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How did I pay off $63K in Student Loan Debt

Awhile back I wrote an origin post for Full Time Finance. In that post there were two sentences in particular that deserve elaboration, “At graduation I had 60K in debt, and no job offers. I did have an emergency fund which I worked my way through over the next 6 months, before finally finding a decent paying job. “   The recent guest post here 2 weeks ago inspired me to further elaborate.  So, how did I manage to pay off $63K in student loan debt?

How did I get $63K in Student Loan Debt

First off the situation was actually worse then just $63K in student loans. You see when I started college the world was flooded with high paying tech jobs. I was even offered a respectable salary to drop out of school and go code. So I had this perception that the world was my oyster, and after I left school it would be like field of dreams, “I graduated so the jobs will come”. That reality was to come crashing down before I graduated, but even though I had difficulty finding internships I still held onto that perception. As such, I not only had $63K in student loans, but I also had $20K in a 0 percent car loan.

So I graduated into the worst job market for computer science majors ever, with no job and $83K dollars in debt. It was also extremely hard to differentiate myself from the recent glut of computer science graduates.  As a result, for the next six months I was unemployed living in my parent’s basement. My student loans were in deferment, and I was paying my $300 dollar a month car payment with my meager savings from summer internships.

The Situation Post Graduation

About 6 months in I finally found a job. The pay was $48K a year and it was close enough to stay at my mom’s house while I paid off debt. This was before it became the norm and acceptable to stay at home post college, so I was terribly embarrassed. However, I sucked it up and lived at home for another 3 years. With $76K in debt by this point I didn’t have a lot of options. The student loan payment would have been more than 50% of my salary (there were none of the student loan programs that exist today where your payment is somewhat controlled by your income. The car loan was also underwater at this point).

For the next 3 years I deprived myself of everything to focus on paying off that debt. I skipped my 401K match, one of the few financial decisions I regret, and focused solely on my loans. I started by consolidating the student loans that I could (only about a 2/3 of the debt could be consolidated) to a 3% rate. The rest hovered at around 7%. I then put every dollar I made except the minimum payments for the other loans into the highest rate loans. Three years later I moved out of my mom’s house with the debt paid off, 2 major promotions, and 45K in cash. In the interim I managed to sell the car for what remained on the loan and pick up a much less expensive car. So at move out I was debt free.

The Hidden Cost

The above sounds inspiring, I managed to eliminate $83K dollars off starting with a salary of 45K. But was it? What was the cost of this insane payoff rate? I had no life for most of those 3 years. There was no using money to buy what I value. With the exception of one admittedly expensive vacation in that 3 year period I did nothing but work and live in my mother’s basement. This is why I so focus on the need to moderate your lifestyle and not just deprive yourself of everything.  I know from experience extreme frugality does not make one happy, nor is it sustainable.

The Aftermath of Deprivation and Paying Off My Student Loan Debt

In fact, after the deprivation I went a little nuts with the $45K. No, I’ve never gone into debt again unless you count for leverage or a 20% down mortgage. But I viewed that $45K as mine to spend. My friends pushed hard on me in 2007 to buy a house with that money but I refused. Instead I went out and bought a New Corvette not long after moving into an apartment. 3 years of pent up spending came out in one hugely expensive transaction. I had the car delivered new to me from the factory.

There is no way to argue that someone should spend every dime they have in this world on a car. This was an incredibly stupid move on my part. Had I invested that money into stocks I would be way ahead. Also had I lost my job during the downturn I would really have paid for that purchase as my emergency fund at that stage was practically non existent. That being said through pure luck purchasing that car worked out. I still have that car today, 10 years later.

It All Worked Out in The End

I still have this car for a reason, it has had a positive impact on my life. It keeps me from spending anymore. It became a symbol of needing to cut down on my spending but also enjoy myself a little. The enjoyment trickled in on the car whenever I took it for a ride, and the rest of the time I focused on savings. Conversely, had I listened to my friends and bought that house I’d still be down the amount of the car purchase. So in a twisted way it worked out for me.

The point here is one I use a lot on full time finance. Finance is a deeply personal matter. What is right for one person is not right for everyone. You should read finance blogs and learn from others mistakes and successes as suggestions, but you should run your life your way.

Do you have a history with high student loan debt?

16 Comments

  1. The Magic Bean Counter
    The Magic Bean Counter April 17, 2017

    That sounds like a brutal 3 year stretch but so worth it to get out from under all of that debt. Totally agree with your last sentence. Everyone is different, and for you purchasing the corvette has worked out. Nice post

    • fulltimefinance@fulltimefinance.com
      [email protected] April 17, 2017

      It was definitely a learning experience. Everything happens for a reason, it definitely helped to direct my life going forward. Thanks for stopping by.

  2. Leo T. Ly @ isaved5k.com
    Leo T. Ly @ isaved5k.com April 17, 2017

    I think that both of us graduated a little bit after the tech bubble busted. I only had about $30K in student loan debt, but my first job paid me only about $35K.

    Paying off my student loan was important, but buying a house in the city that I lived in ten years ago was instrumental to my financial health. House prices pretty much almost tripled from ten years ago. I felt fortunate that I did buy a house 10 years ago and trade up for a better one five years after. I just can’t imagine me being a first time home buyer today.

    • fulltimefinance@fulltimefinance.com
      [email protected] April 17, 2017

      Yeah it sounds like it. It sounds like you had a similar situation. I’m glad the real estate market worked out for you. I was checking the home prices for our current home purchased in 2014. In 2007 it was worth 40K more then it is today. Its up nearly 15K since I bought it.

  3. It’s the power of broke. I’m reading Daymond John’s book right now and he says that if you have nothing, there is no where to go but up!

    Great story. I’m glad I read it 🙂 I’m also glad things are better for you now.

  4. SMM
    SMM April 17, 2017

    I’m glad the car became a symbol for you so that every time you see it, there’s a reminder. We’ve all spent on things we regret later at some point. The lucky ones like us learn from it. Congrats on paying off the debt though, that is an important accomplishment!

    • fulltimefinance@fulltimefinance.com
      [email protected] April 17, 2017

      So true about learning. I wonder would I ever have gotten spending under control had money came easy like during the Tech Bubble. We are all products of our experiences.

  5. Jack Catchem
    Jack Catchem April 17, 2017

    I was well on the road to high student debt, then the world changed overnight. I had just begun my first semester in college when 9/11 happened. That incident and the resulting Global War On Terror dramatically shunted me down another path. I left college for the Marine Corps Reserve and returned a semester later, now a part timer infantryman.

    I was only back in school for a semester before being activated and sent to the Iraq invasion in 2003. For the next seven years I was in and out of college, taking regular sabbaticals for combat deployments.

    Between scholarships for good grades, saved military pay, and military education benefits, my wife and I made it through undergrad (and her through law school) with minimal student loan debt. It’s a weird to say war paid for my education, but it did, and it worked.

    I hear you about the disctinct lack of fun in frugality. Each deployment I came back with wads of cash because there was nothing to buy out in the desert, but it certainly is not an easy strategy for the spirit to survive.

    Thanks for the tale!

    • fulltimefinance@fulltimefinance.com
      [email protected] April 17, 2017

      I was in my Junior Year of college on 9/11. It had a profound impact on my in other ways, but that’s a story for another day. It was an interesting time, it sounds like ultimately that path worked out well for you. Thanks for adding your story.

      • Jack Catchem
        Jack Catchem April 18, 2017

        I look forward to it (I’m a sucker for stories!)!

  6. Mr. Need2save
    Mr. Need2save April 17, 2017

    I’m probably not the norm as I graduated with only around $1,000 in student loan debt. It was a long time ago (1994!) and I think I used the loan to buy a computer. I lived at home during college and my parents paid the in-state tuition and I paid for my books.

    Although that doesn’t sound like a fun three years, it does sound like you were focused and motivated to get rid of that debt. That’s saying something for a 22-year old.

    I’ve certainly made some regretful financial decisions over the years, but overall I’m pretty content with my choices and how things have worked out.

  7. Mustard Seed Money
    Mustard Seed Money April 18, 2017

    I lived at my parent’s home for two years after college as well before I bought my house and got a bunch of roommates to live with. There is no way I would have been able to buy a house without their assistance in letting me live at home. I don’t think I had a single date while living at my parents home but it was definitely worth it 🙂

    • fulltimefinance@fulltimefinance.com
      [email protected] April 19, 2017

      I hear you on the date thing. Funny how I met my wife within a year of moving out..

  8. Wall Street Physician
    Wall Street Physician April 22, 2017

    The job market for computer science has really turned around in the past 10 years, hasn’t it? Crazy how cyclical CS can be.

    • fulltimefinance@fulltimefinance.com
      [email protected] April 22, 2017

      Most definitely. Especially the hot areas like data analytics. It’s at once great as it leads to higher salaries for those in those field and in related fields, and a cautionary tale to not count on job stability.

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