How My Wife (And I) Paid Off $50k In Student Loans This Year
Before my wife and I got married six-plus years ago, we already knew every aspect of each other’s finances. I knew what she made for a living, I knew where most of her money went and I knew she had student loans. She knew the same details about my finances and that I didn’t have such loans. We didn’t think much of it.
After we got married, nothing changed. We continued to spend at similar levels, bought a house and had a child, all while paying back her student loans with the minimum payment expected each month. It wasn’t a pressing issue; Barack Obama had only paid off his loans a few years before he became president, after all. Based on estimates from the student loan administrator, she would eventually pay them off in December 2036 at the age of 52. She, as a media strategist, was the walking stereotype of the student debt-laden millennial, living in our debt-laden nation.
Two years ago, however, we began to wonder why we couldn’t seem to save money more aggressively. Sure, we had costly health coverage through her employer, which played a role. We had the standard issue of overspending a bit from regularly eating out. And we could certainly make a little more money. But what held us back was the nearly $600 payment towards the student loans we had to make every month. It was the biggest non-housing chunk of money sitting in our expense line, which only brought annoyance and dread when staring at it. Two years ago, we had about $70,000 more student loans to pay down. Going into December 2019, we had $50,100 in loans. By the beginning of December 2020, we had a balance of $0.
On this channel, I often speak to those who have embraced the financial independence, retire early (FIRE) lifestyle. Some have powered their way to retire in their early 30s. Some have taken months off of work, simply to travel. Others have reached savings goals that once seemed impossible. I write these stories because they provide other options to the standard way of saving for 40 years rather than retiring when you reach your 60s or 70s. They provide a different viewpoint and perspective to what’s possible when you align your spending and saving strategies. Their results aren’t also just backed by anecdotes, but the math. If you cut back and shuffle more of those funds into investment accounts or pay down debt, then you can achieve financial independence.
While I write about it, I don’t follow every piece of advice. Some months we overspend. We have multiple television streaming channels. We have an expensive phone plan. We have a house, which some FIRE folks prefer to avoid. But it’s also impossible to regularly hear these tactics and not try some. When it came to the student loans, we realized we had to get rid of them. We had to get this expense off the balance sheet. Here’s how we did it. There’s no secret to the process. Some parts of the journey we had control over. Other parts were due to blind luck. Yet, it’s a tedious endeavor that left us wanting to get there sooner and sooner every step of the way, until we finally rid ourselves of the debt.
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We Are Extremely Privileged
The fact my wife had student loans speaks to some of the lack of privilege she grew up with, in some way. But the size of the student loans which originally was over $100,000, was due to her wanting to go to private school for college. The fact I didn’t have student loans speaks to my own privilege.
In a year where jobless rates have soared, with over 10.9 million people unemployed and over 335,000 people who have died due to COVID-19, for me even to write this piece about paying down such a large amount of debt speaks to our privilege as a couple. While I don’t have a single employer – working for many different organizations – I saw nearly 85% of my normal contracts disappear at the start of the pandemic. By happen chance, those contracts were filled by stronger, more long-term contracts that allowed my income to remain at a similar rate as before. Meanwhile, my wife changed jobs weeks before the pandemic, which came with reduced healthcare costs, better coverage and a higher salary.
These two simple facts – that I found contracts as a contract writer in the middle of a pandemic and that my wife got a raise – was why we were able to pay off such a large sum this year. In the next sections, I’ll talk a little bit about how we then used that money towards the debt, but it’s still impossible to do without these funds. I’m writing this piece because of the nice round number that we paid off. But those facing less job security or reduced pay, it isn’t about the number. It’s about the amount you can pay off, based on the pay you receive. If that means $5,000 more than before, then there’s value in that. If that means more, then great. If less? Then that’s what you can do right now.
All these stories of super saving your way to some dramatic savings number needs to have that caveat. Even if the journey involves harrowing circumstances, it still doesn’t happen without some level of privilege.
We Upended Our Spending
Prior to going through this process two years ago, you would usually find us on a Sunday morning eating brunch somewhere. If a new restaurant opened up in the area, we would certainly try to hit it up. We spent an exorbitant amount of money on food, but often after we ate, we didn’t feel excited about it or even could explain why we went out.
Part of the process of taking stock of our spending involved asking ourselves why we did certain things. The big one was why we spent so much money going out for brunch or dinner? We had no answer. We cut that spending in half, without even much of an effort.
I began to cook more at home, which I already enjoyed doing. But we also looked for things that we could cook that would taste good, fill us up, but didn’t require 100 ingredients. Previously, I was someone that if I looked at a New York Times recipe, I would get every ingredient on the list, no matter how obscure. Once I had a better grasp of the recipes that worked for us, and still tasted good with fewer ingredients, this added a significant savings boost to our grocery shopping. So not only were we spending less on eating out, but we also spent less on groceries. This added some $300-$500 more per month, which we first used to bolster our emergency savings then we funneled that into the debt.
We also put off any big spending. This wasn’t difficult in a pandemic. After all, you can’t exactly pay for travel right now. But it also impacted housing upgrades and fixes that we wanted to undertake, like updating our 1970s, wood paneled kitchen. If it wasn’t necessary, then it would wait for once we had the student loans paid off. The kitchen worked as is, so it would wait, panels and all.
Sure, all these efforts helped us put a little more each month towards the debt. The real value in this was the mindset it created. It first started with building out the emergency savings. After that, it was easy to adjust that savings towards the student debt. We spent less on clothes or other things we once viewed as necessities. Suddenly, in almost hidden ways, we would see smaller credit card bills, more money at the end of the month, and debt slowly dissolving. By the beginning of 2019, we were placing 25%-35% of our income into retirement or paying down the debt. Then the pandemic hit, which supercharged this effort, increasing the amount we could save or pay down debt to nearly 50% of our after-tax income.
We Put Every Extra Dollar Into The Debt
The first day of the month became something we couldn’t wait for. On the first, we would pay off as much as we could. Maybe $2,000 here or $4,000 there. Whatever extra from the month – which wasn’t a consistent payment plan because of the nature of my business – would go to the debt. When the pandemic hit, these numbers increased.
My son went to a preschool that charged $1,700 a month in my high cost of living area. With the pandemic, we had to manage our work while also taking care of his day-to-day entertainment, development and care. It wasn’t easy, as many know and experienced as well. But we had jobs where we could juggle our child’s day, and then save all that extra money which went to the debt.
We received some money from the first stimulus bill, so that money went to the debt. We received a local tax disbursement; that went to the debt. We saw pretty much every expenditure outside of food and housing fall. Again, that went towards the loans. Suddenly, we had months where we could put $5,000 to $7,000 towards the debt. We didn’t hesitate. If the option was there, we did it.
When interest rates fell and we suddenly saw our high deductible savings account drop its rates from nearly 2% to only decimals, we moved a little money from the six-month emergency savings towards the debt. This was also made possible because our spending had decreased so much from when we first built the emergency account that we could do so without concern. And since the loan rates were 3.25% – much higher than the rate on the savings account – it made sense to do so.
My wife had often bemoaned that our kid would probably go to college before she paid off her student loans. Through these efforts, that’s no longer a concern. We’ve cut that loan from the expenses, making the last payment on December 1.
Through this process, though, we’ve altered how we view saving. What once seemed like an impossible task, we now have a strategy to follow for the next big expenditure or savings goal. That’s empowering. It’s where the FIRE movement has gained its momentum and why some acolytes preach the basics so loudly.
By experiencing this first, large success the notion of doing it again seems imminently possible. Maybe, in the process, we’ve become acolytes as well.