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We Did It – No More Student Loans!
As I heard the garage door open, I grabbed my papers and ran downstairs to meet my wife and two older kids. I put the two papers on top of the new box and went to the door to meet them. "Quick – come in, I have something to show you." As we all came into the kitchen, I said, "I have good news and I have great news, which do you want to hear first?" "Start with the good news, of course," my wife replied.
"Well, actually, I have pretty good news too – here, I found this thing you lost," I said to my son as I handed him the previously lost back to his faux-jibbit for his faux-crocs.
"Ok, here’s the good news – look at this."
I handed the two papers to my wife that showed the current balance on our last remaining student loan was $0 (well, actually it was -$511 since I overpaid it due to a administrative error on my part, but that’s not important now).
So, we’ve finally done it, we’ve paid off our student loans and it feels…..weird.
This is something I’ve thought about for years. At one point, I honestly couldn’t imagine paying them off since they had such long repayment periods. That was before I got fed up with all of the debt – my student loans, my wife’s student loans, car loans, mortgage. We started by accelerating my loans a little bit and then paid them off. Then we accelerated the car loans and got rid of them. Then we turned to my wife’s student loans.
That was the point in time when I first read Dave Ramsey’s The Total Money Makeover. His advice to use your available cash to pay off your debt was totally new to me. I had always heard of the importance of an emergency fund, but it was completely new to me to drop that fund down temporarily to get out of debt. This opened my eyes to the possibility of getting rid of the student loans within years, not decades.
We then paid a lump sum on my wife’s first loan. We had made some money from selling our previous home. So, after buying inexpensive term life insurance policies, we cashed out our very expensive whole life insurance policies and used that money to get rid of the first loan. After that we really accelerated our last remaining loan by doubling our monthly payments while also saving extra into an account earmarked to pay it off. Recently, I contemplated finally paying the last one off , but was a bit nervous. My wife urged me to just do it and I got some comments urging me to do the same….so we did.
There were scoffers along the way
Along the way a number of people have made only slightly veiled comments about paying off our loans. "The interest rates are low…" "You can deduct the interest…" "Put your money in the market to earn more than you’re paying…" We persevered, however, and as of today, we only have to pay interest every month to our mortgage company. The money that we previously paid for our two car loans, my two consolidated student loans, and my wife’s two consolidated loans now goes straight into our savings account and investment account.
Now what?
The next step, actually, is to decide where to reallocate the money we’ve been putting to loans for so long. I think we’ll increase our 401k contributions, add to our college savings, start investing regularly again, and start savings accounts for vacations, gifts, house purchases, and grow our emergency fund.
After having accomplished it, here are two pieces of advice regarding student loans:
- If you can afford it, do not consolidate them . Changing the term from 5 or so years to 25, while reducing the monthly payment, sure adds a lot of interest to the total. Check out the image below, at the prescribed schedule we would have been making monthly payments until 2032! (2032!!)
- Whatever you do, do not defer them. For some reason, it seemed like a good idea at the time when we decided to defer one of my wife’s loans for a few years. Now, after paying on it for about four years and doubling the payment over the last year, the payoff amount was still more than the original amount of the loan!
How far we’ve come
The original balance when my wife finished medical school was $130,000. The loans peaked, after deferment, at a total of almost $160,000. I finished school with about $20,000 of student loans. We also had a car loan of almost $20,000 and a lease at one point. We replaced the leased car with a $25,000 loan (minivan!) and replaced the SUV with a Honda Civic (now an "ivic" since my 16-month old daughter ripped the "C" off of the back last night) with a loan of about $12,000. Now it is all gone…all gone…wow.
So, what about the "great" news?
Oh yeah – to finish the story….my wife then asked, "So, if this is the ‘good’ news, what is the ‘great’ news?" "THIS!" I exclaimed as I brought out the fancy-schmancy, stainless-steel, butterfly-opening, fingerprint-proof trash can my wife’s had her eye on for a while. I had previously dissuaded her from purchasing it since it cost $70 ($70 to put trash in it! what!?!) She seemed a little more excited about the trash can than the loan, which I expected (that’s why the trash can was the great news).
Her next question to me was, "Well, what are you going to obsess about now, honey?" To be fair, it was a valid question for which I currently have no answer….I’m sure I’ll think of something (blogging, maybe?)
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Awesome. Just awesome. As someone who went through the same journey. You won’t regret it a bit! Enjoy the freedom and use it for Good. Great job John and fam.
The Happy Rock’s latest blog post…Rich Dad, Poor Dad…Owning Your Family History
congrats – that’s awesome. Doesn’t it feel good to be rid of those student loans? They were my last thing to pay off to become debt free, and sending that last check in to pay it off was so exciting. We had a little party that night!
Thanks, guys! It’s exciting to think about how to reallocate all the money that’s been going to the loans for so long. For years we’ve been talking about having a party when we finally paid them off – and getting the fireplace going to burn up our reams of student loan papers!
Hey, I know I’m a day late here, but still…
That’s really awesome! It’s great to see you beat the expected payoff date by about 25 years.
Thanks, Leslie! It pains me to think about paying off those student loans for 25 more years! You know – our mortgage is 28 more years – shoot – now you’ve got me thinking about getting rid of that earlier too.
John, this is why you are the man, you paid off your student loans. Is your mortgage next?
Hey everybody should read Dave Ramsey’s book, The Total Money Makeover, and they should buy it through John’s website!
Thanks, Brian! But, I can’t ever imagine paying off the mortgage (I guess there is a little bit of hope there since not too long ago I couldn’t imagine ever paying off the student loans…)
CONGRATS! That is fantastic!
Ryan @ SpillingBuckets´s latest blog post…Vindale Product Evaluations – Surveys
Thanks a lot, Ryan! It took a lot of planning and some sacrifice and it was a long time coming to get to the point of being able to pay them all off. We are very happy to have been saving and investing that extra money the past few months!
I just stumbled upon your site today and your testimony is great! My wife and I are in the process right now of paying off our student loans and its always a blessing to read about others that are truly financially free. May you use your extra money and time to further the Kingdom and spread the Good News and this good news!
@Dana – It has been great to not have to worry about any student loans for the past 9 months! Good luck to you and your wife on your journey out of debt – persevere, it’s worth it! We’ve gotten rid of everything except the mortgage so we’re now able to do a lot more saving and we’ve also started to increase our giving. Thanks for the stopping by the site, Dana.
Congrats!