Tuesday, November 27, 2012

Paying Off Student Debt, A Walk Down Memory Lane

It's Tuesday, and office day for me.  Clients, papers to review and phone calls to return.  It is also a day when one of two third-year law students is working for me.  In between tasks we chatted about a job interview she had had recently and the current state of the job market for new grads (bleak).  While chatting the topic of student loans emerged.  She is blessed with a scholarship and parental assistance, so she will escape seven years of higher education with little or no debt.  But I feel for some of my classmates, she said, I hear some of them have six-figures to pay back.  To which I raised my hand and said, that was me -- well actually it was $97,000.  But it is gone, long gone thanks to frugal living it was paid off in six years, while working at a State job.

If you are in the same boat, student or not, but have a huge debt to pay off do not give up. It can be done.  Decades ago I lived in Washington, DC and remember a friend quoting a friend of hers who had so much student debt that before reaching age 30 she had resigned to the idea that she would always be in debt.  So, why not use the credit card to finance a winter ski trip -- what the hell!  My well tuned frugal mind has a different response, what in the hell are you thinking?  Don't give up, you can get out of debt with some devotion, attention to detail and a tiny bit of anger at the lenders.

In my case that lender was Great Lakes Higher Education.  Promise after promise to reduce my interest rate was never fulfilled.  36 months of on-time payments -- I got there, no interest rate drop.  Allowing auto payment from my checking was set up, but still no reduction.  I was told oh sorry, the other person you spoke with was wrong.  Well, I had enough and I got mad.  And then I set off to pay them off.  Here are a few tricks from my bag:

  1. Create a spread sheet showing your daily balance, daily interest, and be able to in put information on payments and see how quickly the debt will reduce.  For example, if I was able to put an extra $200 a month to my debt, how much faster would it go away.  What motivation!  Use Excel, or Open Office and set up a sheet now;
  2. Earn extra money.  On top of my day job I tutored international students in conversational English.  Other ideas -- deliver pizzas, babysit, pet sit, get a seasonal job, bag groceries on Sunday;
  3. Maximize your earning potential -- after meeting the man I would late marry, he helped me see that I could earn more, a lot more, practicing law.  I had a government job in policy that I did not care for, and paid well below my earning potential.  I know this is not the situation for everyone.  But can you earn more through a job jump?  Can you ask for a raise and be worthy of it?  What about more hours or moonlighting in your profession?;
  4. Eek every bit out of a penny.  I was a lawyer, but lived like a poor law student.  Small student apartment furnished with items from dead relatives or curb discards.  Brown bag lunches instead of carry out or sit down.  A thermos for coffee.  Work clothes purchased at second hand stores, with an avoidance of those needing dry cleaning.  I bused to work, and was known to walk the three miles home to get exercise as well as avoid the bus fare.  I'd wash a load of clothes, but skip the drying fee by using a drying rack.  I got rid of cable and learned how to use the library for DVDs (my viewing of the entire Sopranos franchise never cost a dime);
  5. Send a payment every week.  And send those hard fought for pennies in immediately.  This decreases the chance of you spending money on other items, and reduces the principal and subsequent interest just a bit faster.
There is a financial planner that I enjoy listening to (Dave Ramsey).  I love his common sense approach to money, but his social values are way too conservative for me.  But I listened often -- stories of others paying off debt motivated me.  And one lesson I took was don't be normal.  Why?  Normal people are broke and in debt.  If you want to be out of debt you can't be normal. So if you embrace these ideas be prepared for others to be surprised, and even a bit annoyed.  That happened to me, but it was worth it.  My debt is gone, allowing my husband and I to save aggressively for our goals.  And having only a small mortgage and no other debt makes our decisions to be a dual self-employed family much easier.  

And that is a trip down memory lane for this Tuesday.  Thanks for reading!

Image credit:  www.sxc.hu - free image



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