How I’m going to pay off $77,412 in student loans in 5 years
I’m part of the first generation in both my mother’s and father’s families to earn a college degree. My parents did attend a 2-year bible college in Pasadena (where they met), but the college was unaccredited and essentially didn’t play a part in giving them the leg up a college degree is supposed to.
I never planned to go to college
In high school I always knew that college was a thing that people did and that I might go to college one day, but I never pictured myself in college. That’s important. It means college was not a goal of mine and that I didn’t consider what I needed to do to achieve that goal. It also means that after I took the ACT and got accepted to the University of Iowa, that I didn’t know what a FAFSA was. Neither myself nor my parents nor my guidance counselor had sat me down and asked me exactly how I was going to pay tuition. Which was why I was surprised after I enrolled at Iowa and received a bill for tuition a few weeks before my first class for approximately $4,500. I had already gone through student orientation and declared a major in Fine Art with an emphasis in oil painting and a minor in Italian. I had already signed up for classes. After I got that bill and realized I had no way to pay it, I dropped out of college.
A few weeks later, I got job working as a lineman at Piedmont Hawthorne, fueling commercial and private aircraft. I got up at 2:30 in the morning and worked until 2:00 in the afternoon. I liked the job, but it was hard work, I always smelled like jet fuel, and I got paid $9 an hour. I found out that another lineman, who had been at the airport and with three different fueling companies for about 15 years, didn’t make much more than I did. His Nissan’s muffler was held on by a clothes hanger. After about 4 months I let go because the company found out I had lied on my application about not having violations on my driving record. They couldn’t keep me on because I was an insurance liability. This ended up being a blessing in disguise. My father gave me an ultimatum at this point. “Get a fire under your ass and go to college or we’re cutting you off.”
I never planned how I was going to pay tuition
So, I enrolled in community college and my mother helped me take out a private student loan to pay tuition. I ended up being in school for about 5 years, earning a double-major bachelor’s, and falling one thesis short of a master’s degree from Iowa State University. I also finished with $75,000 debt. (To be fair, about $15,000 of that is a new car I bought when I was working at the airport. My dad had warned me and I hadn’t listened.) I had only worked 15 hours per week during undergrad, but had taken out about about $5,000 to $6,000 in loans each semester while I was in college. My loans paid for everything. My rent, food, car insurance, soccer cleats, alcohol, laptop, and more.
I currently pay $423 in federal loans per month and $165 in private loans per month. Most of my federal loans have a 6.8% interest rate, and my private loans are around 4.72%. My payoff date for my private loans is listed as 2031. I’ll be 47. Many of my friends will have children graduating high school and receiving their college acceptance letters by that time. It also means that at that repayment rate, I could pay more than $80,000 in interest. That could be one hell of a down payment on a nice house in many parts of the country.
But I’m planning how to pay it back asap
So, I’ve laid out an aggressive budget to pay back my student loans in the next 5 years. And it seems realistic. I have no credit card debt, which means that if I stick to this plan, I could be debt free by age 33. My plan from here on out is to use this blog to keep track of my progress. I’ll post an expense report each week, and write more detailed breakdowns of my budget where food and other discretionary spending is concerned. My goal is to be accountable to myself, and by putting this in the public sphere, to also be accountable to those who are following my journey to being debt free.
Another important aspect, which I’ll post about next week, is how I plan to manage my money, which involves paying bills first, depositing money in savings (and not a debit account), and withdrawing cash allowances for things like food and discretionary spending—it’s much harder to let go of money when it’s in your hand and you see exactly how much you’re giving up, rather than sliding a card at the checkout. I want to be better connected to my money.
My estimated budget for the next 5 years
Salary: $75,000
Annual take home: $47,400
Monthly take home: $3950 per month
Student loan debt (May 4, 2012): $77,412
5 year repayment (payoff at age 33): $1,525.56 per month
Budget:
Rent + utilities + internet: $750
Minimum federal student loan payment: $423
Minimum private student loan payment: $165
Additional loan payment (5 year): 902.80
Food: ($8 lunch / $12 dinner for 7 days per week): $560
Savings: $500
Checking cushion: $649.20
7 year repayment (payoff at age 35): $1,160.80 per month
Budget:
Rent + utilities + internet: $750
Minimum federal student loan payment: $423
Minimum private student loan payment: $165
Additional loan payment (7 year): $562.80
Food ($10 for lunch / $20 for dinner for 7 days per week): $900
Savings: $500
Checking cushion: $649.20
The most difficult part of this plan will be sticking to my food budget.
(Source: stewart-little.com)
