I have been waiting to write this post for a looooooooong time.
Pretty much since I realized how big of a mistake I made in my college years and got my financial act together.
Its time to claim victory over the biggest financial mistake I have EVER made.
WE ARE OFFICIALLY 100% STUDENT LOAN DEBT FREE
BOOOYAH! I didn’t think I would be this excited, but I am.
Over the last 3 years we have averaged paying $15,000 towards my student loans.
Let that sink in.
$15,000 Per Year
That is $15,000 of after-tax dollars leaving our bank account to pay for something I finished 7 years ago. It has basically been a second mortgage for the last 5 years (Our current mortgage+insurance+property tax costs under $20,000/year).
Quick Recap of my Student Loan Story
- 18 year old starts signing loan paperwork without understanding interest
- Uses Student Loans to pay for general lifestyle expenses
- 6 years later I graduated with my MBA and over $85,000 of student loan debt with an average interest rate over 6%
Continued my foolish decision making by taking the 6-month deferral after graduation while interest capitalized. Which then started creating more interest. Derrrrrp.
Made minimum payments to multiple loan servicers (at one time 5 different providers). I had one small loan with a 10.25% interest rate.
$5,000 Interest in 1 year
My big wake up call was doing my taxes and adding up all the interest I paid on my student loan balance. In 1 year I paid over $5,000 in interest and was only able to deduct half of it.
Getting shit together
That realization prompted a financial turnaround, but we still took over 4 more years to pay my loans off (while building a substantial nest egg).
Sweet, Sweet Liberation
We finished about 3 years ahead of schedule per the original repayment schedule. On the 6th of every month, I am going to log into my bank account and celebrate the $1,000 that didn’t disappear.
We were only able to pay down my debt and save a ton of money due to our above average incomes – which leads me to my next bullet point
Student Loans are Crippling
Ultimately we are responsible for the decisions we make. I was a legal adult entering a legal financial contract. But……If I knew how long and how hard we would have to work to pay that balance down after graduation. I would have made different decisions.
I’m not going to cite any stats but can share my first-person experience.
Student Loans can cripple your finances. They can make it damn near impossible to save money after you graduate and people do not realize how long it is going to take to get back to even.
Three things that consistently worry me:
- Jobs that don’t have high-income potential
- People that start having kids right after they graduate from college
- People who overbuy on their first house without realizing the impact Student Loans will have on their finances
If we would have had a kid, an expensive house or, most importantly, weren’t able to raise our incomes significantly… We wouldn’t be sitting nearly as comfortable as we are today. It goes a lot farther than just monthly payments, it can mess with your family and your financial security.
A close 4th is the interest rates I experienced that continue to this day (4-6.31% are the going rates for federal loans). If SoFi can find a way to drop the rates with a re-finance we should be able to find a way to get them cheaper up front.
What are we doing with the extra cash MONEY
Welp. It depends on our raise situation over the next 3 weeks as we are both have a chance to get 5%+ raises. IF (and that is a big if based on my recent experiences) we will split it between a brokerage account, maxing out the rest of Mrs. AE’s 401K and stash some of it for a little travel next year.
If we don’t get our raises, a good chunk of it will be going to childcare for our second child in 3.5 months. Womp. Womp. Woooof. Still way better than trying to figure that out AND make monster student loan payments I suppose.
Time to celebrate!!!!