How We Paid Off Student Loans While Vacationing in Europe
What feels even better than graduating from college? Paying off your college loans!
My husband and I went to school for engineering and education, respectively. The cost of tuition at the state university we attended doubled by the time we graduated and we accumulated $25,000 in student loans. During our first year of marriage, I made $35,000 as a teacher while Neil finished his degree. We kept our expenses similar to when we were still students. Neil graduated and we did something very not frugal–we spent a month in Europe. This trip wasn’t cheap, but we knew it was a rare opportunity. Neil would start with only two weeks of vacation per year, I was off for the summer, we didn’t have kids, and we had saved up the money that year. Flexibility at its finest!
A year or so after Neil’s graduation we caught the pay-off-debt bug, mainly through exposure to Dave Ramsey, who famously says “your student loans aren’t a pet.” He means don’t keep loans around for 10-15 years by paying the minimum, because you’ll end up paying lots of interest and, I’d add, be less financially flexible. When we came to this conclusion we were living in our friend’s basement, paying a little rent and saving a lot.
At first we wrestled with the idea of paying off loans because the interest rates were lower than returns we could get elsewhere. But the very state of being in debt started to bother us. We felt like the money we were saving wasn’t actually ours if we owed it elsewhere. (In an upcoming post we’ll talk about why we never view money as truly “ours.”) One thing that crystallized the inflexibility of debt for us was the possibility of becoming overseas missionaries. Though we pursued different roles in supporting world missions, we thought how difficult and ridiculous it would be to have student debt as a missionary. If you have to raise financial support this would really increase your expenses and it seems possibly wrong to ask someone else to pay off your student debts. Plus we weren’t investing the money, we were just putting it in a savings account for a down payment, and the rates on that account were steadily dropping.
When it came to paying off debt, we didn’t do everything perfectly according to the normal personal finance rules. I left my teaching job and worked part-time. We bought a house before paying off our debt. We traveled a lot. We volunteered lots of free time instead of side hustling for extra cash. And all the while we gave away at least 10% of our gross income. So even if you’ve made mistakes, meandered off the recommended path, or value things like generosity and flexibility, now is the time to get serious about getting rid of school debt. Shortly after moving into our home we started attacking the school loans. Within a year and a half they were paid in full.
So how did we buy a house, travel, and pay off debt within 3 years of finishing school?
1. We kept living like we were in college (minus travel).
2. We avoided consumer debt.
3. We saved aggressively.
4. We bought a home we could afford on one income.
5. We didn’t buy new furniture and furnishings for the house. (Neil remodeled the kitchen using the 2010 home buyers tax rebate.)
6. We used extra savings and income (like bonuses, gifts, my income, and a little side hustle money) to pay off debt (as well as giving some away).
So there’s our story. We paid off the last of the student debt before our first child was born. We didn’t wait to have children until it was paid, but it worked out and we were able to start a college fund as his first Christmas present. Having our school paid for helped us start saving for our children’s education.
If you’re still in college, try to wrack up as little debt as possible. Lending institutions very liberal with student loans. Don’t take out loans for living expenses. Do courses at a community college. Save summer job money to pay for part of tuition. Apply and re-apply for scholarships every year. I could fill another post with tips, but do your future self a favor and take as little debt as possible, and keep it in proportion with your realistic starting salary. An $80,000-in-debt English degree is not a good investment (that’s coming from an almost-English major).
Living like you’re in a college until you’ve paid for college is the best way to pay off debt. I’m talking about keeping spending lean, not late-night partying. That means no car debt, no credit card debt, no new furniture or TV, low food and entertainment costs, etc. No Euro-trips either, I guess. Call it a crime of opportunity.
Student loan debt does NOT have to be forever. I know some people have more debt than we did, or may have a lower income. This means it could take longer to pay off debt, but just having the mindset and goal of getting rid of loans before your college years are a distant memory is a great starting point. If you live on less than you make, you will be able to put something toward getting out of debt. Now we’ve adopted this attitude toward paying off the mortgage. Less debt definitely increases your financial flexibility by freeing you up to save, give, invest, and take opportunities that come your way. Keep plugging away and you’ll get there!
What motivates you to pay off debt? What has held you back? If you’ve paid off student loans, how did you do it? How has it made you more flexible?
21 Responses to “How We Paid Off Student Loans While Vacationing in Europe”
Trackbacks / Pingbacks
- March 3, 2015 -
- April 8, 2015 -
- October 25, 2015 -
- February 29, 2016 -
- March 3, 2016 -
- March 3, 2016 -
- January 16, 2017 -
Student debt has gotten out of control. I had about $15K in debt from private undergraduate and an MA. We paid it off the slow way at low interest, but it’s paid off. Now the typical student from Kent State has over 25K in debt. You got any details? What was your payment schedule? How much did you divert to getting them paid off?
Honestly it’s hard to remember the details! I remember putting a large chunk (several thousand) to finish them off, realizing we didn’t need it in savings since we had a full emergency fund. Before that we would pay maybe $1000 extra every time we had it saved up. I believe we set our auto payments for a little extra every month as well.
We paid off nearly $50,000 in student loan debt. Despite the much higher monthly payment, I’m delighted that we consolidated to a 10-year note instead of the 30-year that was originally offered. Can you imagine still paying for your own student loan debts once your children were starting college?
We ended up paying more aggressively and topped it off at seven years. Looking back, we could have been much more aggressive and knocked it out even faster. It wasn’t a priority to us then. But it should have been.
Hindsight is 20/20! And it’s hard to have that kind of financial wisdom when you’re in your early 20s. But I’m glad we didn’t wait until our kids reach college.
Once we paid off my student loans, (and our other debt), we really got the debt freedom bug and continued on to pay off the mortgage. I can’t believe it, but it’s gone already! I would encourage you to keep it up – living like no one else really does pay off and everything we’ve done has been SO worth the flexibility.
Way to go! Paying off a smaller debt really does make it feel possible to tackle bigger ones. Hopefully in a couple years we’ll be debt-free, too.
Awesome job. It just shows that you can accomplish most things if you set your mind to it. You’re right- student loan debt DOES NOT have to be forever. I hate it when people just assume they have to pay that minimum payment for the next two decades. If you want your freedom, you have to take it!
I know the feeling of not *really* having money, even when it’s in your account. For a couple of years now, we’ve been saving for some pricey medical bills. We have a relatively healthy savings account, but it’s not really savings. It’s Tim’s teeth fund. We’ll be really saving like crazy in the next few months, and even as our savings account increases, it won’t really be our money.
Every time I feel discouraged, I just remind myself that pretty soon we’ll have a savings account that’s truly ours (not including eventual double pane windows).
Saving for boring grown-up expenses is no fun, but so much better than using credit. You’re a step ahead for sure.
Love this post. I paid off my student loan debt by working side jobs like crazy. It was stressful but well worth it.
All the hard work pays off!
Thanks so much for sharing this, guys! You guys have been a huge inspiration to Brian and I in paying off debt quickly! When I started college, I was definitely young and naive and not thinking about the long-term debt. Brian and I both went to a VERY expensive private college that cost >$40,000/year by the time we graduated; we were blessed to have a significant amount of help from our families, but we still came out with quite a boatload of debt! We were fortunate that we went to school for pharmacy and engineering, as opposed to some people with debt similar to ours who went to our school for theater or music. It was hard at times to resist the temptation to splurge on a new car or make the plunge to buy a house which so many of our co-graduates did, but it was well worth it in retrospect!! I can proudly say that, though I was still in school our first year of marriage (accruing more debt!) and did a low-paying residency our second, we paid off all of our loans, paid in full for 2 “new” cars (really second hand, but our old college beaters both bit the dust within a couple of years of marriage), and paid off all of our debt within about 4 years! It is amazing the flexibility it DOES give you! At this point in time, our only debt is our home mortgage, which is a huge relief as we prepare to add to our family and lose the greater of our 2 incomes in just a few months!
Great story. You two are good stewards!
Love the picture of Vernazza In the Cinque Terre. Just took the whole family there last July. It was their favorite part of Italy.