Today, I’d like to share my student loan story. In today’s world, many people cannot obtain a college degree or advanced degree without the help of student loans. I’m not saying that to normalize debt. Student loan debt has become so common these days that it’s more unusual to meet someone who went through school without any debt. Going to school without taking on debt is very much possible. But, that’s not the point of the story today. What I want to share how I paid off my student loan debt in 18 months while making an average income and still saving for retirement.
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Before Law School
I had a 2-year gap between college and law school. The first year I spent in France, teaching English in primary schools. I was only paid 870 Euros a month but that amount of money allowed me to travel around Europe during school breaks and even save some money. As my stint came to an end, I decided to apply to law school. I missed the cutoff to attend during the upcoming academic year so I had another gap year.
During that second gap year, I waited tables full time and lived with my parents to save money for law school expenses. It was hard work and it sucked to be working when my friends were out having fun. But, it was so worth it. Having money saved up allowed better focus on school.
I was 25 when I went to law school. Instead of going to an in-state school for free, I was a fool and decided to go to the highest ranked school I could get into. That meant paying out-of-state tuition and taking out loans. I still consider myself pretty lucky though since I only took out a total of $17,000. That’s a fraction of what some of my classmates are burdened with.
Law School Years
Law school took 3 years to complete, and I didn’t have to make payments on the interest-deferred loan until after graduation. That doesn’t mean I was living it up. I was very much aware that once I graduated, the 6.8% interest would kick in on my loan. Therefore, I didn’t treat the student loan funds as free money. I didn’t lead an extravagant lifestyle. In fact, I very much lived how you expect a student would live.
Being the nerd that I am, when I wasn’t in class, I was usually in the library. My days went like this. I’d wake up around 7, go to classes then spend the rest of the day, afternoon, and evening at the library. I’d pack lunch and dinner so that I didn’t have to leave campus and to save money. I usually studied up until midnight. I spent most of my weekends at the library as well.
As you can see, I didn’t have much time to spend money. I wore mainly t-shirts and jeans to class, so I hardly ever shopped for new clothes. When my friends and I did get together, we usually had potlucks. The craziest thing we did was host an annual Guitar Hero tournament. I know, we’re wild.
During the second summer of law school, I had a paid summer internship at a law firm. It paid crazy well and helped fund my expenses for the remaining year of school. Through simply living, I escaped law school relatively unscathed. I had $17,000 in student loans and no credit card debt.
Life After Graduation
After graduation, I continued to live like a student. I found a job that paid $45k a year and I felt very blessed as some of my classmates were having trouble securing employment. I shared a condo with 2 classmates and our rent came to $300 each. Paying that low of an amount for housing was awesome.
I continued driving my used car that had hail damage and random scratches and scrapes. My dad actually said to me, “Now that you have a job, why don’t you get a new car?” Thank goodness I take after Mom when it comes to money. My used car served me just fine and it was paid off, so I saw no point to take on a car loan. My priorities at that time were to pay off the student loans and build up savings. Therefore, I tried hard not to take on additional debt.
I packed my lunch for work and ate dinners at home, and I didn’t take vacations. It was exciting to be making “real” money for the first time in my life, and I was tempted to treat myself. I knew of friends who took trips overseas to celebrate their passage of the bar exam. I had a very clear goal in mind though, I wanted to pay off the loans as soon as possible so that I could focus on saving for retirement.
That’s not to say that I didn’t save for retirement at all while I was paying off loans. Rather, I wanted the loans gone so that I can put more towards savings. I allocated 5% of my pre-tax earnings towards my ROTH 401K. I made sure that I contributed enough to get the full match from my employer. As I mentioned, living with roommates brought my rent down to $300 a month. The utilities and other incidentals of condo life were also split 3 ways amongst the roommates.
After accounting for retirement savings and living expenses, I pretty much put what’s left of my paycheck towards the student loans. Slowly but surely, the loan balance decreased. After about a year and a half, the balance fell below $5,000, and I decided to pay it off in one lump sum with what I had in savings. It was definitely scary to part with so much money at once, but I knew I did the right thing. After the loan was paid off, I felt a burden was lifted and that I could start a new chapter of my life.
Paying off debt is no fun, but I hope my story shows that by developing a specific plan, debt can be managed. Do you have a debt story?