“Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”
― Sun Tzu, The Art of War
Writing about student loan debt has been tremendously helpful. Now it’s something I cannot deny or run away from because there it is, written out clearly for the world (and ME) to see.
Debt is fucked up. It’s certainly not something we like to admit to our friends, family and more importantly to ourselves. Who likes to saunter into dinner parties and casually mention, “Yes, that is a wonderful new car to purchase, Brenda. And John, Hawaii is lovely to visit. As for me, I’m walking around saddled with 50K in student loan and credit card debt! Isn’t that just delightful?!” Uhm. No.
Debt is a tough pill to swallow. It’s embarrassing. There are times when I think to myself “what the hell is the point of working if half my income will be going to paying off debt?!” Seriously, it’s the worst feeling ever. It’s a rollercoaster of embarrassment and emotional feelings you can’t ever escape.
“I can’t afford to (:insert the biggest dream you want here:) because of my fucking debt!”
As much as I want to push away or ignore it, I just can’t. It’s a constant daily reminder. “Oh wait, I can’t afford to travel around Europe this summer after all!” The only good thing is that debt helps when it comes to reevaluating priorities. What is it exactly that you want? Is debt actually holding you back or are you too scared to move forward? It’s a great wake up call.
Now that I’m in my 30s my priorities have changed. Nothing would bring me greater joy than to get married, have kids and own a comfortable home with my partner. But when you’re saddled with debt these “pursuits of happiness” are not easy. How is it possible to afford a mortgage if you’re writing off half your income to student loans?
Denial is a fucking bitch and I’m tired of it. So I’ve decided to grab debt by its collar and slap it across the face. It’s no longer controlling me, I’m going to control it. I’ve climbed to the top of the mountain just to scream — SCREW YOU DEBT. YOU’RE NOT HOLDING ME PRISONER ANY LONGER!!!
It’s time to grow up. You’re not going to beat me.
Snowballing is simple but also very effective. The snowball method involves making a list of all the balances you owe to various institutions (credit cards, student loans, car loans, etc.) and then tackling your smallest balance first. What you’d do is pay the monthly minimum on all your balances, except your smallest balance, which you’d pay off the most aggressively by applying as much extra money to it as possible. Once you eliminate the smallest balance, you tackle the next smallest balance, and then the next until you’ve paid everything off. This is a similar method I’ll be employing. Now that I’m in a healthy job, I can afford to make large payments each month. Every year I get a promotion, more money towards debt pay off.
Suze Orman also says it’s important to also pay yourself. So each month, I’ll continue putting additional money into my savings account.
Have a plan
Moving to a no-interest (for 18 months) credit card was a super wise investment. That is, by far, the debt with the highest interest rate. Credit card debt has no redeeming features either. At least with Student Loan debt you can deduct up to a certain amount on your taxes. But that’s about the only good thing.
Looking at my figures and what I can afford each month, I’ve found that I could pay off my entire credit card debt and one student loan completely by next summer. That’s about $13K worth of debt alone.
In savings, I’ll have roughly £3500. That’s money I can continue to save for emergencies or I can put half it towards paying off my next sizable loan.
Keep Moving – Paying off Student Loans A, B, and Krakken
After my credit card debt and first of THREE student loans are paid off, I’ll SNOWBALL that money and pay off my second student loan by December 2014. So that will be two out of three KILLED in a year and a half,
My worst “debt” is an amalgam of three combined student loans, which was formed after the Wachovia 2008-2009 bank disaster. I fondly call it the $26K Monster, where the K actually stands for Kraken. The worst bit is that the fixed interest is at 6.8% . Good in a sense, because I hear that if these politicians ever decide to go higher they can’t because the interest is fixed. But it sucks as interest is at 3% (which is great for my one variable student loan).
Over the next year and a half, I’ll have to pay the minimum to keep the interest in check and pay down part of the principle. But here is where is also gets tricky. Do I choose …
Acquire a personal loan. The personal loan would pay off my remaining student loan balance. Now I wouldn’t have conduct a bank transfer overseas each month (which costs an additional £100 each year) and can payoff the loan directly from my bank account in Stirling. The personal loan has a lower interest rate and would cost less each month. I’d chose the option to pay off in three years but instead pay it off in two, thus, completing my debt reduction in roughly three to three and a half years (depending on any future promotions I get in the future). Or do I choose …
Not taking a personal loan and continue making monthly payments to have the student loan paid off in a two and a half years. Both options are highly dependent on a number of factors namely, if I get approved for a personal loan (and that will pay off the total amount) and if I get a good interest rate which will enable me to have it paid off in a few years.
Overall, it’s a highly aggressive but also satisfying plan. There’s a bit of excitement knowing that after a few years whatever I earn I will be able to put into my checking and high interest savings account. While it’s said that most student loans will be paid over a period of ten years I can’t imagine spending another ten years in absolutely misery of seeing my money flush down the drain.
BTW, people who are considering going back to college but it will cost them thousands and thousands of dollars to do so, please take my advice and apply for scholarships and grants! Off set the charge as much as you can.
How are you tackling your MONSTER debt?
Does anyone else have debt they are trying to avoid? How are you going about to solve the problem?