Like many other college graduates, I graduated with student loans. According to a recent report from the Institute for College Access & Success' Project on Student Debt, the average student is graduating with almost $27,000 in student loans.
I just assumed I was a bit above average.
I largely ignored my student loans after I graduated, never really tallying up what I owed, only knowing that about six months after graduation, I received a bill. Seeing what my monthly bill would be, and realizing that it was about a quarter of my monthly take-home pay, I decided to consolidate my loans.
At the time, I knew it was the only viable choice since there was no way I could make the regular payments. However, I wish I would have been more proactive in realizing what the interest would do.
In 2011, just five years after I decided to consolidate my loan, I finally sat down and went through every single loan. It felt like I hadn’t even made a dent in the five years I had been paying off my loans.
As an example, one loan originated at $12,500. In five years, I had paid $3500 toward this loan, of which only $853.51 went toward the principal. So even though I had been paying off this loan for five years, I still owed $11,647. Not to mention the other six private loans that could not be consolidated.
I could have kept avoiding the situation and just continue to make the minimum payments every month, which totaled about $250. It wasn’t breaking the bank, but it was still a decent chunk of change. Instead, I decided to make a change.
From that point on, I made a plan to pay off all my debt. First, I focused on paying off my credit card, then my car loan, then my student loans. Just two years later, I have paid off an additional $12,000 toward my student loans.
I’ve done it by being frugal and freelancing in addition to my full-time job in order to make more money to contribute toward my loans. It becomes addicting to see your overall debt decrease.
If I had continued with the minimum payments, it would have taken me up to 30 years to pay off my student loans! Now, I am on track to be debt-free before my 10-year college reunion.