Paying Off $55k Worth of Debt in Record Time
Disclaimer: My entire undergraduate education was graciously financed by the USDA; therefore, I only accumulated student debt while in pursuit of both my MBA and PhD. My MBA was financed federally while my PhD was financed privately by Wells Fargo. Because privately financed school debt has a tendency to be less lenient when it comes to deferment, I opted to pay them off first while deferring my federal debt for 2 years. The amount I paid off was approximately $55,000.
For starters, once I graduated and signed my contract to become a professor, I immediately showed Wells Fargo my paycheck reflecting a mere salary of $45K. This was in hopes that they would be empathetic and lower my payments, of course! Since I had no dependents; however, they shockingly told me that I, in fact, could make the ($540 monthly) payments and that raising my payments would be ideal if they were to keep my request on the books. As a result, I begrudgingly told them to throw my request for a lower payment out the door. This is when I, with haste, called Sallie Mae (my federal lender) and asked them to defer my $50K debt I had with them. I felt as though this would bide me some time and relax the stronghold Wells Fargo had on my pockets. Sallie Mae thankfully granted my request.
So now then - back to how I paid everything off.
Shortly after I began working as a professor, I quit my job. Why? Well, it was solely to move closer to home. Thankfully, I found an awesome job in Alabama AND my Dean from my previous job asked that I remain a professor for the institution - just online. Having both occupations thrusted my income to approximately $110K per year and pretty much was the catalyst for me paying off my debt so quickly.
When I moved to AL, I decided to live as close to my job as possible (less than 3 miles away). My theory was to live extremely close to cut down on wear-n-tear on my car and the amount spent on gas each week. Luckily, my theory checked out, making me only have to fill my tank every 2 weeks. Next, I cut back on my frivolous spending habits. I purchased a few business casual outfits, 3 wigs, and that’s about it. I did my own nails, hair, facials, etc. In other words, you name it, I did it - on my own (except cooking - I despise the activity and refrain from it at all costs). Due to me not spending much on myself, I was able to save an immense portion of my checks each month. After my bills were paid, totaling approximately $2,657 per month, everything else went to savings (a breakdown of my expenses are below). Keep in mind, throughout this time, I was only paying my private loans, not public.
Rent - $933
Electric - $60
Groceries - $500
Internet (no cable) - $40
Gas - $40
Cell Phone - $120
Car Payment - $261
Car Insurance - $93
Renters Insurance - $20
Fun - $50
Wells Fargo - $540
Total Expenses - $2,657
*Groceries include take out, paper towels, olive oil, Debbie Cakes, and everything in between and available at Wally World.
Living on this budget enabled me to save over 50% of my check - meaning I pulled a Missy Elliot by flipping and reversing the old adage of spending more than you save (spend 70% of your check while saving 30%). Instead I saved more than I spent (56% of my check was saved whereas 44% was expended). Granted, many may not make quite as much money as I was at the time, but the premise is still the same - saving more than you spend will bring your debt to an end.
Before I knew it, I had thousands in the bank which could only mean one thing - time to travel so I could be featured on Travel Noire or something extravagant like that! No, actually it meant it was time to pay the academic piper.
For starters, I began looking at the loan balances that totaled the $55K. As I did this, I kept in mind just how much interest was accruing on each loan on a daily basis. Of course, I was dismayed to see not only how much accrued daily, but also how my $540 payment per month went primarily to that accrual with hardly any to spare in efforts to decrease my principal payments. Without further ado, I took a proactive approach in order to regain control of my debt and immediately paid off the loans with the highest interest. Let me repeat that…
I paid off the loans with the highest interest rates, not the highest balances.
For example: If I had a $20K loan amortized for 10 years with an interest rate of 13%, then my daily accrual would be around $7 bucks. This is pretty darn high! $7 per day for 30 days is approximately $214 bucks that goes towards interest alone. Therefore, if my payment is $298 per month, only $84 dollars is going towards principal. Insane, right?
Right! Thus my justification for opting to pay off the loans with the highest interest rates first. After I overcame those hurdles, I worked on the smaller loans with lower interest rates especially since they weren’t accruing at such a high rate. Within no time, I looked up and my debt was paid off! All $55K of it! *victory dance*
Now this isn’t the foolproof plan to eliminating debt quickly, but I must say that staying prayed up, having 2 jobs, saving more than I spent, and focusing on the loans with the highest interest rates helped me conquer this feat and I’m sure it will help you conquer yours as well.
In the meantime, get to implementing these tactics while leaving some suggestions as to how YOU paid off your debt in record time. Leave your tips and tricks below so we can ALL benefit from one another!
Remember to Live Life, Beautifully ❤️