Will I be Paying Off my Student Loans When I’m Ready to Retire? What to do About Retirement While You’re Paying Back Your Student Loans, Week Two

Last week I spoke about the situation I found myself in, looking into planning for my retirement while paying down my student loans. This week I’d like to talk about the strategies and accounts I’ll be taking and opening to help detour some of the misdirection I received in my youth. It’s scary to think how much time I’ve lost to just not knowing how to plan for the future. But it’s never too late to start and there’s no time like the present. So let’s jump in.

I’d also like to take the time to state that I am not a financial professional and these are just my opinions of how I’m planning for retirement. If you have any questions about your own financial situation, I suggest you seek out help from a professional financial adviser.

10% or 15% How Much Should I Save?

There are a couple of different views on this front. Dave Ramsey says to save 15% of your annual income after you’ve paid off your debt and set up an emergency fund. While Ramit Sethi suggests saving 10% and doing so while you’re paying down low interest debt such as student loans.

Dave’s rational is that if you’re in debt, then paying into retirement doesn’t make any sense if it means extending the life of your loans and the interest you’ll be paying on them. This makes sense, seeing how you’re not really making money if you’re still paying somebody else at the same time.

But Ramit’s point is valid as well. His angle being that the sooner you begin to invest, the more time you have to let your money grow. And it’s better to start the process of saving as early as possible. So the question remains, should we invest 10% or 15% and should I pay off debt first or jump right in with savings?

Whether you decide to start right away, while paying down low interest student loans or to pay into retirement after you’re done with debt, that’s your call. My take on the subject is, the more I save the better and the less debt I have, the easier it will be to reach those goals. If I can put away 15%, I’m going for it. Hell, if I can put away 20%, even better. But before I go ape shit and throw everything I’ve earned towards retirement, I want to make sure that I’m not spreading my finances too thin by trying to save too aggressively. Also that I’m able to enjoy my money as well.

The goal of saving for your future isn’t only about surviving, it’s about enjoying yourself. Do I really want to look back in retirement and think, “man, I’m sure glad I missed out on all those fun things I could have done instead of saving so aggressively for retirement”. This is a bit of an exaggeration, and it’s better to be safe than sorry. But I’m not going to let saving for retirement get in the way of living my life either. Just like most things in life, there’s a balance to be struck.

The Accounts I’ll be Opening

This one was a little confusing for me when I first started thinking about investing. Should I start with an account that is tax deferred, so I’m taxed when I withdraw my money? Or should I open an account where I’m taxed when I make the deposit, and withdraw without being taxed? This all depends on your situation and I suggest that you speak with a qualified financial professional about your options.

But it’s still good to do some research on the subject before hand, so you’ll know the right questions to ask. Dave Ramsey has a good list of retirement accounts and their specific details here on his website. But as for the accounts I’ll be opening, it seems as though most people are on the same page, and me as well.

401k

A 401k is a retirement account that you can fund directly from your paycheck, allowing you to make contributions tax free. The benefits are, your money grows tax free and Uncle Sam takes his share when you make withdrawals. Also, you’re able to contribute up to 22,000 dollars a year as of 2022. You also have to wait until you are 59 1/2 to start making withdrawals or you will pay heavy fees.

This type of account is often offered by your employer. And some companies offer a match up to a certain percentage. This means that the company will offer you a certain amount of money based on how much you contribute to your fund. This may be a dollar amount set by the company, or a percentage of your annual salary.

Roth IRA

Roth IRAs or Roth Individual Retirement Accounts, are personal accounts you take out independently, where your contributions are taxed before being added to the fund and are not taxed when you withdraw your money or while your investment is growing. You fund these accounts after taxes are taken out of your pay, unlike a 401k, and are capped at $6,000 annually as of 2022, $7,000 if you are over the age of fifty.

Roth IRAs are good options because they are available to everybody as long as you meet the income requirements. As of 2022 the limit for a single person is under $144,000 a year. They’re great savings vehicles and the sooner you get started investing in them, the better. Also you don’t have to start withdrawing until you’re 72. Unlike the age limit of 59 1/2 for 401ks.

Social Security

Also, don’t forget about social security! Where this isn’t technically an account that you open, it’s something you’ve most likely been contributing to your entire working career.

How it works is, you pay into it by having it taken out of your paycheck directly. Your contributions are listed as the “social security” line on your paystub. When you’re ready to withdraw, which you can start at age 62 to age 70, the government takes the highest earning 35 years or your working history, and averages them to calculate your payout. If you work less than 35 years, the years that you didn’t work will equal 0. This could hurt your total payout when you decide to withdraw.

This link from The Penny Hoarder goes into detail about how social security works and the questions you may have navigating it. It can be deceptively complicated, so take your time and do some research around this subject.

Other Accounts

The above accounts are what I’ll be using, but there are also a variety of other accounts that may be more suited to your situation. For example, if you’re a freelancer, you may want to open up a SEP-IRA. This is a plan for individuals who are self employed or small business owners. If your employer offers a pension, this is also something worth looking into as well. And again, if you have any questions on what’s right for you in your situation, get in touch with a financial planner who can help you make these important decisions about your future.

What’s My Strategy?

So now that we took a quick look at some of the basic retirement accounts and how they work, how do we put them all together to make a comfortable retirement? I’ll walk you through what I’m planning on doing as of now, with my investing. Of course this is unique to my situation so it will be helpful for you to take a look at what’s out there and what works best for you, speaking with a professional when necessary. Hopefully this will help give you some basic info when deciding what’s best for your plan.

And luckily, Dave Ramsey and Ramit Sethi both seem to agree about some basic money maneuvers when it comes to retirement. Their plans are something I’ve modeled my own after. So if these guys are on the same page, it’s likely that their advise should be taken into consideration. I’d also like to say that I’ll be meeting with a financial advisor once I hit some of my financial goals, to fine tune my plan. So let’s review what I’ve come up with.

Step One: 401k With a Match

The first step I took was to see if my employer had a 401k I could contribute to and if they had a match. Fortunately for me, my employer does have a 401k. Unfortunately, they do not offer a match. If my employer did offer a match, I would most definitely take advantage of this. Reason being, that any match they would give me would be the equivalent of getting free money. And it would just be silly for me to say no to free money. But since they do not offer anything in the way of a match, it’s on to step two for me.

Step Two: Roth IRA

The next step, and the one where I’ll be starting my savings journey is, opening a Roth IRA. You can open a Roth with just about any investment firm or bank. For example, Fidelity has a Roth account you can open with only a few pieces of identification and a bank account with which to start funding it.

As of 2022, you are only able to contribute $6,000 to your account annually and $7,000 if you’re over the age of fifty, incase you need to play catchup for starting late. For me, this means I can max out my Roth IRA contributions with $500 a month. And luckily for me, this fits just inside of my budget for my savings goals with a little extra to contribute to another account. So once I max out my Roth IRA, what’s my next step?

Step Three: 401k, Again?

After I contribute all I’m able to to my Roth, it’ll be time for me to revisit my 401k again. This is where I’ll be putting my overflow from my 15%+ savings goal that won’t fit in my Roth IRA after I’ve met my cap. Allowing my contribution to grow tax deferred is better than letting it sit in high interest savings like a money market account.

My money market account is solely for the purpose of housing my emergency fund and any long term savings goals I have. Such as saving a down payment for a house. And if you still need somewhere to stash your retirement savings after maxing out both a Roth and a 401k, congratulations! Because you are crushing it on your pay rate and planning!

Step Four: Social Security

The good news is, once you’ve established the above accounts, Roth IRA and 401k, by the time you’re ready to collect social security, you’ll be in pretty good shape. Social security was never meant to be the sole source of income for retired individuals. It’s supposed to be supplemental income to your other accounts. And there are benefits to taking out your social security at the later age of 70. So be mindful of how and when you decide to start collecting on all of these accounts. It will literally pay off in the long run.

Some numbers I’ve read are that social security is only supposed to account for 40%-60% of your income in retirement. This means you need a healthy amount in your retirement accounts by the time you start withdrawing from social security. So be prepared and make sure you’re spending time researching what you want your future to look like and how much it will cost to fund it.

Make a Plan and Stay Fluid

When it comes to planning for your future, it’s best to play it safe. Talk with people who know what the market looks like and who have been down this road before. I’ve been lucky enough to have some good role models in this area. One of the most valuable pieces of information being, if you don’t know something, ask someone who does.

There’s a lot of information out there and not all of it good. So be diligent and find some people you can trust to help guide you along the way. Dave Ramsey and Ramit Sethi are two great resources out there for handling money responsibly. Also, The Penny Hoarder and Nerd Wallet are two sites that have a wealth of general information about money matters and ones I visit when I have questions about how accounts, or things money related work.

Knowing we’re in a good place and that we’ll be able to meet our monetary needs for our future is important, and also an act of self-care. Money isn’t the most important thing in our lives, but not being responsible with it can do some serious harm. For example, I just celebrated my 42nd birthday and am $55k in debt. This can be a scary place to be if you don’t have a plan. Luckily for me, there are load of resources at my disposal. And just remember, when it feels like it’s impossible, or your feeling like giving up, know that it’s never too late to start. Just be patient. Peace : ) and thanks for reading.

Image Credits: “Money” by Digital Sextant is marked with CC BY-SA 2.0.

Healthy Eating on a Budget: Reigning in Your Grocery Bill While Taking Care of Your Nutritional Needs

This is something I’ve struggled with for a while now. Actually, I’m still struggling a little bit. If you’ve read my post on “shopping from your pantry first“, you’ll know I’ve covered the topic before. In the above post, I went over ways to use what you already have in your pantry to eat fresher and save money. But somewhere along the line, I’ve fallen off the wagon.

I’ve been focusing on my budget a bit more closely and found that I’m consistently overshooting my food budget on a monthly basis. I may be setting my budget too low, but I don’t eat a ton, and I rarely eat out. And some months I’ll spend upwards to $750! That’s a lot of money no matter how you look at it.

So I’ve decided that it’s time to take a deeper look into my eating and shopping habits. Spending close to a thousand dollars a month on food just isn’t sustainable. You’ll be happy to know I have been slowly whittling down my food stores as I laid out in my post above, “Shopping from Your Pantry First”. But I should be saving money, not spending more this way. So how did I get here?

What’s my Relationship to My Shopping Habits

Taking the deep dive for me meant taking a look at how I was spending my money, where I was shopping and why I was choosing to shop this way. I know I’m still up to my neck in debt, so why am I still spending so much at the grocery store? I have a feeling that it has a lot to do with my upbringing and some underlying insecurities.

You are What You Shop For

I was raised in a family that largely defined themselves by what they purchased. In my youth, we were constantly going from one store to the next. Shopping and looking for deals that my caregivers called “running errands”. This is where I learned how to view shopping and the foundation on which I developed my own shopping habits.

In my teens, I was attracted to the ideals of hippie culture. I believe this was in direct defiance to my family’s buying into consumer culture. And even with all the ways I saw my caregivers substitute what they bought for who they were, I was still hooked by the act of shopping. Even in spite of my teenage defiance. So why was this so?

For me, I think it has to do with security. I was so neglected as a child when it came to me learning how to take care of my nutritional needs, that when I started down the road of healthier living, I got caught up in the colors, trastes, smells and possibilities of the food I was buying. And if you’ve ever walked into a Whole Foods, you’ll know that the store is designed to lure you in and make you want to spend your money. It also helps that they kind of align with my hippie ideals.

So it was in this way that I was confusing the things I was buying for self-care. This was also what my care-givers were doing as well. It makes sense to me now, but when I was in the throws of shopping, I couldn’t see the forest for the trees. It wasn’t until I looked back and saw that I spent around $700-$750 on groceries a few months in a row that I realized I needed to corral my spending habits.

What am I Buying and Why

After I decided to take the deep dive, I opened my Everydollar Budgeting App and took a look at the places I was shopping and how frequently I was shopping there. The first thing I noticed was, there were a lot of entres.

One month’s itemized Spending list on Everydollar

And most of them were at local drug stores for between $10 and $30 a piece. This is when I realized I was in the habit of buying a lot of snacks before I was heading into my second job. So now I’m on the lookout for snacks I can take with me that I get at the grocery store when I work my long days. These along with the meals I’m bringing with me to work will cost less than the frequent trips to local drug stores.

The second thing I noticed about my habits were, I had a lot of entries for Whole Foods. And they weren’t small either. I was spending upwards to $70 dollars a visit some shops. I think this was directly related to me shopping for my self-care dinners once a week and doing it solely at Whole Foods. Add all these to my two big shopping trips a month at the less expensive grocery store at $100 a shop and you have a pretty hefty grocery bill.

And all of these shopping trips are reminiscent of the shopping excursions of my youth. Where shopping was a value. So now that I know what my habits look like and why I shop the ways that I do, what am I doing to change my habits?

Shopping to Fill the Need to Nourish, Not to Belong

Now that I’ve decided to change my habits, my new focus is on buying affordable food that has a high nutritional value. I was buying all organic food on my big shopping days. This is fine, IF you have the money. And I most definitely do not. Something that Dave Ramsey says often on his show is, you can’t afford extras because you’re broke. And owing as much as I do, I am definitely in that category.

So I’m making the switch to buying more frozen veggies and canned goods, as they’re cheaper then their fresh counterparts. It may not be ideal, but I’ll be able to buy what I want when I’m out of debt. It’s just like Dave Ramsey says, “Live like no one else so you can live and give like no one else.”

For me this means going to Whole Foods only when I run out of something. And even then, there’s a Stop and Shop that is equally as close and less expensive. This also means eating non-organic, frozen and canned veggies. The one saving grace is, that this won’t last forever. Once I’ve paid down my debt, I can add a little more to my food budget. Then I’ll be able to buy the things that look interesting, or shop in line with my ideals.

And it’s also important to recognize that I’m in no way depriving myself of nutrients or flavor. The food I’ll be purchasing now will be just as nutritious, if not a little less so than what I’ve been buying. I’m also lucky enough to live near the 22nd most diverse city in the US. This means I have a huge selection to choose from when I’m picking out my recipes for the week. So I’m not lacking in variety.

Shopping as a Pass Time

The other aspect of shopping for me is, that it’s something I enjoy doing. And while I’m paying off my debt, I haven’t been able to shop for myself in a long time asides from the basics. So when I go food shopping, I’m also filling a desire to buy something new.

This is why stores such as Whole Foods are so appealing to me. They’re attractive, clean and their displays are set up to make you want to spend your money. And it feels like a treat when I’m buying something from their store. Also, there’s nothing quite like a good meal. So when we associate the pleasure we derive from the food we purchase, as well as their attractive displays, something as simple as food shopping can turn into a treat. Add a high price tag and we’ll be blowing through our budgets in no time.

So for me, it’s best to steer clear of stores like these altogether until I’ve made room in my budget by paying down my debt. Finding the places that you gravitate towards and like to spend money may be helpful to identify if you’re looking to save yourself some cash.

Spices are the Spice of Life

And finally, if you want to make the most impact on the quality of your meals, investing in and learning how to use spices will go a long way to boost the flavor profiles of your meals. The best part about spices is, that for the most part they’re a once every three or four month investment. If you buy a 10oz container of garlic powder for $4.50, it will last you a few months and add a lot of flavor to your meals.

If you’re new to the culinary world and spices seem overwhelming, this post from Kitchn, about using spices in your daily cooking should be a good start to familiarize yourself with your spice cabinet. And don’t be afraid to experiment. Look for new recipes and dishes that use new to you spices. These will help you to broaden your culinary repertoire.

Black Bean Soup:

And finally, here is a recipe for black bean soup I’ve been making for years. It has a lot of flavor for being only a modest bean and you can make it on the cheap. You may not have all the spices on hand, and if you don’t, they’re good ones to buy in bulk. They are used in a lot of recipes so having them available will help improve your cooking game. And check out my Community page for links to recipe sites for inspiration.

Black Beans Over Rice

“Black Bean Soup” by TheBushCenter is licensed under

Ingredients

  • 1 Pound dry black beans
  • 2 Med onion, diced
  • 5 Cloves garlic minced
  • 1 Small bunch fresh cilantro chopped, removing woody stems. Tender stems are desirable.
  • 2 Tble Neutral oil
  • 3 Cinnamon sticks
  • 7 Bay leaves whole
  • 2 Tble Onion powder
  • 2 Tble Galic powder
  • 2 Tble Coriander ground
  • 1 Tble Dried oregano
  • 1 Tble Cumin ground
  • 1 Tble Turmeric
  • 6-8 Cps Vegetable broth
  • Salt and pepper to taste
  • Your choice of rice cooked to manufacturer’s instructions (I use a mix of basmati and jasmine. Adding a stick of cinnamon and a few bay leaves to the water to give your rice an added boost of flavor.)
  • Fresh cilantro, lime wedges, Monterey Jack shreds, sour cream, avocado or guacamole, tortilla chips and fresh sliced white onion for serving (optional).

Method:

  1. Using a large stock pot, 12 quarts, heat oil over medium high heat. Once hot, add the onion and sauté for 4-5 minutes until onion is translucent. Add garlic and spices and cook for another 1-2 minutes until the aroma blooms from the spices and garlic
  2. Rinse the dried beans and pick out any stones or dirt clods. Once clean, add dried beans to onion, garlic and spice mixture. Stir to coat.
  3. Add the vegetable broth, just to cover the beans. Turn heat to high and bring to a boil. Once boiling, reduce the beans to a simmer over medium-low heat and cook uncovered. The beans will take between 1.5 to 2 hours to cook, so keep the remaining vegetable broth near by and add to keep the beans submerged throughout cooking. The broth will thicken and turn black from the beans, creating a rich and thick broth.
  4. In the last 5 minutes of cooking, add salt and pepper to taste and the chopped, fresh cilantro. Also taste and adjust spices here.
  5. Serve beans over rice, discarding cinnamon sticks and bay leaves, with desired toppings and tortilla chips on the side. Best when eaten fresh, will stay in the fridge in an air tight container for up to 5 days.

I hope you enjoy this recipe and it aids you on your culinary journey. It isn’t always easy, reigning in our spending. Especially in a category as primal as our food budget. But with a little will power and know-how, we can eat healthier while saving money. If you make this recipe, let me know how it goes in the comments section below. And as always, peace, and thanks for reading : )

Image Credits: “Health Tips…Drink Liquor Responsibly….Eat Fruits Liberally…Remember Both Comes From Same Source…..VeG….” by Sunciti _ Sundaram’s Images + Messages is licensed under

Paying Your Bills & Debt: How Being Buried in Student Loans Can Help You Get a Handle on Your Financial Life

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. It can be overwhelming, when you’re staring out of the deep hole you’ve dug for yourself. But there’s hope. And I should say, it’s totally doable. You just need a plan, a positive attitude and a little help : )

The Short Road to Nowhere

If you’re like me, you borrowed a lot of money during the height of the student loan lending frenzy. I ended up with close to 87k 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. When I stopped going to high school I was 15. 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. When I failed by way of not going to classes, I was subsequently 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”. Hurt people hurt people.

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), 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.

Paying Your Bills & Debt

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. Then I switched for the second time to journalism. This is where I received most of my education and also where I racked up my student loan debt.

I did this with enthusiasm. No one told me to 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 87k in student loans and 20k in credit card debt plus 10-20k in miscellaneous other expenses. This was a tough pill to swallow. I fumbled my way into just over 120-130k 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 much needed changes in my spending 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 guidance I so needed to take hold of my financial house. This was also a confusing place to be, because growing up my caregivers were consumed with everything finance. Though they never imparted any of their wisdom to me about how to handle my finances. 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, for anything really. Money was such a sore spot for my entire family growing up, that I felt as though it was off limits. 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.

Taking the Reigns

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.

Going Vegan, Running, Meditation & Yoga Helped Me Pay My Debt Faster

Going Vegan

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

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 wrapped 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 & Yoga

Meditation and Yoga help in sort of the same ways but from different perspectives. 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 87k 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 78k 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.

Federal Student Loans=No Bueno

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 finances for my future. So I began looking into what my options were for paying down my student loans.

I Have a Plan… Sort of

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. 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.

Private or Federal Loan?

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 in doubt, ask.

You Don’t Have to do it Alone

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 rests along the way. 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 on, 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 patience. You’ll get out of it. It just takes a little resilience. Peace & thanks for reading : )

Image credits: “The Big IOU” by brent flanders is licensed under CC BY-NC-ND 2.0

Updated: 11/8/2022

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