It’s funny the things you remember when you are younger, which at the time you feel have no significance. I remember sitting in my Grade 12 calculus class, it was the final semester before high school graduation. By then, everyone had picked out their schools and had either been accepted or not. The feeling of independence, a sense of accomplishment and the eagerness to experience college/university life had filled the classroom.
I then distinctly remember my teacher talking about how we would all probably need to get a student loan to attend post-secondary, how he just finished paying off his student loan last month and how it took him over 12 years to pay off.
Although I did not have any understanding about personal finance back then, there was something really depressing about his comment. Granted he wasn’t an old teacher. He was probably in his early 40’s but when you are 17-18 years old….that’s old. I remember thinking to myself, 12 years to pay off a student loan, that’s crazy. He never told us how much he owed, but it didn’t matter, what he said was enough.
Fast forward to my MBA graduation and I find myself anchored with $64,000 of student loan debt and my husband (then boyfriend at the time), with his $46,000 debt. Plus the $10k of consumer debt between the both of us.
Now don’t get me wrong, I am grateful for my education and the opportunities that it has brought me, but there was no way I was about to let myself become a statistic. For someone reason that day back in Grade 12 came rushing into my head. I may have made some silly mistakes with money (some of the $64k + my income from employment during both my degrees while in school were used to fund the “university experience” as well as education), but I was determined not to take 12 years to pay off my student loan debt (or even the standard 10 years).
At 27 and a half years old, I thought, I need to clear this debt by the time I am 30 (I like round numbers). There was something about starting a new decade in my life with no debt that was appealing. So for the next 2.5 years my husband and I worked, learned a lot about personal finance, and clawed our way to freedom!!!
Even if you consider student loan debt to be good debt, here are 10 reasons why you should not nurture your student loan debt:
- It may prevent you from obtaining other assets like buying a home. I never really wanted to rush into home ownership after all that schooling and my whopping debt, but when my husband and I would go to look into other credit products at the bank and the lender pulls up my credit report, I could tell almost to the second when they reached my student loan debt balance (before we started attacking it). There facial expression was priceless.
- It may delay you from getting married or finding a significant other.
- Depending on the size of your student loan debt, taking 10+ years to pay it off could almost double how much you owe. For my husband and I, if we took the 10.5 years they gave us to pay off the debt, it would morph from $110,000 to almost $180,000 making those minimum payments…ouch. Even more if we requested to extent the length of the loan repayment.
- Prevents you from taking on additional risk. There is something so burdensome about student loan debt than any other debt that just makes you pissed off. It’s difficult to bankrupt (although I am not advocating that you should), it owns your income until you pay it off, you can’t sell it, eat your loses and walk away and the only way to escape it is death. How depressing. With that much weighing on your shoulders, it will robe you from taking on new opportunities, whether its taking on new and exciting work, buying property, or relocating to a foreign country for the experience.
- You can only justify it as “good debt” for so long. I struggle sometimes with the whole good debt versus bad debt distinction, only because it makes people complacent (including myself at one point in my life), to take on more of the “good debt” and justify it to themselves that there investing in their future. Whether it’s buying more house then you can afford or taking on more student loans because you qualify, debt is debt and it’s stupid. Net worth statements don’t make that distinction and neither do lenders, so why do we?
- For every dollar you put towards your debt, that same dollar could be used to grow your investments and long term savings. This was the real kicker for me. The concept that really sold me in not nurturing my debt and complying with what society tells us is OK to do. Giving full credit to my husband on this one, he is the investment guru and showed me the numbers. We like numbers, and once we saw the numbers, I couldn’t get rid of the debt fast enough.
- You will have “student loan repayment” line item on your budget for 10+ years. The idea of me seeing the word “student loan repayment” on my budget for the next decade or so, knowing that I am paying for something that I already used up (my education), was a little depressing. I am all for taking responsibilities for your actions and paying back the debt you owe, but dragging that experience for 10 years and then some was not something I wanted to do.
- It may cause you additional stress. Dealing with the expenses that living on your own and starting adulthood brings is hard enough. Add a mortgage, a few kids, a rental property (if you so choose), vacations, taking care of your aging parents AND the student loan debt, you’ve been nurturing… and you have stress to the max. Paying off your student loan debt quickly gives you options and the room to breathe again.
- Set an example. I have nieces and nephews that are heading off to university and I want to be a good example for them. I hope they can learn from my experience and not make some of the same mistakes.
- Not owing the government any money feels good. Granted I am aware that not everyone takes out a federal & provincial student loan, but it feels good not to have to pay the piper, whomever that may be for you.
If you are graduating or have already graduated post-secondary, but are sitting on your student loan debt making minimum payment only, really consider attacking it and getting rid of it…fast. It will free up your life so much. I have no regrets with the decision I made to pay off my student loan debt as quickly as I did. It took a lot of sacrificing though, and it was not easy. But if it was easy, then everyone would do it…right?
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