I graduated in May of 2011 with a Bachelor’s of Science in Nursing degree with summa cum laude honors. I love my career and what I do for a living. My blood, sweat and tears went into my degree. I walked away with a great degree, but I also walked away with over $35,000 in student loan debt.
I know that is considerably less than some of my millennial peers who have upwards of $50k… $100k… maybe over $150k in loans. But, the average US college graduate student loan debt is actually $30,000. So, I was in the same position as a lot of my peers were/are in. I got a few academic scholarships and one small grant, but I still had to finance the majority of my education. My parents were not able to help me with any education costs or expenses (my parents actually filed for bankruptcy my freshmen year of college).
But, my dream was to become a nurse and a Bachelor of Science in Nursing usually provides better employment options. So, I went the 4-year BSN degree journey.
At this point, I was watching my parent’s financial situation implode, and it left me feeling insecure about money and finances. This is actually how my interest in personal finance first started. I started watching the Suze Orman Show on CNBC every Saturday night attempting to learn how to manage money, save money, and not make the same mistakes my parents had. It was from Suze Orman that I learned student loans can be a crippling expense to pay back after college. I did my best to follow her recommendations.
And, I did my best trying to keep my loan balance as low as possible. I attended only public universities and colleges. I actually did my first two years of prerequisites at a public state university, but I still needed 2 more semesters of prerequisites before I could apply to nursing school. So, I decided to switch to a community college to save some money (plus it was closer to home).
This saved me approximately $3500 in tuition/fees (for 2 semesters), plus I got more financial assistance in the form of a grant. I now wish I went to community college for all three years of college before I started nursing school. I would still have the same degree in the end, and by my estimation I would have saved almost $7,000.
I also lived with my parents until my last year of nursing school to save the expense of renting or living in a dorm (I don’t feel like I missed out on anything important there). I only financed my tuition, fees and books. I didn’t take any Spring Break Cancun vacations or European Excursions and finance it with student loans. I actually knew a woman who used her students loans to pay for breast implants (insert sad face).
Even with all this, I still started having anxiety about my student loan balance and payments before I even graduated from college. My payments were going to be about $400/month… for the next 10 years. I also figured out I would pay around $15k in interest when all was said and done. This made me even more sick.
I knew I had to do something. I had to take control. I had to get rid of this debt.
Here’s how I see things: Money = Security = Freedom.
I wanted freedom.
So I started paying double the minimum payment amount to begin with. Just kind of some random number that I could afford and I went with it…for about 15 months. I thought I was doing a great job, too. I estimated I would have it all paid off in 3-4 years, which is fantastic compared to 10 years.
When I switched jobs and I was prompted to reexamine my budget. Using Mint, I plugged my numbers into their goals calculator and had a shocking revelation…I still had almost 3 years left before I would be free of student loans. Not only that, I was paying my loans off all wrong.
I had naively believed Nelnet (my loan servicer) would help me pay off my loans by dividing my large payment each month in a manner consistent with “snowballing” or “debt stacking” (I know, I was so naive). But, guess what? Nelnet doesn’t want you to pay off your loans faster, they want you to only pay the minimum amount and pay as much interest as possible so they can make more money.
So, I hadn’t been “snowballing” or “debt stacking” my loans at all. Snowballing debt is a reduction strategy, where the smallest balance of debt is paid off first and then you move onto the next slightly larger debt to pay off until eventually you are paying off your larger amounts of debt. “Debt stacking” is where you pay off the balances with the highest interest rate first, and pay off the lowest interest rate last.
This is what Mint recommended I do. Not only that, but it graphed and showed which sub-loans to pay off first (the highest interest ones obviously), how long each sub-loan would take to pay off and when I could expect to have it all paid off by.
Then, a lightbulb in my head went off at this point. How quickly could I get my loans paid off? If I cut back on expenses and became uber-frugal and put all that extra money towards the loans? Mint’s calculator said 13 months. I was astonished …and excited and committed myself to aggressively paying off my loans as fast as I could.
So, I stopped buying new clothes. I didn’t drink Starbuck’s coffee. I rarely went out to eat. I suspended my gym membership. I didn’t go on shopping sprees. I sold stuff on eBay to make extra money. And, I think my family and friends got really cheap, DIY birthday and Christmas gifts too.
**Side Note: Nurses can make good money, but it is usually less in the hospitals and I was still technically a new-grad (very little experience). So, I was making less than $41K/year when I first started working in a hospital.**
But, I didn’t pay off my loans in 13 months. Why?
…Because I paid them off in 9 months. I paid them off 4 months earlier because I became so motivated and dedicated by using Mint to pay my loans off. I think the visual of it all made it seem more possible and do-able. I could visually see how quickly the debt was diminishing.
So, it took me actually 25 months in all, but I paid off my $35,000 of student loan debt and it was the most liberating feeling ever. I highly recommend it!
Take Away: Student loans can be very dangerous to have, because they are not dischargeable in bankruptcy. They are impossible to get rid off. It is best (if you are pre-college or in college) to try to keep your loans to a minimum by: -Not financing anything beyond tuition, fees, books and maybe room & board. -Starting out at a community college to begin with. -Have a plan (and maybe a plan B), but do not go into college and end up staying for 6+ years of undergrad.
Your turn: How much student loan debt do you have? What are some ideas to get it paid off faster?