I graduated University of Southern California (USC) with $26,000 in student loans.
However, in my senior year of college I took out an extra loan in order to invest in the stock market. Read more of the backstory.
This was extremely risky and dumb, but I did get lucky and made a couple grand (please don’t do this).
So, right before my loans went into repayment status, I returned the extra loan and a bit extra to lower my student loan balance to $16,000.
Graduated to Reality
In the beginning, paying off student loans was not a priority.
I figured I’d pay the minimum and they’d be gone after 10 years.
I was making about $3,200 a month after taxes at Fandango in digital marketing. Thinking I was grown up now that I had a real job, I upgraded my lifestyle with a new leased car and one bedroom apartment.
My monthly expenses in Los Angeles were usually $3,000 – $3,500. So, often I was losing money each month.
That’s when I discovered personal finance blogs and books.
After a year of making changes to my life (eating out less, buying an old used car, selling extra things, etc) my monthly expenses averaged closer to $2,800.
Still, I was not thinking about student loans.
Instead, I was focusing on saving as much money and investing in index funds.
Investing in Stock Market versus Paying Off Student Loans
This is a hot topic and deserves its own post, so I’ll just touch on this briefly and then jump back into the story.
I am definitely one who looks to maximize my returns.
But, now that I know what it feels like to have no debt, I know paying off student loans was the right decision versus sticking that money in an index fund.
Reducing your risk and freeing up your mental energy beats a higher investment return, especially when it’s a relatively small amount like $16K.
From Fandango to Facebook
A couple years passed, I kept working at Fandango and paying the minimum on my student loans.
I believe I was at $13,000 when I got hired at Facebook.
I moved up to San Francisco to take the higher paying job.
In conjunction with raising my salary, I lowered my expenses by living with roommates and taking advantage of the free food at Facebook.
At this point, because I didn’t inflate my lifestyle (actually deflated it), I was able save more than 50% of my income most months.
This allowed me to quickly build up my investments and cash reserves.
Meanwhile, I started listening to Dave Ramsey and got inspired to look at my debt differently. Fortunately, I never had credit card debt, and I had bought an old car in cash the year before.
The only thing left was my student loans.
So, I stopped contributing large amounts to my 401K and instead stockpiled cash.
It took a few months, but I paid off the student loans in two payments of $6K each.
And then it was done!
In reality, my first emotion was that I felt cash poor.
Cash makes us feel safe and insulated.
But, the next day I felt amazing. Like an invisible weight had been lifted off my back.
I really never thought my student loans had much control or power over my emotions, but I was wrong.
Knowing that you owe no one, nothing, is a freeing feeling.
So, get out there, save more money, make more money and pay off those student loans!