Blogger Kara Perez shares her story of paying off her student loans and becoming debt free.
My college graduation day was one of mixed emotions: excitement over my degree, anxiety over my debt. I knew I was graduating with $25,302 in student loans and no job. It was a bleak picture, smack in the middle of the recession. No one was hiring, and I had no savings. My loans were a burden from that day on—I wasn’t sure I would ever pay them off.
English majors with no real work experience weren’t a hot commodity in 2011. I secured a job waiting tables in my hometown and moved back in with my mother to save money. I started paying back my loans when my grace period was up in January 2012.
I knew I was never going to be a high earner; I’ve always wanted a creative career, which could mean a low-paying job. I knew if I didn’t take my loans seriously, they would hang over my head. They’d be there as I pursued marriage, homebuying, and my writing career.
While I lived at home, I was good about my loans. I paid extra every month. I had five loans total: four federal, one private. I would pay an extra $60 to $120 a month on all of them, depending on how well I was doing at the restaurant.
Unfortunately, I had no real system for that extra cash. I would send an extra $25 to one loan, $25 to another. I had almost no personal finance education growing up, and it showed. I had no idea there are debt pay off tactics, like the Snowball or Avalanche methods. I had no idea my interest compounded daily. I just knew that being debt-free as soon as possible was my goal. The extra payments were a good idea, but I didn’t see much in the way of results.
After a year at home, I moved halfway across the country to Austin, Texas. My extra loan payments evaporated in the face of rent and grocery expenses. I continued to wait tables and got an unpaid internship. I made the minimum payments for the next two years.
By the beginning of 2014, I was sick of being a waitress, and sick of being broke. I had worked my booty off in high school to get into my first-choice college. I graduated from a prestigious school and saw nothing on the back end.
I quit waiting tables, and my income took a huge hit. I found myself working three part-time jobs as a lacrosse coach, gym receptionist, and at a catering company. I was unable to make even the minimum payments and had to take a six-month deferral on all my federal loans. I kept making payments on my private loan, and sometimes managed to send over a few extra dollars.
Those were some dark days—I struggled to find a full-time job and battled feelings of worthlessness. My loans were hanging over my head, exactly as I feared they would. I felt trapped by my low income and high debt.
In January 2015, I still owed $20,000 in student loans. It had been almost four years since graduation, and I was terrified I was screwing up my life. It felt like I was dooming myself to poverty forever.
My deferment ended in August that year, so throughout the spring and early summer I aggressively looked for a job. I’d had enough—my life was controlled by anxiety and fear around my student loan debt. I had to take serious action to pay down my debt and reclaim control.
Between October 2015 and June 2016, I paid off my final $18,000 in student loan debt. My income in 2015? $15,000. In 2016? $32,000. Before taxes.
When I say I got serious, I mean it. I was 100 percent committed to debt pay off. A friend put me in touch with a nonprofit looking for a part-time development person and I landed the job. I continued to work as a coach, caterer, and receptionist—with the nonprofit work thrown in, my income grew. I stopped going out with friends, opting for nights at home instead.
I slashed my budget to within an inch of its life. I spent only on necessities, and even then there was some wiggle room. That catering gig? You better believe I brought home leftovers after every event I worked. Eating leftover food helped shrink my grocery budget to tiny numbers, like $30 and $40 a month. In February 2015, I even managed to spend $0 on food, living solely off catering leftovers.
If you’re struggling with your own debt, here are my top two tactics to shrink the balance in record time.
- Make multiple payments a month. Student loan interest accrues daily, so making multiple payments in one month means more money will go to making a dent in the balance. I often made five to seven payments in one month.
- Pick a pay off method. I personally used the debt avalanche method, where you focus all extra payments on your highest-interest loan and meet the minimums on the rest. Once you’ve paid off the highest-interest loan, transfer your focus to the next highest-interest loan.
Being debt-free has changed my life and has shown me how capable I really am.
Kara Perez is a freelance personal finance writer living in Austin, Texas. She is passionate about helping people become financially literate and telling people’s money stories.
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