We have a student loan crisis in America. According to CNBC, Americans owe almost $1.5 trillion in student loan debt. That’s $37,172 per person, up $20,000 from 13 years ago.
This is exactly the amount I owed 7 years ago, and it was angering me.
Though I knew not to get into debt, I did anyway for the sake of starting a business I really felt I was supposed to start. Common sense would tell you it’s never a good idea to fund anything besides tuition with student loans! However, I fell into that trap.
Over $37,000 later, I was in a deep hole with a $310 per month payment to show for it. Though it wasn’t what many people are faced with, (some accrue too much in student loans to even try to pay back), it still became a burden on my finances.
When my husband and I got married, we had other loans, such as credit cards and a car payment, in addition to two mortgages. Over a 7 year process, we committed to getting out of debt, starting with the credit cards first, then the homes, then the cars, then the student loan. At the beginning of our marriage, we owed over $300,000, including our mortgages! But at the end of the 7 year process, we paid off all our debts with the exception of our (one) home, and are now in the positive with it comes to net worth.
Motivation is key
I’m not sure what really got me going, except that it angered me to see so much money going to interest when it came to all of our debts. The angrier I got, the more determined I became not to live in a cycle of debt. We started listening to Clark Howard and his advice for paying off debt, and became all the more motivated to reach our goal! One of the most impactful things that motivated me was realizing how much money I would save by paying off my student loan early.
Paying off student loans earlier vs. later: Save $10,0000
Once I did the math and calculated on paper how much I’d be saving in interest by paying off my student loan early, I began to realize we could do so much with that money that would otherwise vanish into thin air. How much was it?
On my current loan path, I was going to be paying $19,200 in interest over a 15 year period. Though I had already paid a bunch in interest, by paying off my loan 8 years earlier, this saved $10,797 on the total cost of my loan.
So what about you? How much would paying off a loan early save you? Think about all the things you could do with that money, and create a plan to get there. You can do it!