Student loans suck. Debt sucks. Here’s the real question though;
What are you doing about it?
Action is the most important step in your entire debt free process.
Here’s what my wife, Allison, and I did to give our student loans and consumer debt the middle finger while still in college.
My Student Loans: $9,355.85
Allison's Student Loans: $22,591.11
Consumer Loan: $3,500
$40,469.17. All gone in less than 15 months!
After each of us had a stint at Oklahoma State University, we both transferred to, NWOSU, a regional university (Allison in the fall 2009, me in the spring 2010), which is also where met. Transferring to the smaller university had a huge impact in the speed of repayment process that came later.
We met in the spring of 2010, were engaged that fall and married by the next summer. We were your typical poor, married, college couple just scraping by with student loans far out of sight and mind. Over the next year the precursors to fiscal responsibility started falling into place.
I was working as a teller at a local bank. Day after day I was seeing people with overdrawn accounts and taking out new consumer loans (often the same people). I couldn't stand the thought of being that type of person.
I bought and binge read Dave Ramsey’s Total Money Makeover.* I realized the impact that his advice could have on our situation; however, I knew the Renaissance Wife would not be up for reading a financial book so I made a deal. If she would read it, she could have $150 in guilt free spending money. If she read it in the next week, I upped the ante to $200. She was a spender. It had to work… and it did.
The last piece of the puzzle was stumbling into the world of blogs and debt payoff. “You mean this can be done? Loans aren’t a way of life?” The latter of the two was especially eye opening working at a bank.
In December 2011 we had the talk... We needed to get serious about our debt.
Let’s get into the meat now. How did two college student do it?
1. We worked part-time then full-time through college.
We both worked part-time jobs throughout our early years of college. The part-time jobs were typically bringing in $450-$700/month/person. When there was a chance for each of us to take a full-time job while still finishing college, it was an opportunity we couldn’t pass.
Allison was offered a one semester, full-time position as the director of a small, newly opened art gallery to the tune of ~$1700/month (net), then began working her $450/month part-time job again in the spring for her last semester.
Prior to my second senior year, I applied for and was offered a firefighter position where we live. Working my 24 hrs. on, 48 hrs. off schedule and using lunch breaks and trade time made going to classes possible.
2. Scholarships and Grants
We took care of business when it came to acquiring scholarships. Allison was receiving nearly a full ride due to scholarships, and I was no longer paying for tuition or fees due to receiving a large scholarship plus OK Promise, which is a tuition aid for coming from a low income family.
You know how I was talking about the huge impact of a lower cost regional university? This is where it comes into play.
After getting married in 2011, we were now eligible for a pell grant of $5500/year/person, then the following year, I was eligible for an Oklahoma Tuition Aid Grant (OTAG) of $500.**
Instead of blowing this money, we took action with it.
2011-12 Pell Grants: $11,000
2012-13 Pell Grant: $5,500
2012-13 OTAG: $500
Good bye $17,000 in debt.
3. We avoided lifestyle creep.
We were both working full-time now so we deserved a new car, right? Not a chance. Allison was still driving a 1999 Ford Taurus, which we kept until it fell apart. I was driving a paid off 2008 Nissan Titan… don’t worry, I sold it later.
Married with full-time jobs. Time to buy that forever home, right? Yea, let’s hold off… We weren’t ready financially for that.***
We cooked our own meals, weren’t going out every weekend, and avoided shopping. We lived simply and were aware of our spending.
4. We found extra income streams.
Low salaries and wanting to expedite this process necessitated the need for side income. There's only so much of a working class/lower middle class income than can be saved so we monetized our talents and current interests.
Allison is an incredible artist. After doing a commissioned piece for a friend of a friend, word got out of her work, which turned into several hundred dollars in extra income throughout her last semesters.
I’ve always enjoyed working with my hands and learning a new skill. This lead to helping our landlord out with his rentals a few hours each week then to helping another local landlord remodel a house.
During this time, my grandmother had passed away, and there was an estate sale within just the family members. For $1 I bought 10-15 old oil cans and took home a box of old car parts that no one wanted. That $1 turned into ~$1,000 over the next several months as I researched the parts and sold them on eBay.
5. Save & Pay
In our checking account we started the month with a minimum amount ($1500 for us at the time), which covered the majority of our monthly expenses at the time. We saved like crazy, then at the end of the month anything over that amount went to our loans. Many months this allowed us to make $1000+ payments.
There it is. It’s not fancy. It doesn’t require any specialized knowledge, but it did take hard work and action on your part. I’ll admit that while it seems simple on paper, it wasn’t. We were tempted to splurge, to give in to the life style creep, to give up, to buy that new gadget, or to just make the minimum payment during payoff process.
Don’t believe that the payment schedule you’re given is your only route. Set a goal and work towards it.
Find a way. Take Action. Give your debt the middle finger!
When it’s all done, treat yourself, then get back on track saving. We used a “Me Month” (I’ll write about it later). Our entire savings from the month following our debt payoff we split 50/50 for guilt-free spending.
Are you on your debt free journey?
Did you pay your student loans off early?
Let us know how it's going or how it went in the comments!
*Dave Ramsey was great for understanding our debt and developing a plan to knock it out; however, there are other routes to save more and build wealth faster using other methods.
**As you read this, some might be tempted to complain about how we actually paid off our student loans. To you I say, you’re missing the point entirely. The point is to make fiscally responsible choices and take action. Yes, we had an advantage over others; however, everyone has their own competitive advantage is some way, shape or form.
Also, I’m not advocating getting married in college to acquire additional grants. For us, it was just an added bonus.
***There are very good reasons why buying a house or small multifamily dwelling may be the right decision for you at this point in your life. If you don’t thoroughly educate yourself on this topic or have enough financial reserves, you’re not investing - you’re gambling.