This is an amazing guest post from Natalie a.k.a. FinanceGirl. If you are looking for some encouragement along the road to debt-freedom, this post will do just that! Thank you Natalie for such an awesome debt-free story!
I am a practicing attorney in Cleveland, Ohio. I cannot tell you how incredibly amazing it felt to graduate from law school and pass the Ohio Bar Exam. At that point in time, I truly felt so proud of myself and accomplished. I got a job at a big law firm a few months later, and I’ve been working there ever since. About the same time I got my job, my student loan repayment was set to kick in. Prior to this point, I really hadn’t thought much about my loans or finances at all.
I graduated with $206,000 in student loan debt
I got my paperwork together and made some phone calls, only to discover I owed $206,000 in student loan debt. My payments would be near $2,000 / month. Oh em gee. This was horrifying. This wouldn’t be as big of a deal if I was making $200,000+. But, I graduated in a really tough economy and at a time where the structure of hiring and promoting lawyers was changing. My salary hovers around the $80,000 mark. Factor in health care and taxes, and my take home pay is about $4,000/month. Now, $2,000 of $4,000 is 50%!! I was nearly shocked and horrified. That is when I started learning everything I could about finance. I became so passionate about it and so shocked that I was actually among so many who didn’t have a clue about their personal finances. That’s when I started Financegirl, where I decided to write about finance and intentional living for young, professional women, like me.
I paid off $50,000 in 3 years
At first, I paid close to $2,000 month on my repayment plan. That became really difficult given my living expenses in a one bedroom apartment. I felt poor – not just broke, but poor. I changed my repayment plan to the 25 year extended plan for a bit, and that was more manageable. My payments went down to about $1,100/ month. After some time, I began to pay attention to the total amount owed and realized I was getting nowhere because my interest rates were an average of 7.9%. Let me tell you – it’s so discouraging to pay $1,100 / month and never see your total amount owed go down.
So, the following year, I decided to put my bonus onto my loans. Seeing that principal go down immediately was so gratifying. I wanted to see that progress more. So, I decided to go back on the 10 year repayment plan. (I wrote a post about that decision here.) Now that my loans were a little lower from my bonus payoff, my payments on the 10 year plan were (and still are) $1,605/month. And since then, I’ve paid off a grand total of $50,000. That seems crazy to me! I try to focus on this so I’m encouraged and not discouraged by how much is left. $50,000 paid off is a substantial start.
I still have $156,000 to go
After paying $1,600 / month and being on the 10 year plan, I finally feel ahead of my interest. In fact, I usually see the principal number going down another thousand almost monthly. This is huge. Seeing the progress keeps me going. And every little bit counts. The momentum from being on the 10 year plan and seeing the principal go down has been so inspiring and encouraging, that I’m launching my own automated 12-month accelerated repayment plan for 2015. I haven’t announced the full details yet, but here’s an overview of what I’ll be doing: I’m going to add an additional $1,100 / month to my student loan repayment every month, so I will pay off $2,700 / month for 12 months assuming my income and living situations stay the same. So, my goal is to pay off $32,400 in 12 months. I’ll live off approximately $1,400 / month or $16,800 for the year. (You’ll have to visit Financegirl in January for the rest of the details 🙂 )
What it feels like
I think about my debt constantly. It feel horrible to be in this kind of debt. But that is exactly why I keep focused on my debt – because it’s my job to do something about it. The feeling of owing that much money is daunting and frightening. But I instead turn that around and ask “What does this make possible? What can I do about this?” This mentality is so much more productive for me than sulking or having a pity party.
My attitude
My attitude about my student loan debt is this: “I got myself into this mess, and I’m going to get myself out of it – and share my story along the way.” Having an attitude that pushes me forward is so empowering. If you owe money or are struggling in other ways do whatever you have to do to avoid the victim mentality. I never knew anyone who became successful and wealthy who acted like a victim. Become the victor; make things happen that wouldn’t be possible otherwise.
If it weren’t for my student loan debt, I probably never would’ve learned this much about finances. Nor would I have started my blog or freelance writing. I am so passionate about personal finance now, and that is due to graduating law school with massive debt. I never would’ve found my purpose but for this debt.
My financial philosophy
Although my debt has empowered me to write and create a blog that I’m so passionate about, the reality is that my debt is still there. As a result, getting out of debt is my number one priority right now. This means being “frugal” and trying to increase my income in order to get out of debt as fast as possible. It also means focusing in on my debt and not becoming side-tracked with investing or other fun financial things (I’m saving that for later).
Additionally, I don’t use a credit card. I don’t have a credit card. In fact, I’ve never had a credit card. Ever. (You can read more on that here.) If I am trying so hard to get out of debt right now, it makes zero sense for me to add any consumer debt. It’s against everything I believe about personal finance.
Overall, my personal financial philosophy encompasses becoming debt free, learning to manage my finances (including budgeting and being frugal), and building wealth over time. I’m grateful for the opportunities that have come from my student loans, but I can’t wait to say bye to them forever.
Natalie Bacon is the author of Financegirl, where she blogs about finance and intentional living for young, professional women. She’s an attorney by day and a personal finance freelance writer and blogger by night. You can join her as she digs her way out of student loan debt on Facebook, Pinterest, Twitter, Google+, and Instagram.
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WOW you are awesome!! Such an inspiration! A close friend of mine’s husband is a lawyer and he has around $180K of student loan debt. I’m not sure what they’re plan is, but I don’t think it involves hustling to pay it off sooner. I feel like most people with student loans try to find ways to delay payments rather than focus on getting rid of the debt as quickly as possible. Way to go!! Can’t wait to read more about this in January!
Thank you, Sarah! And I agree – the other people who I know with student loans are trying to find ways not to pay them (or put off paying them), when really it’s your debt and you should pay it off ASAP!
I think you’re spot on Sarah! I think most people are hoping for that 10-year forgiveness plan to kick in but that’s a whole lotta interest on a hope that our government will be able to honor it.
I love this article. It is refreshing to read your plan to pay off student loans and it’s amazing how much you have paid of. It is really inspiring to read how you have accelerated the payments and really motivates me to come up with a better plan to pay mine off!
Thank you, Kristin! It really is motivating once you get started. Having a plan is the first step; after that the momentum really helps!
Amazing progress Natalie!!!!! Have you heard of Joe Mihalic (nomorehavarddebt.com). Similar story. He paid off $80K of grad school debt in a year. We really have to adopt an aggressive mindset when attacking large debt amounts!
Thank you, Toni! And I have not heard of Joe Mihalic, so thanks for the recommendation! I’m always so amazed and inspired by other people’s debt-pay-off stories.
You are a hustler Natalie! We’ll have to meet up sometime I’m an hour north of Cincinnati 🙂
Thanks, Alexa! We’re too close not to – I would love that!
Way to own your debt instead of letting it own you! That is a huge amount, but you are booking through it! It took me about two and a half years to pay off my debt and it was the same as a years salary, Yours is 3X that much and I still bet you’ll have it knocked out in about 5 years with that attitude.
Student debt totally sucks, but there are so many of us who got into personal finance because of it that it definitely has a silver lining in a way.
Nice job, Natalie! I know there’s still a lot left, but $50k is nothing to scoff at! I have a friend that went into immigration law to work for the INS on graduation just for this reason: law school loans were suffocating.
Thank you! Remembering the progress absolutely keeps me positive and motivated. These loans will be gone in no time! 😉
Your dedication to becoming debt free is truly inspiring Natalie. There are so many people who would just freak out and become almost paralyzed by such a large goal, yet it has inspired you and made you a stronger women for it. Keep up the great work!
Thank you, Shannon! I hope my motivation is inspiring to others! Like you said, too many are paralyzed by their debt and don’t take action.
“I never knew anyone who became successful and wealthy who acted like a victim. Become the victor; make things happen that wouldn’t be possible otherwise.” So true! Way to take charge and ownership of everything, and congrats at how much you have paid off so far!
Thank you, Tonya! What you quoted certainly is a more productive attitude to have. It helps me and I hope it helps others!
I think you are doing great Natalie. I think mindset and attitude is everything. We are constantly thinking about our student loans too. The emotional weight of debt can be really heavy at times but we try to just remind ourselves that this is a phase and it will pass. We will pay off this debt and move on with our lives!
Thank you, Liz! I think for me having a plan is how I combat the “emotional baggage” that comes with massive student loan debt. Amazingly, it’s very helpful.
You’ve got a great mindset/attitude towards your debt, Natalie. And I know that it seems so big today, but you’re doing a great job managing it and eliminating it. I love how you not only own your debt, you’re clearly in the driver’s seat in how you use your money. So many people let their debt own them and give their power to debt. You’re not, which makes a huge difference and will help you kick that debt to the curb, far ahead of your peers.
Shannon, I definitely think my mindset with respect to my debt is the most powerful tool I have. I think if more people used how they think to attack their debt, it would be less of a problem. Ownership is key – I took out the debt and I’m paying it back.
Your attitude and focus are inspiring! I actually found it so helpful to see actual numbers because it makes me feel like I can relate to your situation more, knowing the details. I’m rooting you on to get that paid off- what a happy occasion that will be!
Your article is really helpful to those people who have not knew about students loan. In this article you want to share and know how you or we get free from students loan.My personal opinion, It becomes painful when you delay to pay off your monthly installments,
and its growing interest. So i also say that only then we will able to pay off our loan amount
being “Frugal”. O one more thing, your personal philosophy is not bad.
Thanks to your good intention.
I can relate! After I finished grad school, my student loans were 50% of my income. It’s overwhelming and your payments already feel unmanageable, so the idea of paying extra on your student loans seems crazy at first. But when you see your principal balance FINALLY starting to decrease a decent amount, it’s so worth it! Great job with paying off $50,000 already. That’s a huge accomplishment!
I can also relate to your point about your student loans having a silver lining. I probably never would’ve become so passionate about living a frugal, debt-free life if I hadn’t found myself buried in student loan debt. It taught me a lot about debt and focusing on what really matters in life (not material things).
Natalie I SO love reading this! Your attitude is super positive, taking full responsibility of your debt and then doing all you can to get rid of them.
I’m in the same boat, focusing on getting rid of my student loans as well before worrying about investing and other financial stuff. I came up with a plan to be debt free in 3 years but I’m hoping to shorten that time length! I will definitely be checking in on Financegirl to borrow inspiration from you while on my debt freedom journey too 😀