Paying off massive student loan debtPlease welcome Jen, from Frugal Millennial to the blog today! Her story is amazing! 

My husband and I had planned on saving up for a down payment on a home as soon as we got married.

Fast-forward to after our wedding and we were forced to confront a harsh reality – together, we had accumulated $117,000 of student loan debt (75k was mine and 42k was my husband’s).  I didn’t do a very good job keeping track of how much I was taking out in loans while I was in college (huge mistake!), and at the time, I had no idea how compound interest worked.  When I realized what my monthly payments would be, I was horrified and I became depressed.  I thought about our debt constantly.

We Created a Get Out of Debt Plan

We realized that buying a house would be a very bad idea with the amount of student loan debt we had, and we worried that even renting an apartment (which is expensive in the Twin Cities, MN area) would put us in an endless cycle of debt.

We became inspired by the debt snowball idea (from Dave Ramsey’s The Total Money Makeover). Instantly, we were amazed at how much money we would save in interest by paying our loans off in another 3 years instead of sticking with the standard 10-year repayment plan.

Our minimum payment on a standard 10-year plan was originally $1,405 total ($545 for Ben and $860 for me). My husband and I came up with a plan to pay our loans off in 3 years instead of 10, and we realized that doing this would save us nearly 40,000 dollars in interest!

We put the money we had saved for a down payment on a house and put it toward our loans instead, and committed to our 3-year plan.

An essential component of this plan is living an extremely frugal lifestyle, which involves making many sacrifices! Here’s a closer look at how we’re paying off our massive debt.

Our Budget

Our budget consists of the following expenses:

$1,160 = Minimum student loan payments on 10 year plan
$450 = Medical and dental insurance premiums
$600 = Groceries
$200 = Gas
$150 = Rent (paid to my parents)
$125 = Car insurance ($50 for mine, $75 for my husband’s)
$90 = Cell phones ($45 each)
$30 = Prescription medications
$21 = Adobe subscription (my husband is a graphic designer and views this as a necessity)
$8 = Netflix subscription
$5 = Gym membership (it’s cheap because I was added to my parents’ family plan 10 years ago)
$0 = Entertainment/eating out
$0 = Car payments (both of our cars are paid off)

This gives us about $2,000 left per month.  We try our best to put all of this toward our student loans ($1,000 to mine and $1,000 to my husband’s).  Sometimes this isn’t possible because other things come up – we both drive very old cars that have needed some expensive repairs lately.  Even when issues like that come up, we still put as much as possible toward making extra payments on our loans.

Living with our parents

The biggest savings that we have in our budget is rent. My husband and I are living with my parents for the next 3 years while we pay off our debt. 

I am incredibly grateful to my parents for allowing us to live with them.  It if weren’t for my parents, my husband and I would never be able to get out of debt in 3 years.  We are saving thousands of dollars by not paying for a mortgage or apartment rent (we do pay my parents rent, but it’s only $150!).

I am so grateful to my parents.  That being said, we live in a small, crowded house and it’s not easy for any of us.  It’s challenging, but financial freedom is well worth the sacrifice.

Driving a 16 year old car

My car is 16 years old, and my husband’s car has nearly 200,000 miles on it.  We both intend to keep driving these cars for as long as possible, and we only get repairs when it’s necessary for safety.  Even the basic safety-related repairs are starting to get a bit expensive, but we’re still paying a lot less than we would pay for “new” (used) vehicles.

If we were to purchase new (or used) vehicles, we would have to make monthly car payments, pay higher amounts for insurance, pay more for tabs, and pay more for each repair (newer parts are more expensive to replace).  Our cars are what many people would consider “embarrassing” and they make a lot of squeaking, cranking, and rattling noises.

I prefer to drive an old car and pay off my debt in 3 years.  Buying a new vehicle would be less embarrassing and would allow us to fit in with the rest of our peers, but it would also delay our student loan debt repayment and it would give us a new kind of debt.  It’s not worth it.

Skipping salon visits

I’ve never been a big spender, but one area I used to splurge on occasionally was salon visits.  I have dark ash blonde hair that resembles the color of dishwater, and I’ve never been too fond of the color.  I used to get my hair dyed by a professional – a very expensive professional.  She did an amazing job, but I just can’t justify spending $200 every few months.  That’s an insane amount to be spending on haircuts/colors when you’re buried in debt!  I highly recommend dyeing your hair yourself or skipping the dye altogether.  I used to hate my natural hair color, but it has really started to grow on me over this past year.

Spending ban on outings with friends

I have a complete spending ban on outings with friends. There are people who think this is crazy.  People tell me that I won’t have any friends if I’m never willing to spend money or that I’m missing out on the best years of my life.  There is a common misconception that you have to spend money in order to have fun.  I don’t avoid my friends because of my spending ban – I invite them to do things all the time, but I invite them to events that are free.  There are a ton of fun things that can be done for free, such as going on a 5k walk, having a movie marathon or board game night, doing outdoor yoga, going to fairs or festivals, going on a scavenger hunt, or lounging by a pool or lake.

Delaying starting a family

Every day when I skim through my Facebook newsfeed, I see my peers having babies.  My husband and I have been together for seven years, and ever since we got married a year ago, people are constantly asking us when we’re going to have kids.  We’re not ready to have kids right this minute, but we would like to start a family within the next few years.  Because we’re paying our student loans off over the next 3 years (and living with my parents), that’s just not possible.  Waiting to start a family is a difficult sacrifice to make – I have a biological clock, and it’s ticking away.   Still, I take comfort in knowing that we will be debt-free when we do start our family.  We will be providing an excellent example for our future children, and we will be able to raise them to be fiscally responsible adults.

A Final Note!

After only 6 months my debt is down from $117,000 to $96,000 – we’ve paid off $21,000 so far! We are on track to be debt free by May 2018.

My husband and I are making many sacrifices now so that we can achieve financial freedom later.  As Dave Ramsey says “Live like no one else now, so you can live like no one else later.”  These sacrifices are difficult, but they will be well worth it after 3 years when we will finally have financial peace.

Jen is an HR/Finance professional by day and a frugal lifestyle blogger by night.  Jen and her husband are paying off over $100,000 of student loan debt in just 3 years.  She writes about healthy eating on a budget, budget wedding tips, destroying debt, and living frugally on her blog Frugal Millennial.