UW Graduation Financially Engaged

We’re Debt Free!

Today is a BIG DAY for us, because I (Hannah) paid off my last student loan today, in just four and a half years (and over five years early)! Since we don’t have any other debt, we’re officially debt free!

I Graduated with $40k of Student Debt

After attending four years of undergrad at UW-Madison, and one year of graduate school at UW’s Wisconsin School of Business, I graduated with roughly $40,000 in student debt. While the exorbitant cost of college is getting more and more air time these days, many students unfortunately don’t realize how much college truly costs until they have to start making their first loan payments.

I always knew college was expensive, but $40,000 was an eye-popping and intimidating amount. That’s why I was so grateful that I picked a major (Accounting) that I knew I could get a job with when I graduated. A year before I received my Master’s degree, I had a job lined up in Chicago, which definitely provided some peace of mind.

When I finally graduated and passed the Certified Public Accountant (CPA) exams, I was faced with a $400 minimum monthly payment on my student loans. Ugh.

How I Paid Off My Student Loans

As I started my new career and got settled into living in downtown Chicago, I decided to begin by making the minimum payment on my loans. Getting established in a new city and with a new (to me) car led to lot of upfront expenses. At that time, the thought of putting more towards my loans was far from exciting.

However, I quickly started realizing how long it would take to pay off my loans if I stuck with this approach – ten years felt like forever!

Before I could get aggressive with my loans, I first needed a simple way of tracking how much I had, how much I was earning each month, and how much I was spending. This is when Brady and I started the very first version of our own financial plans. It’s funny to see how far our tool (and finances) have come since that day.

It’s safe to say we got addicted to seeing our progress and helping others see it too!

It all stemmed from just wanting to know how much I could afford to pay towards my student loans each month, while maintaining my emergency fund, covering things like rent, and ensuring I still enjoyed my time in Chicago. After setting up the plan, I realized I could actually be paying around $800 each month towards my student loans, if I was a little more diligent in some areas of my spending habits.

Each month, I began paying double my minimum payment, and it was so satisfying seeing the balances get lower and lower. Every time I got a bonus from work, I would also pay the bonus towards my student loans, rather than increasing my lifestyle.

Although this wasn’t fun, I never really missed it, because it was only in my bank account for a split second before I would pay it towards the student loans! I realized that giving up a slightly better life today meant I could have a much better life down the road.

Over the next couple of years, I kept sticking to my financial plan and building momentum towards a debt free life. As of December, 2017, I had $10,000 left in student loans, but I was so far ahead on my payments that I technically didn’t owe anything until April, 2021.

At that time, Brady and I had enough money to pay off my loans in full, but we also had to save for an upcoming wedding and honeymoon and a down payment on a house. Given the progress and other short term goals, we decided to halt payments towards my loans.

Peace of Mind

Over the last year, we paid for our wedding, a bunch of unexpected medical expenses, and have been saving for that future house, but we recently decided that there was a more important aspect to continuing to pay the loans off early:

the peace of mind of being debt free and fulfillment of achieving such a big goal!

Given the low interest rate on most student loans relative to today’s mortgage rates, you can make the argument (as we initially did) that it doesn’t always make sense to pay it off as soon as possible. However, you can’t ignore the psychological side either.

There is something really powerful about reaching your goals and being in control of your finances. Achieving one goal makes you even more likely to reach the next…and the next..and the next. And it’s so nice to not feel indebted to anyone!

We also realized that by originally deferring my student loan payoff, we began to fall victim to lifestyle creep. With the payments not due for another 5 years, at times we’d feel richer in the moment than we truly were. As our savings increased, we began to inevitably feel that we could increase our down payment for a nicer house or buy a nicer car, rather than putting it toward my loans.

In other words, deferring my student loans only made sense if we didn’t start increasing our spending or other goals too – which was very difficult to do!

Tools for Success

I can’t emphasize enough how important it was to track our progress and lay out our goals, so we knew what was possible and had something to aim for. The tools that we use ourselves are all available in our Freebies section of our site.

With these tools, we know that we will still be able to afford a down payment on a house soon, along with several other short term goals. So today, we said screw it, let’s pay off the student loan balance, and I’m so glad we did! The freedom of being debt free is amazing, and we know that by using our financial freebies, you can get to this feeling too!

Questions

What was the value of your student loans when you graduated? What has been your method for paying them down? Comment below and let us know!

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