Student Loan Debt

Pay Off Student Loans Before Graduation

It’s difficult but not impossible to pay off student loans before graduation. And there are three good reasons for you to do so.

Being in debt sucks!

Any of you who regularly read the blog or listen to the podcast will know that Listen Money Matters is firmly anti-debt. While having a mortgage can be smart in some cases (though you shouldn’t have most of your wealth invested in your home), consumer debt and student loan debt are a big no-nos.

That puts me in a problematic position. As a sophomore in college, I’ve already taken on nearly $11,000 in student loans, and I estimate that by the time I graduate I’ll have a total of at least twice that (not including interest).

“What’s the big deal?” you might ask. “That’s not that much debt. And going to college is a good investment anyway. Why worry?”

And in some ways, you’re right. It’s not that much debt. It’s below the national average, and it’s way less than what some people have.

As far as college being a good investment, in general, the data still supports that claim. In theory, I stand to make more over the course of my lifetime than someone without a degree. Although that could have just as much to do with the life circumstances that allowed me to go to college as the actual value of the degree itself. And less expensive alternatives do exist.

Ultimately, though, the relative amount of my debt and the predicted value of my degree are not the point. The point is that I’m in debt. The point is that I’d rather not be.

That’s why I’ve set the ambitious goal of paying off all my student loans before graduating. I even put the goal on my Impossible List to hold me accountable.

Crazy? Definitely.

Needlessly ambitious? Possibly.

But hear me out …

My Motivations

Three main things motivate me to pay off my student debt before graduating:

  1. The peace of mind I’ll get from being debt-free
  2. The brutal reality of compound interest
  3. The freedom graduating with no debt will give me

I’ll go into a bit more detail about each one and why it’s such a strong motivator.

1. Peace Of Mind

I owe many people debts that I can never repay:

  • My parents, for encouraging me to think for myself and being my first teachers.
  • My high school English teachers, for teaching me the skills that allow me to write posts like this one.
  • Mentors such as my professors and LMM’s own Thomas Frank, without whose teaching and inspiration I would never have started a blog and wouldn’t be writing this today.

Yeah, I owe a lot of people a lot of things, but unlike student loans, none of these debts are monetary.

The people who have helped me get where I am today didn’t expect anything direct in return for helping me, and I know I can “repay” my debt to them in the form of emails wishing them well or just by pushing myself to excel in my work, school, and life.

The student loan relationship, on the other hand, is a bit more cut and dry. They want their money, not my good wishes. True, I am grateful that my loan provider helped me pay for school, but I’m not going to show my thanks by paying interest or holding onto my debt for any longer than necessary.

I can’t remember where I heard it, but this quote always sticks with me:

“Being In Debt Is Immoral.”

That’s not always true, but in my case it sure feels like it. I’m not saying that being in debt keeps me up at night, but it does make me a bit uneasy when I remember how much money I owe, how my net worth is currently deep in the red and will be until I pay those loans off.

I’ll have enough things to worry about when I graduate. I’d rather paying off loans not be one of them.

2. Compound Interest

If you’ve listened to any of the LMM episodes on investing, you know that compound interest can be a powerful tool for building large amounts of wealth over time.

Unfortunately, compound interest can also work against you when it’s accruing on your debt. In the same way your wealth can grow exponentially over time, so can your debt. Using the calculator available from my loan servicer, I learned that for one of my unsubsidized loans the interest accrues at about a dollar a day. If you have any unsubsidized loans, the same is likely true of yours.

That’s fucking depressing if you ask me, and it’s a process I want to mitigate as much as possible.

At the very least, you should try to pay down the interest on your loans while you’re in school, since often the interest that accrues on your loans while you’re in school is capitalized once you graduate. This means that the interest is added to your loan principal, at which point interest is accruing on interest.

The result is that you end up paying interest on a higher amount than your originally borrowed, and that sucks.

If you’re still in school and have student loans, check to see if interest accrues on them while you’re enrolled and whether or not the interest is capitalized once you graduate. If nothing else, you should be aware of how much money you’ll have to pay.

3. Freedom

More than anything, though, the reason I want to graduate college with no debt is the freedom it will give me. I don’t want to feel pressured to take a shitty job because I need the money to pay off my debt. It may sound entitled, but wouldn’t you avoid taking an awful job if you could? Right now, while I’m in school, is just such a chance.

And even beyond the job, graduating with no debt will give me the freedom to do my own thing and not necessarily worry about making a lot of money. I’m not saying that I don’t want to do well, but I’d rather not have any external pressures.

Crazy things such as traveling the world or starting an online business (or whatever your dreams may be) are a lot easier when you don’t have several thousand dollars in debt hanging over your head.

It’s Complicated

Of course, I also realize that my relationship with debt is complicated. I really identified with what personal finance blogger/cartoonist Stephanie Halligan had to say in her LMM interview.

She points out that while she doesn’t encourage students to take on debt, the journey to pay off her debt ultimately led her to start the business that now supports her. Had she never had any loans to pay off, she probably would have just gotten some standard sort of job and never discovered the online business space.

I feel the same way. While I don’t (yet) make enough money online to support myself, the journey to pay off my debt was what got me into online writing and business. If I hadn’t been interested in paying off my debt before graduating, I wouldn’t be writing this article.

And I can’t stress enough the value of the education itself. While I’ve learned and refined most of my “practical” skills outside the classroom, my undergraduate education has exposed me to perspectives, people, and ideas that I would never have encountered if I had tried to learn the same information online. Heck, if I hadn’t gone to college where I did, I would probably never have learned about College Info Geek or Listen Money Matters.

Strange how things seem to fall into place in retrospect.

The Challenge Still Stands

All that aside, though, I still have $11,000ish dollars in debt to pay off before I graduate. Assuming that I’ll graduate on my planned date of May 16, 2017, that leaves me (as I write this) 753 days to pay off my debt.

Graduation’s not getting any farther away, so I need to get on it. The money I earn from writing for College Info Geek is a start, but I need to step things up if I plan to accomplish my goal.

Now if you’ll excuse me, I’m off to work on my business.

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