We Paid Off Our Student Loans – Now What?

We’re spending Memorial Day weekend on Cape Cod. I’m sure we’ll be spending time at the National Seashore, one of my favorite places, especially Marconi Beach. (Maybe if you hurry up, you can find us!) I’ll be using some photos from our earlier trips here.

And as part of our trip, we’ll be celebrating a big milestone…

We are now student loan free!

Maebys Marconi Sprint (4)

That’s one happy puppy

Yes, twelve years after graduating college, and hot on the heels of paying off our car loan, we just extinguished another type of debt from our balance sheet. Now the only debt we have is mortgage-related. How did we do it?

Well, over the long-term, we haven’t done much except meet our normal monthly payments. Occasionally I would make an extra payment or two, but if you look at our debt chart, you can see the student loan debt is a simple, straight line until the end. Mainly, between the two of us, we have just been paying the $211 per month dutifully for twelve years.

Marconi Beach Day1 (4)

Then in the last few months, I made a few big payments. We had to meet a couple minimum spending requirements for credit cards in order to get the rewards points, and what better way to do that then to use our credit cards to pay off the student loans using an online card processor. Get the credit card bonuses, and be student debt-free. Kill two birds with one stone.

I don’t know about you, but I start to get frustrated when a debt amount gets low and doesn’t just get paid off quickly because the payments are so low. We could’ve waited another three years for these loans to be paid off naturally, but I just wanted to finish them, so we put in the extra $4,000 or whatever.

Marconi Beach Day1 (1)

Marconi Beach

Forgive me if I’m not more excited. It has been a long slog, so finally having them paid off  feels like more a relief than some giant windfall. And with our monthly payments totaling $211, this is not the hugest sum of money. Since we already put away $4,000 a month in savings, this is a nice addition, but $211 is not the boost it would have been had we been able to save it straight out of college.

I know many people’s student loans are much larger than ours. Marge and I both started out with somewhere between $15,000 and $20,000 each in student loans in 2004. It was so long ago, I actually don’t even remember what the original amounts were. But now the future looks bright, and I wonder what we should do with that extra 200 clams every month. Speaking of clams, now that we are enjoying a trip to the Cape, rest assured we are popping a bottle of bub and eating some raw sea-meats to celebrate the “debt free lifestyle.”

Province Lands (5)

Province Lands bike path

We try to go to Cape Cod at least once year, which was easy while there was a cottage in my family. My grandmother owned a tiny cottage for as long as I’ve been alive. (The other side of my family also had a cottage a long time ago, but President Kennedy took it away. Long story!) But recently, my grandmother had to sell her cottage to finance her long-term care, so we haven’t been able to mooch a place to stay and have had to pay our own way this year.

Lucky that our cottage rental is offset by a sudden lack of student loan payments. That’s what we call a happy coincidence.

What about today’s graduates?

Ah, but what about today’s graduates? We know people who graduated with high five-figure, even six-figure loans. Will anyone else ever again be so lucky as to pay off their student loans?

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That’s a chart of the average college student’s debt load at graduation. Can you imagine a time when the average student had only $9,000 in debt? It wasn’t that long ago. As you can see, there was a big run up to 2000, and then lending  started actually leveling off.

Apparently they waited for Marge and I to graduate, because since 2004, the average amount of student loans has increased from $18,630 to $37,172. Quick math tells me that is a 100% increase! Cumulative inflation over the same time period was 27.9%. That’s four times higher than inflation.Meanwhile, the median income per capita has risen from $25,035 in 2005 to $28,889 in 2014. That’s just a 15% increase.

Well, I hate to keep going on about how the system is rigged, but… the system is rigged. We tell kids they need a degree to get a good job. But unless Mumsy and Dadsy are paying for it, the cost unfairly falls on the kids. So for a lot of them, the only way to pay for college is with loans.  Then when you come out, you’re saddled with the payments, depriving you of the savings you could be putting towards your retirement early on. Or you’ve spent extra years in school because you were working concurrently to pay for said school. If you weren’t born with money, say goodbye to those prime savings years!

Marconi Beach (3)

Then you’re stuck. You have a good education, but since the pension system is gone, you can’t save for yourretirement because you’re paying down the loans. Or if you’re saving for retirement, you can’t afford health insurance. For most graduates, something’s got to give. People deserve to have things like education, healthcare, housing, and a retirement without having to make choices between them. Marge and I have been able to do it with the hand we were lucky to have been dealt, but the situation for the average person just gets worse every year.

If we graduated today, our (very average) monthly $211 payment would be more like $422 a month. That’s about how much it takes to max out a Roth IRA every year. After a loan repayment period of 15 years, at a growth rate of 7%, those lost savings would’ve been worth $127,253. We should be able to find a way to pay for higher education as a society. That way every kid can go to college without being burdened with loans at the end just because they came from a poor family. Then even those kids will have a shot at saving for retirement.

Made any progress with your debt lately? Now that we paid off our student loans, what are we supposed to do in this strange new world?

10 Comments

  1. Congrats! We felt the same when when we got to the end of our debt repayment. we just wanted it gone. Guiding our three teenagers as they prepare for college is a big challenge. We are doing our best to avoid any debt.

  2. Congrats – one less thing to worry about! I have one small loan left but it is at 2.75% so I haven’t been paying much extra. The balance is small so I know eventually I’ll get sick of it and just pay it off. My previous student loan debt I paid down with reckless abandon because those 4.5% to 6.8% interest rates killed me every time I looked at them.

    • Norm

      June 1, 2016 at 11:08 pm

      Yes, the impatience was starting to get to me. Enough with the slow bleed. Just kill the thing already!

  3. I was lucky and graduated sans debt (thanks Mom and Dad! They sent all 4 of us through 4 years each of state school (that was right before the costs decided the stop matching reality)). When I married my wife we suddenly dropped into a category that the student loan interest wasn’t deductible so (aka, it went from “good” debt to “bad” debt) so I was already moving my investments around and took some of that money and killed it. To make up for the lost cost I created an internal “debt” (with interest!) that we have been repaying every paycheck until it is cleared.

    • Norm

      June 3, 2016 at 8:02 pm

      That’s really creative, plus it takes some self-discipline to pay off the imaginary “debt.” I’ve done things like that myself. I like it!

  4. Heck yeah!! congrats! That is awesome. Now its all about saving and investing! Fun Fun! 🙂

    • Norm

      June 2, 2016 at 7:20 pm

      I’m looking forward to having enough “fun money,” after retirement savings, to buy a few individual stocks.

  5. How did you use your credit card to pay your student loans?

    • Norm

      December 8, 2016 at 5:48 pm

      I used a service called ChargeSmart. Now they’re called Tio. There is a service charge, but it was worth it because we earned a bunch of bonus miles on a credit card.

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