When I took out student loans for law school, I really had no idea how they would impact the rest of my life. Unlike my love life that all of my friends and family members seemed to have a strong opinion about, no one seemed to challenge my decision to go to law school, taking out thousands of dollars of student loans. For myriad reasons including the fact that I probably wouldn’t have listened, law school was actually a great choice for me. But, the way people generally view student loans is that its “good debt” you’ll be able to pay it off effortlessly. Well, it definitely wasn’t effortless for me. But that is in part because I chose to pay off my student loans as quickly as possible. (Read about how I paid them off in 18 months here). And we are still chipping away at about $490k of Danny’s student loans from his grad school and subsequent dental school. Even though paying them off wasn’t effortless, there are definitely some important things I have learned along the way.
7 THINGS I LEARNED FROM PAYING OFF STUDENT LOANS
TO DO HARD THINGS.
I think one of the most important lessons I learned from paying off student loans was the fact that I actually can do hard things! Having big debt hanging over your head is just hard. There’s no other way to put it. Knowing that you are going to be living like a student for a VERY long time can be disheartening. But that is exactly one hard thing that I can do that will serve me well the rest of my life– I can live frugaly.
TO ACHIEVE GOALS.
Another important thing I learned from paying off student loans was how to achieve goals. We set a goal to pay off our debt 5 years after Danny graduated and we knocked out my loans in 18 months! If I hadn’t set this goal, I’d STILL be paying off my student loans for another 7 years! Set goals for yourself. And remember, a goal without a plan is just a wish, so make sure you are actively seeking ways to accomplish your goals.
THAT EVERY PENNY COUNTS.
It is really easy to justify all kinds of small purchases. Oh, this shirt that I don’t need is on sale for $5. Oh, getting fast food for the whole fam is only $20. This brand of ice cream is only $1 more than this brand. Etc etc. Before you know it, you have completely destroyed your budget. If paying off student loans taught me anything, it’s that every penny counts. Pennies add up to dollars which add up to hundreds of dollars which add up to thousands. Plus, when you are paying interest on every penny, that can also escalate quickly. I’ve found that paying attention to the seemingly small things makes ALL the difference in how much extra money we have to throw at our student loans.
THAT “GOOD” DEBT IS STILL BAD FOR YOUR MENTAL HEALTH.
When I was in school, any time I thought about or was asked about student loans, I just perceive student loans as “good” debt that was necessary to get where we wanted to go in life, since I wanted to be a lawyer and Danny wanted to be a dentist. And yes, student loans helped us achieve our dreams. But I still don’t see student loans as good debt. We had interest rates as high as 7.9%– thats about twice as high as people pay on auto or home loans! That fact plus the fact that we had about half a million dollars in student loan debt meant that we were paying THOUSANDS of dollars in interest alone each year. Having that kind of debt is not good for anyone’s mental health. In fact, I was literally losing sleep over the stress of it. (Which is why we opted to forgo any of the income driven repayment plans– you can read about that here. And if you need help coping with stress from your student loans, you can read about that here.)
THAT COMMITMENT IS NOT THAT SCARY AFTER ALL.
Committing to paying off our student loans when we had more than half a million dollars of them was really scary. We were really worried about losing the protections that exist under the federal plans (such as opting for income driven repayment if one of us loses a job). But we knew that once we started making aggressive payments on our loans, there was no going back (since if we chose to switch to income driven repayment after that, all of that money would basically have been wasted!
THAT PROCRASTINATION IS THE ACTUAL DEVIL.
I regret procrastinating two things with our student loans: 1) I regret procrastinating making payments and 2) I regret procrastinating refinancing Danny’s student loans.
We procrastinated making payments on my student loans out of sheer ignorance. I had heard in school that you should try to make a few payments while you are in school but I never really understood why, other than the obvious fact that you’d be a little ahead making payments and pay them off faster. But the true reason why you should be making payments in school is that any payments you make before your “grace period” ends will be applied to the principal balance of your loan, which could potentially save you thousands of dollars in interest.
We’re still paying off my husband Danny’s student loans from dental school, and I regret not refinancing his student loans sooner. We waited a little over a year after he graduated to refinance just to be sure that we could afford the payments. That decision cost us thousands of dollars in interest, literally. If you can afford the payments and have been sitting on the fence about whether you should refinance, don’t procrastinate! It’s simply too expensive of a decision to procrastinate. You can read more about whether you should refinance in this post here.
TO EARN MORE MONEY.
One GREAT life lesson that I learned from paying off student loans was the simple fact that I have earning potential! And you do too. Do you currently have a low paying job that makes your budget a little tight? It’s probably a difficult to say the least to make extra payments on your student loans when you are living pay check to pay check. It doesn’t have to be this way! I’m not saying go out and quit your job, but there are PLENTY of things that you can do on the side that don’t take up too much time to supplement your income. (Here are a few fun ideas to get you started). In addition, you can negotiate for a raise, or consider taking a different job. You are NOT stuck in whatever financial position you are currently in. You can increase your income to accelerate your debt repayment!
Paying off student loans taught me important life lessons. But, hopefully you can use the lessons that I had to learn the hard way before you have to learn the hard way yourself! 😉 What have you learned about paying off student loans or other big debt? Share your wisdom in a comment below!