The Best Ways to Avoid Building up an Overwhelming Student Loan Debt

Many graduates today, acquire their degrees alongside high-debt burden from unsettled student loans which can be tens of thousands of pounds. However, with a strategic approach, consistency and commitment, you can pay off your student loans faster, lower your monthly payments or avoid surplus borrowing in the first place. Below are definite ways to avoid a huge student debt profile.

Look for varsities that help you rely less on loans

Besides excellent teaching, research facilities and reputation, one critical factor that you should consider when looking for admission at colleges is the load of student debt encouraged- choosing one that does not overload their students with debts.

One way to do this is to check the statistics. Avoid schools with high default rates, which forces students to take up debts that they can’t afford. However, note that default rates may be an average stat and may not reflect the personalised financial package of individual colleges.

Make a budget

Having worked out your monthly repayment sum, the next step is to create a budget. Make sure to treat it strictly with the same commitment and discipline that you would treat other monthly bills like rent, utilities and insurance.

Pay off the loan upfront

Always pay off your minimum balance and avoid excessive default or late fee penalties. It’s a good thing that student loans don’t count on credit ratings and so don’t impact a person’s capacity to borrow in the future after graduation. However, lenders factor them in when considering a mortgage application.

Reduce your principal

Some of us might be lucky enough to find that we have some money lying around. Rather than put it towards the repayment of your student loan; pay it as part of your initial debt capital and lower the original amount. Make sure you notify your lender of this approach so that they know how to credit the extra payment.

Reduce your rate

If you have a consistent job with a fair income that is considerably higher than your total monthly repayment rate, you can refinance the high-interest student loan into a lower one and help you to pay off your debt more quickly. Be sure to have an understanding of the personal loan market before perusing this option to ensure you get the best possible deal.

Automate your payments

In addition to the peace of mind that comes with knowing that your debt profile dwindles further at the end of every month, some lenders offer extra incentives for people who want to put their repayment plans on automatic deductions from their bank accounts.

Get a job that pays your loans

You can as well look for a job that offers help in cancelling student loans. Many of the professions that have the highest loans like law, medicine and veterinary also provide students with opportunities to pay off their debts by working certain jobs.

Opportunities also exist in other fields and professions as well, like law enforcement, qualified charity organisations, social work and education. Even if it is not strictly a loan forgiveness plan, some employers offer student workers debt repayment as one of the incentives in their employment package.

 

Ding. Dong. The witch is dead.

Yo yo yo! Quite possibly the most exciting announcement EVER . You’re probably going to want to take a seat before you read this. Are you sitting down yet? Okay good.

Today, mi amigos, I would like you all to know, I just popped a cap in Sallie Mae’s a$$ and laid her to rest. FOR GOOD!!!! That’s right PF’ers I am debt free! I feel so many things right now, but mostly I’m just turned on. What can I say? Being debt free is sexy. Ahhh, it feels so good to say, I think I might just say it again… I’M DEBT FREE!!!! Okay, now that I’m done gloating, let’s take a little walk down memory lane…

I graduated college Spring 2007 with $28,462.96 of student loan debt. I did the typical post-grad choice and deferred my payments for the six months allotted. I then consolidated my student loans with Sallie Mae, which in hindsight was the biggest financial mistake of my life. In February 2008, I had to make my first student loan payment. A whopping $178. I did this one time. After the first month, I decided I didn’t want to be in debt for the next 20 years, so I stepped my game up. I began doubling my monthly payments and figured I’d be out of debt some time in 2017. I thought I was pretty smart.

I continued making these double payments for exactly one year. In March 2009, it was time to get even more serious. I began throwing between $1,000 and $1,500 towards my loan every single month. Although I was committed to paying off my loan quickly, I still lacked the intensity needed to really get the ball rolling.

In April 2010, that changed. I became determined to be debt free by my wedding day. This is when I made a $10,000 decision and reduced my loan from $14K to $4K. After some more number crunching, excel spreadsheeting, and mathematical calculating I realized it was time to say goodbye to Sallie Mae for good. Over the weekend I submitted my final payment, and in case I haven’t already told you, today marks my first day of debt freedom!!! Kind of.

Apparently I made a mistake in predicting the accrued interest over the few days it would take my payment to process. Come to find out, my calculation was off by eleven cents…

So over the 2.5 years it took me to pay back my loan, I ended up forking over $3,832 in interest. This brings my total repayment to $32,295. While that number might be painful, it’s a whole heck of a lot better than the $52,000 total I would have paid had I taken the full 20 years to pay it back. Boo to the Ya for saving money.

I can tell you right now, I am already benefiting from the psychological effects of debt freedom. I feel incredible and am so excited to be able to spend my money without a voice in the back of my head saying “You shoulda used that money towards your debt.” Sallie Mae is one woman I never want in my life again. Ever.

As if you couldn’t tell, I am  really excited about this. Let me just get it out of my system one last time. HELL YEA!!! I’m Mother Effin, Debt to the Free. It’s time to go play “Ain’t gonna tie me down” over and over again, cause as of today, I am no longer Sallie Mae’s biotch.

Any suggestions for what I need to call my blog now? Perhaps, Punch Making Really Dumb Financial Decisions In The Face?

I will gladly give you my student loan

Are you sick and tired of me blogging about my relationship with Girl Ninja yet? If so, don’t worry there is a $100 giveaway included with this post and if you read on you can figure out how to enter. Anyways, I wanted to take a little time today to write about how Girl Ninja and I are going to operate, financially speaking that is.

First things first. There will no longer be a “my” debt or “my” savings. Nor will there be a “her” checking account or “her” credit card. By getting married we are committing our lives to each other. Yes, that sounds cheesy, but it is true. Remember the part in traditional wedding vows “for better or for worse, for richer or for poorer” well guess what ya’ll; Girl Ninja is going to be in debt for the first time in her life beginning August 8th.

No she’s not taking out student loans, buying a new car, or charging up her credit card. She’s actually doing one of the stupidest things she could do…marry me (she’s way out my league). Which means she will also be marrying my student loan. It’s not all bad though, ’cause she will also get to marry my savings account, which thankfully is quite substantial.

While my debt will still legally be solely my responsibility, we are prepared to work through the “for richer or poorer” part together. It means there is no more “mine” or “hers” but everything becomes “ours”. In the matter of a 30 minute wedding ceremony, we will transform from TWO individuals to ONE team (a pretty sexy-licious team I might add).

The days of individual checking accounts will be a thing of the past. Once we’re hitched, we plan to open up joint checkings, savings, and credit card accounts. We wont have any accounts that the other person doesn’t have full access to. Both of our paychecks will go in to OUR checking account, so it can be transferred to OUR savings account, and eventually be used for OUR expenses. Did ya see what I did there? I emphasized “our” because that’s exactly what everything will be…ours.

I personally don’t understand how some married couples (or even couples who are practically married) can separate their financial lives. There are married couples out there in which the man and woman will literally split “mutual” expenses down the middle. Excuse me married couple, Do you and your wife really need to write separate $500 checks to cover your $1,000 rent?

Why must you keep separate accounts and divvy out who pays what bills? If you made the decision to completely and transparently share your lives with one another, why should your finances not follow suit? Is it because you don’t want your spouse to see how much you racked up on your credit card this month? If that’s the case you have bigger issues in your relationship than financial ones.

  • So married couples, do you and your S.O. have joint accounts? Was the process of combining your finances frustrating at all? Anything you regret or would have done differently?
  • If you don’t combine accounts, why not? Is it so both have financial responsibilities?
  • What’s one thing about money you wish you would have discussed prior to tying the proverbial knot?

p.s. Remember that $100 giveaway I mentioned at the beginning of my post. There isn’t one. I just needed a way to keep those of you who don’t care about my relationship involved. Sorry.

Bigger isn’t always better

I love when people say “Bigger is better.” I mean, we all know the popular Texan slogan “Everything’s bigger in Texas.” We are told we need to make a BIG income, so we can buy a HUGE house, with a LONG driveway, to park our EXPENSIVE cars in. Unfortunately, success is often measured by appearance and not by personal accomplishments. Today, I make my case for a few areas where bigger is not my priority.

Income. Like every other college graduate, I was determined to enter the workforce and bring home a big salary. The grim reality… that didn’t happen. I started my job at a solid $38K/yr (quite a bit less than the $80K/yr I felt like I was worth). But now, after a few years in the work force, and a couple promotions later, I’ve learned BIG income can mean BIG problems. After a few more years, I could begin to explore the option of pursuing supervisory type positions. They make more than I can in my current field, but their increased salary just isn’t worth it.  Sure they make $15k/year more than I will, but they don’t get to work from home, they don’t get a work vehicle, and they are responsible for a whole crap-ton of issues I would never want to deal with. Yes, they make more than me, but in my eyes, the “bigger” income is not worth the increased responsibility.

Home size. Who doesn’t drive by a ridiculously beautiful white mansion with big columns and think “Ah, that must be the good life”? I know I am guilty of “mansion envy” every now and again. But when it comes down to it, I don’t ever plan on living in a house with twice as many bedrooms as people living in it. A larger home means larger everything (i.e. property tax, maintenance costs, utility bills, more furnishings, etc). I live in San Diego in a small 2 bedroom apartment with a roommate. I hate having to dust my tiny living quarters as is, I couldn’t imagine having to dust a 5,000+ sqft home. I’ll take a moderate sized home over a mega mansion any day of the week.

Student Loans. I don’t know what clever marketing scheme the college recruiters conjured up, but they are geniuses. People are graduating from college with six figure student loans for an undergraduate degree in art therapy. WTF do you do with a degree in art therapy?! I went to a ridiculously overpriced private college, and learned my lesson the hard way. Although the school might be cool, it’s not really worth taking on MASSIVE student loans. Instead of getting $5,500/yr tuition at the University of Washington (a rather reputable school), I went to a private college that no one has ever heard of with tuition upwards of $25,000/yr. With the help of scholarships, and the parents, I managed to “only” rack up $28,000 in student loans, compared to the $120,000 loans many of my fellow classmates had. HERE ME NOW ALL PROSPECTIVE COLLEGE STUDENTS: Harvard is nice, but so is your local state school. I promise the college you get your degree from, will not be as important as you think. Bigger student loans, don’t mean a bigger income…sorry.

I could keep on going, but I think I’ve proved my point. In a culture where size matters (that’s what she said), I take a stand and say “F YOU culture.” I’ll take my modest home, slightly used car, average job, and enjoy life just fine.

How the heck as society been so clever and tricked us all in to desiring “more”? What are some other areas you can think of where bigger is definitely NOT better?

p.s .the answers to yesterdays “two truths and a lie” are both A. Good job to those who guessed right, you earn the creepy stalker award.

It’s not what you make, it’s what you spend (seriously)

Screen shot 2009-12-02 at Dec 2, 2009, 8.24.22 PMThe proof is in the pudding suckers… whatever that means. I did some hardcore number crunching over the weekend and realized something: I’m totally stoked on my financial progress over the last 12 months. Sometimes I get so focused on what lies ahead, I forget to take a little walk down memory lane and reflect on where it all started. Let’s take that “walk” now, shall we?

Since I posted about my net worth yesterday, it’s only fitting to start there. I currently have a NW of $27,389. Wanna know what my NW was one year ago? I was rockin’ a solid -$10,000 NW. That means in twelve months I have totally turned my financial situation around, to the tune of almost $40k. There are a few factors that have played crucial roles in this awesome change. 1) A big help in this increase is due to the rise in the stock market over the last year. 2) I got an $11,000 raise. I was making $39K this time last year and now I’m sitting pretty at $50k. In February I will be getting another raise to $62K so I can’t wait for that day to come. 3) Supplemental income. I’m obsessed with making money. I have found tutoring/odd-jobs to be quite lucrative. I think I’ve made about $6,000 this year in side work.

If you’ve been reading PDITF for a while, you know I am quite bi-polar when it comes to my student loan. I started the year paying double payments to Sallie Mae each month (about $330). In April, after advice from my readers, I decided to up the payments to $1,000/month. A few months later I got real crazy and decided to throw between $1,500 to $2,000 at it each month. Then, about a month ago, I decided to go back to just double payments. Although my payment strategy has been all over the place, I’ve made some pretty solid progress. In fact, I have reduced my student loan debt by $11,500 over the last year. I have another plan in my head as far as my student loans go, but I think I’ll save that for a future blog entry 🙂

I totally obliterated my 2009 savings goals. If you cruise to the “My Budget” page you will see on 12/31/08 I had these goals for the ’09 calendar year…

Checking: $1,500
Savings: $11,000
Roth IRA: $8,000
401K: $10,000
Total: $30,500

These are what my accounts currently look like…

Checking: $3,060
Savings:$19,525
Roth IRA: $11,877
401K: $10,772
Total: $45,234

As you can see I exceeded my goals by $15,000. Do you know how awesome it feels to set goals, and not only meet them, but completely destroy them! It makes me one happy ninja.

Over the last year, I have improved my financial situation faaaaar more than I would have ever anticipated. The secret to this change is quite simple, and I’d be happy to share it with you: Spend less than you make. Period. End of story. This financial principle is not open to interpretation or debate. If you live on less than you bring home each month, you will have nothing left to do with your money but pay down debt, save, invest, and give it away. There are absolutely no excuses to live outside of your means (aside from medical emergencies). I am living proof that spending less than you make REALLY WORKS! I’m so glad I don’t have to live the paycheck to paycheck lifestyle. At  24 y.o. I’m totally stoked to see where I am ten years from now. Anyone else have any success stories from living within their means? I would love to hear them to motivate me even more.

What are you worried about?

Screen shot 2009-11-19 at Nov 19, 2009, 8.04.58 PM

I’ve never really understood why asking people about money is off limits. What are people worried about? Why is it offensive to ask someone how much their new car cost, how big their mortgage is, or how much they are contributing to their 401K? Finances are often a “don’t ask, don’t tell” gig.

Now I’m not saying that everyone needs to be comfortable sharing their financial status with anyone that asks. Obviously if a stranger wants to know how much debt you have, you have my blessing to punch them in the face. Similarly, I believe salary should definitely be kept confidential within the work place (causes too much office drama if Pamela makes more than Carmen). Budgets Are Sexy wrote a great article highlighting the times it is NOT appropriate to ask someone about their income.

One of my favorite ways to learn is through conversation with friends and family. How the heck am I suppose to be financially educated if I can’t really talk about money with anyone I associate with? It’s not like the school systems teach the fundamental of finances. What are we scared of? Are our friends going to judge us because we make too much money, or not enough? Why are things like mortgages, student loans, and credit card debt never to be discussed?

I know where most of my friends stand in regards to their political and religious views, but for some strange reason I feel like they would shoot me if I asked “Have ya been saving for retirement?” Sure, there are situations in which discussing one’s financial situation is inappropriate, but I also believe there are times when finances NEED to be discussed, but aren’t, out of fear of the other party becoming offended. Screw that. I’m laying it all out there. My name is Debt Ninja and this is my financial situation…

Annual Income: $50,547
Cash in Savings: $18,755
Total Debt: $16,877
Percent of income contributed to retirement: 18% + (5% match)
Number of Credit Cards: 3
Annual burrito expenses: $600

You don’t have to be scared. My blog is a “safe place”. No one will judge you no matter what your financial situation. Are you feeling bold? Care to share your financial situation? Any thoughts on why finances are so taboo?

p.s. For those that haven’t commented before, today’s post would be a great day to come out of hiding 🙂