BY SHARISE DANTZLER
This past May 4th I had the opportunity to make the final payment on my student loan debt of $10,300 and the feeling is still unbelievable. I was so excited to overcome the debt that I released a video to share the experience with my followers. I received so many kudos and inquiries about my accomplishment that I finally decided I was going to tell my story to inspire others.
I graduated from North Carolina A&T State University on December 12, 2015 with a degree in applied mathematics and no job offers. You’re probably wondering, why the lengthy introduction about my background? I want you all to know that I was under the impression that I had 6 months to find a job while also student loan interest would begin to accumulate. However, this was not the case. Fortunately, I was offered a job a week later, yet student loan debt was the furthest thing from my mind. I was on top of the world and I was finally an adult, or so I thought.
Going forward I started my first official job on February 8, 2016 and I was ecstatic. Now what I’m about to say is super important since this is what most new grads ponder about. When I received my first pay check all I could think about was all the things I was going to buy and all the places I would travel. However, I am somewhat disciplined so I already previously decided I would put some money on my student loans. When I opened up my Nelnet account (dept. of education), to my surprise I had already accumulated over $300 in interest. I thought, I’ve only been out of school less than 2 months, how sway? Of course, I read over the student loan pamphlet and realized interest accrues daily. (I’ll explain more on this later.)
From that point, I decided I needed to keep the interest low and make my payments on time. My father told me I should be aggressive and just pay them off, but my mother told me an emergency fund was far more important. Thus, I made the decision to pay the loans off in five years, 2021 being the projected year. Months went by and I was making two payments per month amounting to approximately 283% of the actual payment due. For example, if you owed $30,000 with an interest rate of 3.5% and a standard 10-year repayment plan 100% of the minimum payment per month would be $297.
This plan was working for me and then summer came and the payments stopped for about two months. I thought I could take a break since technically my payments were not due for months. FYI, when you make additional payments to your student loans there is an option to not advance the due date, which I should have selected and I will tell you why in a bit. In August of 2016 I began making more payments and by the time October rolled around I noticed I had only paid a little over 10% of the 10,300 I owed. This is when I started closely analyzing the interest of my loan and why I was not really making a dent. I did so much research and finally decided I was NOT going to spend the next four and a half years paying the department of education a cent more than I had too!
As promised, I will explain how student loan interest works using the following key term:
Basically, compound interest is the interest rate divided up by the total number of days in the year and then charged daily based on the outstanding balance that day. Using the same criteria mentioned above with $30,000 outstanding balance, 3.5% interest, the interest divided by 365 days would amount to 0.00958% per day. This means the interest on $30,000 would accumulate by $0.958 per day. In other words, interest on top of interest!
Once I learned that compound interest was nothing I wanted to play with, I applied for a temporary 0% interest credit card to aid in my repayment of my loans. The credit card would allow me to complete a balance transfer, or transfer my student loan debt to the credit card to save on the interest payments. This option would have worked had I selected “do not advance due date” of my loans. The issue with the department of education is if your loans are NOT due you can only pay the balance with cash. So, it was on to plan B: create a unique budget.
My plan B was in fact UNIQUE. I lived frugally and I eliminated costs I did not realize I was utilizing. I realized if I stopped partying so much, going out to eat, going to the movies, traveling to every state possible, etc., etc., etc. I could free up some money. However, that was not enough I had to go the extra mile. DISCLAIMER: What works for me may not work for you. I stopped saving money for my emergency fund and I transferred that money to my student loan payments. I asked my parents to continue to pay my car insurance, phone bill, and health insurance until I finished making all my payments. I cut my cable off and I monitored my utility expenses. Some days I found myself at work later just to save on toilet paper and my electric bill. I also used all of my windfalls of money to help pay my bill instead of going shopping. Windfalls of money include: income tax returns, bonuses, stock gains, etc. I know all this may sound extreme, but I was on a mission and I would not stop until I reached the finish line.
I want to share some additional tips I wish I could have participated in.
- Down size living arrangements
- Live with your parents the first year
- Start paying while in college or grad school!
- DO NOT get a new car or an equal expense
I want to thank all of you that made it through this article and I wish you the best in your future planning and payments of your student loans. Be free!