Tag Archives: Student Loans

Status: Ahead of Schedule!

  • Extra Payment: $1,435
  • Total Pay Down: $1,740.66
  • Total Pay Down Since Start: $8,482.46
  • Total Outstanding Balance: $62,690.29
  • Percent Complete: 11.9%


*These numbers are for my Wells Fargo Private Loans only.

Month two of my rapid debt pay-down adventure is complete. Overall I did very well in February. I was able to make a pretty large extra payment thanks to low rent this month and modifying my 401(k) deduction.

Again I have tracked every dime I spent during the month and graphed it all out to give myself a visual representation of how well I am doing. I love seeing how my new habits are having a positive impact on my financial health.

Outstanding Debt & Goals

This chart plots my high interest rate Wells Fargo loan. The black bars give you my outstanding balance goal each month and the red line is the actual monthly ending balance I achieve.

Click to enlarge.

Click to enlarge.

I ended February $600 below my goal! Thanks to a special rebate on rent during the month and a clever adjustment to my 401(k) deduction I was able to make a much larger extra loan payment than anticipated. The best part: the adjustment to my 401(k) will allow me to keep making larger than expected extra payments. This means I will be well ahead of my goal in the coming months and this graph is going to keep looking better and better. Stay tuned.

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A combination of increasing student debt, tighter lending standards and high levels of unemployment and underemployment has hampered young adult’s buying power.

StudentDebtA recent article from CNN Money audaciously claims that low debt levels among young adults is bad for the economy. The author, Nin-Hai Tseng, suggests that “young people are less willing to take on credit card debt and auto loans” as if they are doing that by choice. Tseng claims that debt is necessary for a healthy economy. This may be true in the consumer driven American economy however I am not convinced that young adults are choosing to have less debt.

If you really dig into the data you will find that lower debt and spending levels among young adults is a result of the economy instead of an increase in frugality and/or savings. As the article mentions (and the report from Pew states) student loan debt has increased while all other forms of debt have decreased for people under the age of 35. The author is perplexed by this:

What’s maybe most perplexing is that student debt has increased while all other consumer loans fell.

This isn’t perplexing at all; the decline in other loans is directly tied to the increase in student debt and the great recession. Acquiring student loans is still relatively painless while it is much more difficult to secure other types of loans or lines of credit, especially for young adults.

Consider this: in 2007 it was extremely easy to get loans and credit while student loan debt levels were much lower than they are today. In fact the average student debt level for people under the age of 30 in the first quarter of 2007 was $15,848; however by Q1 of 2012 the average student debt level had grown to $20,835 among adults under 30 [1]. Average student debt levels are accelerating with reports for recent graduates showing a staggering rise to $26,000.

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Mile One of the Debt Pay Down Marathon

Mr. Money Mustache says:

Developing a habit of small but frequent action that moves you in the right direction is all it takes to accomplish just about anything, given sufficient time.


Today I began my rapid debt pay down plan. It was as simple as a call to the student loan department at Wells Fargo.

I dialed in the number and after navigating through a few menus was put on hold. I waited a few minutes listening to a piano play a song I have never heard before but have probably heard hundreds of times. I waited a few more minutes, each second I became more hesitant about what I wanted to do. Finally, a man named John picked up the phone. After the obligatory identity verification he asked me what he could do for me. Well, I said, I would like to make an extra payment on my student loan. He asked me which loan, and I told him the high interest one. He asked me how much, and I said $6,500. Next he asked for an account and routing number and I provided that information. Then he asked me if there was anything else he could do for me, I answered no.

Just like that the call was over. Ten minutes on hold and less than sixty seconds talking to John. Eleven minutes, my savings account was $6,500 lighter and my debt pay down marathon had begun. I didn’t have time to hesitate and there is no going back. My first step towards financial freedom had been taken.

It was a relief to actually begin the process. I have been planning this for a few weeks now and I can even go back to August when I found NMHD as the time when I started to really want to do something about my debt. However, I was a little worried that I would not follow through, that I would not even begin my marathon. It would be so easy for me to delete this blog and pretend like I never even thought about making extra student loan payments. My eleven minute call changed all of that.

I have begun to make extreme extra payments and it actually feels good. I thought I would be worried about having less cash on hand but that’s not the case. I am happy to be putting that cash to use, even more than that I am using that cash to improve my situation in life and I’m no longer tempted by it. I could have put a down payment on a new car or I could have went out and bought a bunch of new tech gadgets. I would be lying if I said I haven’t been tempted. I am particularly fond of the Ford Mustang.

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My Plan To Get Out Of Debt In 3 Years

No More Harvard Debt says:

Debt Pay-down Is a Marathon, not a Sprint … This is 26.2 miles up the side of an extremely steep mountain.


Obliterating my Student Loan debt has become my top priority. This is my battle plan.

I am embarking on the challenge of rapid debt repayment. The next few years will challenge my former relationship with money and my former lifestyle. I am doing this by choice. I am choosing to take the more difficult route, the route that will lead to financial freedom. I am choosing this because it is hard and things that are hard tend to reap the best rewards. Today I will lay my debts out on the table, acknowledge them, and form my plan.

The Back Story

After four years of college I have accumulated quite the portfolio of student loans. Unfortunately this is not a good portfolio, this portfolio pretty much represents my entire net worth (in a monetary sense) and it is a very large, negative number.

To pay for my first two years of college I took out substantial private loans through my bank, Wells Fargo. I needed the loans to cover my tuition expenses but I also used them to cover housing costs, textbooks, and food. I was also able to take out a few small Federal Loans that helped to cover a small portion of my annual university costs. However, I did not qualify for subsidized interest rates on my Federal Loans nor did I qualify for financial assistance from my university. So, Wells Fargo was there to pick up the slack and fund the rest of my education / college experience.

In 2008 the US financial markets crashed and lending from private banks dried up. I was only half way through my four years of education yet Wells Fargo informed me that I no longer qualified for a private student loan. I was stuck; I needed to graduate in order to get a job to pay off my debt that I needed to incur in order to get an education so that I would qualify for a job (follow that?).

My university told me that I did not qualify for need based aid, apparently my parents made too much money. My parents told me that they couldn’t afford the high cost of my private university education. For a few months the situation became desperate, I was on the verge of being forced to drop out of school. Eventually I was able to find a solution. My parents were willing to take out a parent loan to cover the cost of my education on the condition that I pay them pack. I jumped at the offer.

So I was able to fund my education. I borrowed the money, I went to school, I graduated, I got a job, and I started paying it all back.

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How I Got Where I Am Today

Mr. Money Mustache says:

Your Debt is not something you “work on”. It is a HUGE, FLAMING EMERGENCY!!!


“What you don’t know can’t hurt you!” they say, but it’s not true. What they really should tell you is: What you don’t know will DESTROY your future! Whoa, did that get your attention? because it finally got mine.

I thought I had a pretty good life, I thought I had my finances under control, I thought I had a great retirement to look forward to! As it turns out, I was just lying to myself through the egregious sin of ignorance. In reality I am in the middle of a DEBT EMERGENCY!!! And not just that, but I have been in a debt emergency for 5 years!! 5 YEARS! And I didn’t even know it.

How did I get here? How could I be so stupid? Why did I do it?

To answer these questions I went back to the beginning in an effort to illuminate the decisions that have lead me here.

I come from a comfortable life. My father was always able to put food on the table, sent me to the best private high school in town, and even bought me a car when I turned 16. He did this all with a high school degree having never set foot on a university campus, a model of the America Dream if I have ever seen one. Yes, life was good. However, despite this cushy existence, by the time I turned 18 and graduated from high school I was eager to leave it all behind and go do my own thing. I wanted freedom! and independence! and College was the way I was going to get it.

About that time every college in the country was sending me nifty little postcards and full color brochures that all said the same thing: We have the most beautiful campus! Our classes are the best and our professors the brightest! Your future will be better if you get your degree here! And you know what dear readers? I bought it. Hook, line, and sinker.

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