I started college the summer of 2003. I went to an in-state school with lower tuition that was 6 miles from my house, however; I made the choice to live on campus for the “experience” for freshman and sophomore year. In doing so, I left my bachelor’s degree with $25,000 in student loan debt. I then made the decision to immediately go back for my master’s, the summer of 2007, and at the time (pre-2008 crash), graduate students could take out up to $25,000 per year of student loans to pay for cost of school, even if tuition was not that expensive. I made the decision to do so, even though my tuition was around $20,000 for the full two year program. My justification was that I was going to school full time, and I needed the funds to cover living costs while I was in school.
So, in doing the math, I left my master’s degree with $75,000 of student loan debt. If I stayed at home for my undergraduate degree, and took the minimum needed for tuition in my master’s program I would have left with a little more than $50,000….a big difference from $75,000.
So, what about that other $100,000 I mentioned above? Some can be attributed to interest, and I can also look to freshman year of college for the addition of the other major blunder. As a freshman in 2003, living on my own for the first time, I came across a table in the student center during my first week of class. This table offered a remarkable display of pens, t-shirts, and assorted pins….which could be mine if I filled out an application today for a credit card! It would be easy, they said…I would receive notice in a few minutes. So, I filled in that application and was approved for a $500 credit limit, along with a shiny bag full of new pens and a t-shirt.
As soon as I had that piece of plastic in hand, I went right to the Apple store to purchase my very first ipod (yes, ipod…). It was all I wanted, but my parents could not afford one for my birthday or Christmas….but, hey, I could afford it all by myself now! Or so I thought.
Fast forward to 10 years later--credit line increases, 20.99% APR, and a spending habit all equaled to $32,000 of credit card debt.
What did this all cost me in the long run? For that, I am still doing the math for the interest I’ve accrued over 10 years…so let’s go with around $175,000 (but I am fairly positive it is more, and I’m sure a kind reader somewhere will do that math for me).
What was that reality of living with this debt?
After I graduated, I was luckily able to obtain work with a decent wage, earning $50-70,000 per year in the time frame I started paying off my debt. However, despite the decent wage, there were several roadblocks that popped up preventing me from achieving goals due to my financial blunders. For one, when we went to purchase our home, I could not be on the note, and if it wasn’t for my partner’s frugal spending habits and lack of debt we would never have been able to afford a home at all. Why? My debt to income ratio was too high—the majority of which came from student loans. I also was not able to significantly contribute to my retirement accounts as most of my income was tied up with paying minimum payments on those loans, while I continued my spending habits. During those first 3 years, I learned hard lessons about my choices in racking up student loan and credit card debt.
But…after 3 years of paying the minimum payments each month, I took a long, hard look at my spending and my debt, and I made the commitment that I was going to get out of it. It would take me 7 years or so, but I was committing to this action…to improve my spending habits and to decrease my debt significantly. I made the goal that by the age of 35, I would have no credit card debt, and no student loan debt…and I would learn from the mistakes of the past.
How did I do it? I’ll share my strategies in the next blog…sign up below to get the link sent directly to your email!