This is a guest post by Lauren May. She is a freelance writer, budget enthusiast, and recovering expat. She blogs about her family’s experiences in finding their financial footing and getting settled into life in the US at The Write Budget. If you’d like to be featured at Vosa.com contact me here.
It’s quickly approaching the one year anniversary of my last student loan payment. While I’ve been enjoying my newfound freedom from debt, I’ve had some time to reflect on the 6 year long journey of paying it off.
Anyone who has had, or currently has, student loan debt hanging over them knows how overwhelming and insurmountable it can feel at times. Whether you have a 4, 5, or even 6 figure debt that you’re trying to tackle, there are moments when you feel like it will never be paid off.
Speaking as someone who has come out on the other side, I can tell you that there are actually some great lessons to be learned from paying back those hefty student loans.
Here are the 4 biggest ones that I’ve taken away from my experience:
Lesson #1: If you can Avoid it, Don’t Defer
Deferment is a period of time where you are permitted to postpone your loan payments. You need to apply for it and meet certain criteria. Depending on the type of loan, interest may accrue during deferment, and can then capitalize once it’s over. This means that while no payments are being made, your total balance due can continue to rise. It’s essentially delaying the inevitable, and potentially making the situation much worse for a borrower.
When it came time for me to start paying back my loans, I applied for a deferment. I honestly didn’t know much about it, just that I could get a yearlong reprieve from making payments. My employment situation was unstable at that time, so it sounded good to me. Much to my delight, the loan providers granted my request. I coasted through the next 12 months giving little thought or concern to the thousands of dollars that I still owed.
There are situations where deferment can be a good option, but I would caution anyone from taking advantage of it just for the sake of delaying repayment. Even if you are only able to make the minimum payments at first, that would still be better than no payments at all, especially if interest is going to build up. Looking back on it now, I wish that I’d just started the repayment process right away, rather than delaying the inevitable.
Lesson #2: “Someday” Will be Today Before You Know It
Another naive mistake that I made when taking out student loans was thinking about them as something that could be dealt with years down the line, at some distant time in the future. After all, just about everyone seems to take out loans today, so it really isn’t that big of a deal, right?
When you sign on the dotted line and accept the loan money, you are accepting not just the amount that you see in front of you, but also all of the interest that will build up, too. This could end up totaling in the thousands of dollars.
Putting your loans on the back burner, or simply pushing them out of your mind until some future date, is a huge mistake.
That far-off, distant “someday” in your mind is going to be today before you know it. When the loan bills show up in your mailbox with a big, bold Amount Due staring you in the face, you do not want to be taken by surprise. Educate yourself on the terms and conditions of each loan that you accept. Know what kind of financial situation you’re putting yourself in so that you can prepare accordingly.
Lesson #3: Treat Debt with Urgency
This goes right along with avoiding deferment and facing reality.
Once you leave school, you may be struggling to find full-time employment and pay all of your bills. Regardless, the grace period for your loan repayment will be up before you realize it. You need to do whatever you can to keep up with the monthly payments. If that means continuing to live like a college student for a while longer, so be it.
Pick up a side hustle, take on odd jobs, and throw whatever extra money you can at your debt. Budget, make a payoff plan, and stay focused.
It’s easy to get lulled into making the monthly minimum payments, which was exactly what I did for a few years. Even though I was working and earning enough to pay more, I just stuck to the minimum. Had I treated my student loan debt with urgency, I could have avoided paying hundreds of dollars in interest over the years.
If you do find yourself earning a good income after school, don’t give in to the temptation to inflate your lifestyle. Paying off those loans is more important than keeping up with the Jones’s or having the latest and greatest stuff. Focus on becoming debt-free by maintaining your lifestyle until you have the loans paid off.
Lesson #4: Debt Payoff is Possible
Finally, the greatest lesson that I learned from paying off my student loans is that debt payoff, no matter how insurmountable it may seem, is possible.
It takes hard work, focus, and sacrifice, but the day will arrive where you are sending off that final payment.
That day will be nothing short of an enormous relief, and you can give yourself kudos for such an awesome accomplishment.
Afterword From Brent
Albert Einstein once said “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” I’m not sure about you, but I stand up and listen when Albert Einstein calls something “the eighth wonder of the world”.
The sooner you can pay down your student loans and end the compounding interest snowball the better. For Lauren, this was a 6 year process. How long before you’ll be student loan or debt free?
One great way to pay down credit card debt and avoid the high compounding interest rates is to take advantage of a 0% balance transfer like this one with 2X the bonus miles or this one with no annual fee but only 1X the bonus miles. Click here for more information about how to use 0% balance transfers in your debt repayment strategy.
As I’m sure Lauren knows, the feeling of writing that final check and wiping out your debt is amazing. I strongly encourage you to assess your debt situation, make a plan and use everything in your power to pay down the debt as quickly as possible. You CAN do it!