Today I’m happy to share Jeena Cho’s story with you. She borrowed over 100k for student loans and she’s figured out a way to knock out her debt. Jeena’s top 4 tips are below.
“At 21, borrowing $100,000+ for law school seemed like a no-brainer. After all, once I land that job at that fancy law firm, with my fancy office, with my fancy house, car and wardrobe, earning a six-figure salary, repaying $100,000 should be easy. Right?
For the first seven years after graduation, all I managed to do was prolong the cycle of debt. As long as I was making the monthly minimum payments and keeping all the balls in the air, I was doing great. My life was all about living a lifestyle suitable for a lawyer, filled with nice things.
When my husband and I got married, we sat down and took stock of our finances. Seeing our numbers in black and white, on paper was a real eye opener. So, we sharpened our pencils and got to work. In the past 2 years, we paid off about half our student loans. Yes, about $50,000!
How We’re Tackling Our Six-Figure Student Loans…
1. Pull out the calculator – This may seem obvious but I find that most people avoid this like the dentist. Say you have $120,000 in loans at 8%. If you repaid it over 25 years, the total amount repaid would be about $280,000! Your monthly payment will be $930. Calculate it over 5 years and the monthly payment jumps to $2,430 but the total amount repaid decreases to $146,000. That’s $134,000 in savings. Play around with the numbers and find a number that feels right for you.
2. Ask yourself ‘What are my priorities?’ – We made a list of what’s important to each of us individually, then compared our lists. What we valued was time with family and friends, travel, health and financial security. What wasn’t on our list was fancy clothes, or luxury goods. The plan was simple: spend according to our values. We made a budget to reflect what’s important to us.
3. Attack – I wish I could tell you that there’s some secret to getting out of student loan debt. There isn’t. Think of it as removing a Band-Aid. You can rip it off or prolong the pain by peeling it off slowly. After running various repayment scenarios, we picked 3.5 years as our target repayment term. Instead of making our payments monthly, we pay weekly via BillPay. This allows us to adjust the payment if necessary and there’s satisfaction of seeing the debt balance decrease each week. I keep an amortization schedule on my desktop and cross out the payments as we go. (Note: Most loans will advance your payment when you pay more than the scheduled amount. Be sure to put a note “do not advance payment” so that the extra amount will be applied to the loan. Check with your lender about the terms of the loan permitting this.)
4. Take charge – The most difficult part of getting out of debt is changing your mindset. Once we changed our mindset from ‘we need nice things now’ to ‘we need to get out of debt’ it was easy to change our habits. We reduced many of our expenses such as dining out, cable, wine purchases, Starbucks, etc. Before spending, we ask ourselves ‘do we need this?’ and ‘is there a way to get this for less?’
What I learned through this is that even though we’re spending less, we’re happier. Instead of keeping up with the Joneses’ we find what works for us. We are focusing more on creating happy memories instead of accumulating more stuff.”
Jeena Cho is an attorney out of San Francisco that works with people who are in overwhelming debt. When not practicing law so enjoys blogging and travelling with her husband.
Do you have student loans? How have you approached paying them off? How do you wrap your mind around an overwhelming amount of student loans?
P.S. Ready to get out of debt ASAP? Check out the Spending Fast Bootcamp!