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?