emergency funds to pay off student loans immediately? Well, it depends on your liabilities.

As a car owner, with certain financial obligations, I need to have some money on hand in case something goes awry. Likewise, this is the first tax season where I’ll be paying Uncle Sam. While I’m happy to do it, I need to prepare for significant budget buster in mid-April (when my payment is scheduled). The key here is to pay as much as you can, while insuring yourself against totally tragedy.

5. Recognize Your Accomplishments

Bring in the reinforcements! Good habits are largely built from strong, positive reinforcement behaviors. Pavlov and Skinner are the two psychologists credited with founding the field of classical and operant conditioning. If you’ve ever taken a psychology course, you’ve likely learned about them.

Those two stodgy, crotchety scientists were pioneers in the field of education and behavior management. Skinner’s operant conditioning reinforcement schedules are as important as ever. Simply put, when you’re done paying off a significant chunk of student loans, reward yourself! Today, mine will be an extra coffee before work. What’s yours?

I Just Paid Off A $25,000 Student Loan!