I’m in debt. I’ve talked about my debt before on this blog, but with the COVID-19 student loan forbearance ending at the end of this year, I’ve decided it was time to take the deeper dive into finding out what my best options are for repayment. And I was a little surprised with what I found out. I’ll be going over some of the specifics about my situation, but also what I’ve discovered along the way as I’m researching what my best options are. It seems like a lot, when you’re staring out the deep hole you’ve dug for yourself, but there’s hope. And it’s totally doable. You just need a plan, a positive attitude and a little help : )
What Did I Borrow?
If you’re like me, you borrowed a lot of money during the hight of the student loan lending frenzy. I ended up with close to 85k in student loan debt that I am in the middle of paying back. And I went to an in state school! I was completely clueless when it came to getting my degree. I had no idea what I was doing, what I wanted to do, or what I was even good at. I stopped going to highschool at age 16, but thought I was supposed to go to college to get a degree so I could get a job. So that’s what I did.
I started in community college when I was 19. This was a poor choice given the circumstances I was in. I was past the age of being a dependent on my caregivers and one of them told me to go to school, so that’s what I did. I failed by way of not going to classes, and subsequently was given the boot from my childhood home. I was 19, and as good as homeless. Years later, when I asked my caregiver why they kicked me out with no guidance and with such callous disregard, they responded with, “it’s what happened to me”.
So, with that in my rearview, I drifted around for the next five years in a haze of alcohol, seedy apartments and questionable life events (but some good stories, like the time “one” of the Allman Brothers was at my apartment telling stores), until a friend of mine got me a job at a residential program for at risk adolescent boys. This is when I decided to go back to school, only this time for social work. I wanted to help people who were in similar situations to my own. But I still had no idea what I was doing when it came to navigating the educational system. This is when I started taking out loans.
I would later switch my career focus two more times. First to architecture, but stopped that pursuit in it’s tracks when they said I would be working 80 hour plus weeks for the rest of my life. And second to journalism. This is where I received most of my education and also where I racked up most of my student loan debt.
And I did so with enthusiasm. I didn’t look for grants or scholarships, but this wasn’t surprising as I had no guidance, nor was I seeking any or knew how to ask. I was again adrift, in a financial world where I would soon be in way over my head.
It took me close to nine years to finish my degree. And when I was done, I had close to 85k in student loans and 20k in credit card debt. This was a tough pill to swallow. I fumbled my way into just over 100k in debt, with little to show for it and no idea how I was going to dig myself out of the hole I had worked so hard to get into.
Okay I Give, How do I Get Out Of This Mess?
This, in conjunction with a few other realizations, left me in one of the darkest places I’ve been in my life. This was where I decided to make some needed changes in my habits and the ways I was living my life.
This is around the time I found Dave Ramsey. Here was finally where I found the guidances I needed to take hold of my financial house. This was also a difficult place to be, because growing up my caregivers were consumed with everything finance. Though they never imparted any wisdom to me about how to handle this aspect of my life. I had to stumbled upon Dave Ramsey in my mid thirties by chance before I really began to take charge of my finances.
This was demoralizing. Mostly because I didn’t feel as though I could ask anybody in my life for help or advice. Money was such a sore spot for my entire family growing up, that I felt as though it was off limits to talk about. I spent so much time not thinking about money due to the unspoken lessons I was taught, about how money was something to be feared, that I completely neglected my financial future. This was a difficult and terrifying realization to come to as well. I wrote about this some in my blog post about what to do when you’re starting to retire at forty.
But this is also where I learned that I needed to take the reigns for myself. Because I was the only one in control of my future. This doesn’t mean that I can’t ask for help when necessary. Which is and was the case considering how little I knew/know about how to handle finances. But I couldn’t wait any longer. I knew I had to do something about my future, regardless of how I had been neglected by my caregivers.
As I said above, I started when I found Dave Ramsey and his baby steps, but it took discipline and patience to follow through with the plan. I had been so used to buying whatever I wanted whenever I wanted that when it came time to exercise self control, I was at a complete loss. But there were a few things that helped to fortify my self-restraint.
How Being Vegan, Running, Meditation and Yoga Helped Me Pay My Debt Faster
Of all the changes I made in my life and my habits, going vegan was probably the most effective. I needed to learn how to cook using different ingredients while also making substitutions for staples I was in the habit of using when I ate animal products.
I also had to batch cook for the weeks ahead due to my busy schedule. This taught me how to put a shopping list together by choosing recipes and making a list by shopping from my pantry first. This was just another way to budget, only using food instead of money. But also if I didn’t cook, I had to eat pasta with Earth balance for dinner. I didn’t always want to cook, but I needed to eat, so I did.
Running was another great way to cultivate a sense of discipline. Throwing shoes on and pounding out the miles week after week helped me to build a resilience while also helping me to find a rhythm.
For me, when running mid level milage, the first few miles of a run are the most difficult. It’s kind of like waking up in the morning. You’re a little tired, it takes some time to get your muscles warmed up and head around what your body’s doing. But once you’ve settled into the motion and movements of your body, the miles start to drop away with an ease that’s hard to describe.
It’s similar to when you’re paying off debt. The first few months take some adjusting to. But once you find your rhythm, and recognize that the discomfort of your sacrifices to your new budget won’t last forever, you find that same rhythm.
Meditation and Yoga help in sort of the same ways but from different perspectives or directions. With yoga, learning to be still when you are in the midst of a difficult pose and sensation. And meditation when difficult thoughts and emotions arise, being still and present with what’s difficult builds resilience.
This is the same sort of resilience you need when you’re paying down a sizeable debt. For me it was important to sit with the discomfort of just how much money I owed. About 85k total in student loans alone. If that doesn’t put a seed of fear in your belly you’re either wealthy or in shock. Learning to sit and stay with what’s difficult, while coming up with and exciting a plan is what is most important when faced with a challenge of this size. Now let’s focus on some of the specifics of my loans and what I’ve found to be most useful.
Logistics of Paying Off Bigger Numbers
I have federal loans but when I first took out my loans I had both federal and private. About 9k in private and 76k in federal. I don’t remember exactly what the beginnings of my loan repayments looked like. I was in and out of school for 9 years, so my actual repayment date didn’t start until my mid-thirties. And probably for the best, I wasn’t in the habit of paying my bills regularly or at all before then.
Most of my bills I defaulted on with most likely the intention of never repaying them at all. But I had to start somewhere, and where I started was in my mid-thirties, under a pile of debt. I used the snowball method to start. This basically means paying the minimums on all your debt, but using all other available income to pay off your smallest debt first. For me this was all my credit cards that totaled 2-5k small debts. All together around 14k. Then it was on to my private student loans of about 9k total.
Some systems suggest you pay the highest interest rate percent first. Luckily my credit cards were all high interest and my loans much lower. So when I got to my private student loan, with about a 7% interest rate and my federal at a 6%, I put all available funds towards the private. My federal loans were in deferment, so I didn’t have to start paying them back until later. And with my private loans in the past, I could finally focus on the big one. My federal loans.
When I started paying off these loans, they were in deferment. This means that you don’t have to make any payments on your loan for a specific amount of time for different circumstances. I believe the time available for deferment is 3 years, but check with your lender to make certain yours aren’t different. But what I hadn’t realized was that when my bill came due, I would be making close to 1k payments monthly. I was not making much at the time and definitely wouldn’t have been able to afford these payments. So I defaulted to my default. I planned on defaulting on my loans because it just seemed like too much.
But after I had done all the difficult work of paying off my other loans, I realized I didn’t want to head down the same road I had been traveling for so long. I needed to take control of my financses for my future. So I began looking into what my options were for paying down my student loans.
I Have a Plan… Sort of. Now What?
My plan was to just throw money at my debt until it started to dwindle. But was that really my best option? As it turned out, yes. As we all know, COVID hit about a year and a half ago and since then there have been a lot of layoffs. As a way to ease some of the financial burden of student loan borrowers, the government put all loans on deferment without accrued interest. This has been a Godsend for those laid-off, but for folks like me, making payments interest free has been game changing. With all of my payments going towards principle, my debt is shrinking faster than expected. I’ve paid off close to 25k in principle since the COVID-19 forbearance began.
But I was still concerned with the amount of interest I was being charged. 6% seemed like a high number for such a large loan. So I started looking at private loans to see if I could get a better rate. Turns out, I can. My rate would drop from 6% on my federal loans to almost 3% in a private one. Seems like a good deal. But when I ran the numbers, this only decreased my overall amount owed in interest by 1k over the life of the loan. Not even half a months payment. So I decided to stay in the loan with the higher interest rate.
I should also mention that I plan on paying my loan off in two years, so the interest doesn’t make that much of an impact. But if I choose a more traditional route, of say paying over ten years, I would be accruing up to 17k in interest alone. Then I would look into a loan with a lower rate. But another aspect to consider when thinking about switching lenders is, the benefits of federal loans far out weighs those of their private counterparts.
As we’ve seen with COVID-19, federal loans went into a period of deferment. Something that private loans did not do. Also, if you fail to pay a federal loan on time, you have considerably more time before your loans go into default. I’ve read up to 240 days, and you still have time to pay and be in good standing with your loan. With private lenders, it’s only 30 days and that’s it, default. You also have the option, with federal loans, to pay in an income driven repayment plan. This adjusts your payment to a percentage of you discretionary income. This is not an option with private loans.
Also, you are able to consolidate your loans with a federal lender. This takes all the small loans you’ve taken out each semester and consolidated them into one loan with one payment.
With so many benefits attached to holding loans with the fed., it just didn’t make sense to switch to a private lender. I may be paying 1k more over the life of the loan than if I was with a lower interest, private loan, but peace of mind with the terms of my loan is worth more to me that a little under half a months loan payment. And when I’m doubt, ask.
If you have questions about your loan, contact you bank. Hey, even ask if they’ll lower your interest rate. Through my lender, if you’re enrolled in auto payments, they reduce your interest rate by a quarter of a percent.
And if you’re like me, you like to go hard. For me it’s do as much as humanly possible to pay off my loan in as short a period of time as possible. Don’t forget to practice a little self-care along the way. For me it’s a foot soak once and a while and a ten-pack at my local yoga studio for 175$. It’s good and healthy to take tests along the way. The road can be hard and long, don’t forget to take care of yourself. So incase no one told you, it’s okay to take a break every now and again : )
I hope this has helped in some way. Student loans can be daunting to take in, especially all at once. But don’t be deterred! Talk to your lender often and whenever you have a question, regardless of how silly it seems. They want you to be successful. So, if you have a ton of student loan debt, come up with a plan and have patients. You’ll get out of it, it just takes a little resilience. Peace, and thanks for reading : )