Life’s better without bills!
It doesn’t matter how you slice it when you don’t have to part with the money you bring home, you’ll get ahead faster. For the last five or six years, we’ve had student loan debt to pay off. Student loan debt is so insidious because you can pay back a little interest or you can pay back a LOT of interest, it just depends on how you make your payments. The ideal situation for the lender will have the loanee paying back the loan at the minimum amount. If you choose this method you will be paying back your loans for the rest of your life! We fooled around with this scheme for long enough to realize that our balances were actually growing! When that realization dawned on us, we got serious about paying off our debt.
We found the Debt Snowball method promoted by Dave Ramsey really works. The basics are this, you pay down your smallest loan amounts first, regardless of the interest rate, and you make the minimum payments on the other ones. After you get one loan paid off you take the amount that you were paying toward that loan and you start putting that same amount toward the next lowest amount loan. The banks will try to steer you into spreading your payment around to all the loans, this is a trick to keep you from paying off any of your loans. It’s hard to make much headway to begin with because the outstanding amount is so large, so your initial payments are high. So if you need say, $400 to service your debt every month, then you need to pay that amount plus an extra amount on your smallest loan, say an extra $400. It hurts! You’ll wonder why you make more money than you ever have but you’re still broke.
You have to make up your mind to pay down your debt and stay with it. So if you decide to pay one thousand per month, do that every month. There’s no hack or shortcuts, it’s pure pain. Once you get one loan paid off your overall principal will go down and you’ll start to feel like you can breathe a little. But you still have a long way to go! I think we had originally five or six loans, I don’t remember precisely. It was way up there, over fifty thousand dollars. For at least a year but maybe more we didn’t realize we weren’t denting the principle because we were just making the payments that Sallie Mae had set up for us. I was so angry when I found out the amount of money we had paid them but we still owed the entire amount! It’s a loan sharking racket that the mafia would be envious of, written by bankers and codified by Congress to fleece the youth of the country. No matter if you’ve paid the debt three times over in interest they will keep on charging you forever unless you pay down the principle! A lot of people find out the hard way. We did.
There’s a silver lining however if you get into the habit of sending them way more money than you owe per month. Firstly, you get disciplined to live off of what is left over after you pay your loans. In this way, you are actually living below your means. Secondly, after your loans are paid off you get to start saving all of that money that you were having to send in and then your savings really start to grow fast. If there is one thing this generation will know it’s that compound interest will EAT YOUR LUNCH! After going through the student debt gauntlet you are way less apt to ever want any kind of loan ever again.