In college, I loved everything about being an English major- the books, the group discussions... even the late nights I spent toiling over essays. But as my graduation from New York University approached, my enthusiasm turned to dread. I had $111,000 in student loans, two unpaid magazine internships, no full-time job in sight, and no super rich parents to bail me out. It was 2010, post-recession. I was 21 years old, not so practically educated, totally broke, and scared.
My problem was far from unique-then or now. Americans’ collective student-loan balance surpassed $1.5 trillion (!) in 2018, according to the Federal Reserve System. In fact, you’re probably nodding your head-women hold nearly two-thirds of this debt, according to the nonprofit advocacy group American Association of University Women.
At first, my own loans felt like a 111,000-pound kettlebell I was destined to haul around forever (35 percent of Americans with student debt are still paying it off into their 40s and beyond-ugh). But then I carefully crafted a plan to slash all of it (yes, all of it) by the time I turned 30. I got a job-as a magazine reporter-and started to feel good. Really good.
“Debt can feel painful to address, but taking control of it should actually help you feel better,” says Jim Mahaney, vice president of strategic initiatives at Prudential Financial. He’s right. I made my final payment two months shy of my 30th birthday and I. Felt. Amazing. And with a ton of determination, a little bit of grit, and some (okay, a lot of) $3 bottles of wine, you can too. Here’s how.
Make an Aggro Plan
Postgraduation, my main goal was to get rid of my loans ASAP. But I didn’t want to make my payments easier... I wanted them to be over. So I opted for the most aggressive plan possible.
I had a mix of federal and private debt but more due in the latter. My interest rates ranged from 2.25 percent to 6.8 percent, and all of them were on a hard-core 10- to 12-year repayment plan. This made my monthly minimum high: $917. (In comparison, the average monthly payment now is between $200 to $300.)
Yeah. Nine hundred and seventeen. Every month. I shed a lot of tears over that number. And I became pretty obsessed with saving every cent I could. The most I ever shelled out for a single purchase, for stuff like clothing or food, was $50. Once I even cried when a cashier shorted me a dollar of change.
Friends and family tried their best to give advice: “Defer!” “Consolidate!” “Refinance!”But those strategies, which are fine if you have an emergency or can score a lower interest rate, would have only prolonged my loans by years.“Deferring payments is usually a mistake,” says Taunya Kennedy, a student-loan counselor at Money Management International, a nonprofit that provides financial education and guidance.“In most cases, your interest will continue to accrue, which keeps increasing your balance.” For me, that was a hard pass.
I briefly looked into refinancing my private loans with a bank that would have lowered my monthly payment to around $600, but it also would have tacked on 10 more years of payments(and nearly $14,000 in extra interest) just so I could live more comfortably in the moment. Hard pass on that too.
If I'd been more chill about my debt, I'd still be paying it off. I did the math: If I had postponed my $14,625 federal loan for one year at its 5.5 percent interest rate, it would have turned into$15,429. Add another year, and it would have been $16,277. To me, that felt like throwing $1,652 in the trash. If you have a financial hardship and need to defer, make sure
it’s only for the duration of the situation, says Kennedy. “You risk getting used to not making payments and failing to make your debt a priority.”
Go All In On a Budget
In my first job, I took home around $1,800 a month after taxes, leaving me with about $800 to divvy up among rent, food, gas-everything-after I paid my loans. Not great, but not impossible.
I was able to spend less than $400 on my housing (more on how I made that happen later) and about $75 on utilities, leaving me with roughly $300 of spending money per month, or $70 a week.
Since my goal was to save as much as possible, every choice I made revolved around that decision. I hustled to find freelance-writing gigs, frequented the same bar every Saturday because it served free drinks for one hour (yes, I’d hoard vodka diet sodas to last well beyond those precious 60 minutes!), scoured the internet to find every BYOB restaurant in town, and adopted a wardrobe of black staples I could dress up with a bold lip. It was no frills, but it worked.
Luckily, many of my friends were in similar positions, so that was a big help-we were all trying to live a fun but frugal life together.
Rethink Your Rent
Conventional budgeting wisdom (aka finance books from your parents’ generation) suggests that no more than 30 percent of your salary should go toward rent.
But modern money experts say there’s no reason it should be that high. “Cut that to 10 percent, either by living with a few roommates or by choosing a different neighborhood (or both!),” says Grant Sabatier, author of Financial Freedom: A Proven Path to All the Money You Will Ever Need. Then apply the savings to your loans or investments.
I get it: This sounds like a crazy-low amount of money for rent. Ten percent of my first salary would have been $250 a month-basically impossible in many areas of the country. Still, I got my rent as low as I could by accepting a job in Pennsylvania, even though I was also offered a gig in my dream city, New York.
The move lowered my total housing costs to $390, less than half of what I would have paid to live in Brooklyn (don’t be fooled, “big city” doesn’t always mean “big paycheck”). I put the $460 difference toward that hefty monthly payment and visited my friends in New York on the weekends. Sure, all those bus rides sucked, but the sleepovers-and those $3 bottles of wine!-are now part of some of my best memories.
Can’t bring yourself to relocate? Consider living just beyond your city limits with a friend who’s also looking to save. You can also take advantage of rental services like Airbnb to stash even more cash. “List your apartment, then stay with a friend or significant other when it’s booked,” says Sabatier. This could end up paying for 100 percent of your rent.
Don't Be Afraid to Job-Hop
Less than a year after starting my journalism job, I realized I just didn’t have time to play the “ask for a raise and wait a year” game, only to get a 3 percent bump that translated to an extra $40 a paycheck.
Instead, I learned something really valuable: You end up making more money when you switch jobs. This might not work in every industry, but I was able to double my salary in only three years simply by moving employers regularly.
Although some companies may look down on job-hopping, one survey shows that 55 percent of them won’t hold it against you. In fact, by jumping around, I took on a lot of responsibility at a young age, networked like crazy, and beefed up my résumé. And when, at 26, I landed at my fourth employer, I was comfortable enough with my salary that I stayed there for four years.
If you’re in love with your office, or if your industry isn’t cool with quick moves, consider a side hustle. “The internet makes it easier than ever to earn money in your free time,” says Sabatier. You can ghostwrite for blogs, run Instagram accounts for businesses, or work as a virtual assistant. Just Google “recruiting firms in [insert your industry]” and reach out for freelance work. One of Sabatier’s connections in digital marketing earned a $55,000 salary plus more than $45,000 a year in off-hour gigs. Sure, that’s an extreme (and extremely lucky!) example, but Sabatier says you can easily make $1,000 to $2,000 a month with this strategy. Case in point: I brought in an extra $10,000 a year through side projects alone.
Once I found my flow, paying down my debt made me feel like a boss, not deprived. By the end of my eight-year journey, I’d developed budgeting habits that will last the rest of my life, established a career I love, and bought my first house with my husband. “Student loans can empower you to be assertive about your career, your finances, and your life,” confirms Bobbi Rebell, a certified financial planner and the host of the Financial Grownup podcast. “You have skin in the game because you invested in yourself.”
This article originally appeared on the February 2019 version of Cosmopolitan magazine on newsstands now. Click here to subscribe to the digital edition.
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