Too often, loan repayment success stories are shrugged off. Even when we can appreciate how someone paid off thousands in debt, we might forget to ask: What was it like when you made that last payment?
Welcome to The Moment, a recurring series that aims to rehash memories from ex-borrowers for the benefit of current borrowers. Our hope is that hearing these tales just might push you closer to your final payment, too.
“I got my first bill, and I was like, ‘Oh no. What is this?'” Emily remembers. “I honestly thought it was a mistake. I went back and asked myself, ‘Did I do this? Did I take out loans and have no memory of it?'”
Scrambling to pay back forgotten student loans
It happens more often than you might think. About 28% of first-year students who took out federal loans reported having no federal debt, according to a Brookings Institution analysis from 2014.
Before and during her college career at Penn State University, Emily earned academic scholarships and worked jobs on and off campus. She even wound up graduating a semester early.
However, Emily also filled out federal financial aid forms. When she received her financial aid award letters, she saw she was eligible for Unsubsidized Stafford Loans. She took out those loans without realizing she had to pay them back.
“[I] filled out the forms for whether or not you’re eligible for aid — not realizing it’s a loan — and [the school] was like, ‘OK. This is what you’re eligible for,'” Emily explains. “I was like, ‘OK. Good. This is what the government says I get to have.’ And then they sent the bill later.”
Thankfully, she borrowed only about $10,000 with an average student loan interest rate of about 4.55% at the time. Emily received her first bill from her servicer, American Education Services (AES), after graduation.
“When the bill came after my [grace] period, I was like, ‘What?’ I was caught off guard,” Emily recalls.
She was already deep in credit card debt, too. She would wind up about $15,000 behind on her card payments, thanks in part to a post-college trip with friends.
“I wasn’t anticipating having a student loan payment on top of that,” she says.
Using the debt avalanche method to attack debt
When Emily got her first job in corporate finance in 2010, she “fell into the trap” of spending what she earned.
“I hated being behind on the bills and not knowing how I was going to make credit card payments,” she says.
Six months into 2010, she got her head above water. Her debt avalanche plan was simple: Start working on credit card payments first since they have higher interest rates.
By 2012, she and her new husband set out to become debt-free when they merged finances.
As for her relatively smaller student loan debt, Emily never missed a payment once she became aware it. Paying the minimum amount for four straight years was one of a few ways to reduce the interest rates on both her loans.
Emily’s last student loan payment
On Oct. 26, 2017, Emily was flying from Philadelphia to Dallas for a finance conference when she learned she could put a stop to her student loan payments for good.
“I was just working on mapping out our household monthly budget for 2018,” she says of her moment. “When I looked at all of our monthly expenses, I realized it would be much more satisfying to me to pay off my student loan and car immediately … and not have those monthly payments hanging over our heads anymore.”
Emily sent $196.27 to AES, closing out a student loan debt that had cropped up years before without warning.
“It felt amazing to pay it off midflight,” she says. “When I landed, I knew the only debt I carried was my mortgage.”
Here’s a screenshot of Emily’s student loan details once she made her last student loan payment.
Emily’s advice: Become an informed borrower
Now a personal finance coach, Emily says she was embarrassed when she realized she had taken out not one but two student loans without realizing it.
If you’re an undergraduate, the moral of her story is a simple one: The next time you apply for federal financial aid, understand what you’re getting into. If you borrow, pay attention to the required federal loan entrance counseling. Then educate yourself on the basics of student loan repayment and get to know your servicer.
If you’re already out of school, Emily’s advice is to first get out of your own way.
“I was hard on myself after realizing what I had done,” she says. “Have mercy on yourself. There is a way out, but you can’t see if you’re just criticizing yourself for the decision you already made.”
For borrowers in repayment, Emily also stresses that it’s wise to give your money a purpose. When she struggled with credit card debt, for example, she put a greater portion of her income toward minimizing her debt, not increasing it.
Since Emily and her husband are now aiming to pay off their mortgage by 2020, she says discipline and planning are once again crucial.
No matter the type of debt you’re attacking, Emily says, you need to put a plan in motion ASAP.
“People stay in a debt cycle because they spend money without thinking,” she explains. “Your debt will get paid off but not if you don’t do anything about it.”
If you’re nearing or recently made your last student loan payment, we want to hear about it. Your story might inspire someone to follow in your footsteps. Write to firstname.lastname@example.org.
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