Thanks to strong academic performance as an undergrad, Kate of the blog Goodnight Debt got a full tuition scholarship for law school. However, she took out $45,330 in federal student loans to cover her living expenses, which she’d originally hoped pay off in 3.5 years.
Thanks to Kate and her husband’s frugal lifestyle, they managed to destroy that debt in only 15 months.
“I do” to debt
Kate’s motivation came in part from her husband’s debt story. “On his own, he paid off $35,000 in credit card debt right before we met,” she said.
“It didn’t feel fair that he’d worked so hard to be debt-free, and now he was dating, engaged to, and then marrying me with more debt than he ever had. I wanted to respect his accomplishment by getting rid of my debt as fast as possible,” Kate explained.
She hadn’t borrowed money for her undergraduate degree, so her aversion to paying interest also kept her focused on her goal. “I played around with a few loan payoff calculators and the amount of interest I would have paid over 10 years was terrifying and incredibly motivating,” she added. “My student loans were an anchor to my days in school. I wanted to be an adult and do other things.”
A low-key lifestyle
While Kate completed law school, the couple lived off her husband’s income and some of her student loans. Then once she graduated and started working, they avoided lifestyle inflation and continued living a similar lifestyle (with the exception of a trip to London; Kate admits she has the travel bug) so that any extra money went towards her loans.
“We did all of the normal frugal things: we prepare our own meals, don’t buy take-out coffee or snacks from the gas station, obtain most of our entertainment from the library,” she said. “All of these things are small by themselves, but they add up to impressive sums.”
Even though Kate planned to aggressively pay down her loans, she switched from Standard Repayment (10 years with the same payment every month) to Graduated Repayment (10 years where the payment starts low and increase every two years).
Her minimum payments dropped from $525 to $311 as a result. That way if any emergency expenses popped up, she’d have more flexibility in her monthly budget. Fortunately, she didn’t need that wiggle room.
The plan of attack
Since all her loans carried the same interest rate, Kate used the debt snowball method to attack the smallest loans first and build momentum. When one loan was paid off, she’d divert that money to the next smallest loan.
The couple made four to six (sometimes small) payments each month, so tracking progress on her blog through recaps helped her stay motivated. “Each month was energizing to see what I had done, all in one place,” she said.
The blog also helped her connect with others with similar goals, since she still doesn’t know any aggressive debt-payers in real life. “Through the blog, I met some fantastic debt slayers from all over the world,” she said. “It helped to chat with other people who were aggressively paying off their debt and what they were going through.”
While Kate initially viewed the loans as hers alone, her husband helped her understand the importance working towards financial goals together. “About halfway through the process, Hubs and I had a discussion about whose debt this was,” she said. “He convinced me that it was ours. Having a unified effort made a huge difference in what we could accomplish.”
Kate made her final student loan payment last spring and she’s now maxing out her retirement plans and saving towards a down payment on a home, which they hope to purchase when their lease is up early next year.
“The biggest thing that I’ve taken away from all of this is that money is a tool that should be used,” she explained. “By thinking about it as a tool, I’m now able to use it for the future and not pay for the past.”
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