Monday, November 25

DIY [paying down debt]

**If you're bored to tears by money talk, a DIY with some shiny gold paint is coming your way tomorrow.

We're just kicking off a season of celebration, and in that spirit I wanted to share something I'm celebrating on the personal side this week: I paid off the $23,000 private loan used to afford my wonderful, worth-it undergrad degree in 43 months, or 3.5 years. Made a final lump payment on Friday evening, and it feels so. good.

the view that was worth $500/month to me
Paying off debt is a huge concern for me, and if conversations with friends and family are to be believed, it is for most of my loved ones as well (for real, I can't remember the last conversation I had with a friend that didn't have some financial/debt element). You can call educational costs "good debt" 'til the cows come home, but it's still debt and it still cripples your vision for the future (and your budget).

We all struggle with finding answers- should I pay more than the minimum? Should I refinance? Am I eligible for loan forgiveness? Should I prioritize debt repayment or building savings? That last one is a debate I've been losing sleep over for years, and a question I pose to anyone even loosely related to the financial industry in hopes of collecting good advice and data to find the perfect balance.

Ultimately, I made the decision to prioritize my private debt, because (1) it had a higher interest rate, and (2) my generous and supportive aunt and uncle co-signed on my loan in 2011. Although they could afford to carry that debt in their portfolio, I wanted to relieve them of that burden as soon as possible out of respect and appreciation. Thanks to their willingness to co-sign, I was able to move from a 9.8% interest rate (holy hell) to a 6.5% interest rate, which clearly saved me thousands and let me focus more energy and resources on attacking the principle balance, rather than just covering interest. This Christmas, I'm asking Santa to bless everyone I know with affluent, supportive family members to help them lower their interest rates, for real.

If my experience with paying off my private loan has given me any perspective, I have two takeaways:

1. It is worth taking on debt for something that is worth it. I have a deep affinity for my undergraduate education, and a lasting loyalty to the Jesuit liberal arts degree I received. I'm feeling a bit emotional as I write this, but the friends I made, the service and community projects I participated in, my introduction to development and non-profit fundraising, and the philosophy degree I earned were, undoubtedly, worth the debt. I don't think this is a message that gets shared as often as it should, as the opposite view of most-colleges-aren't-worth-the-cost is much more popular with my un- or under-employed peers, their parents, and the political sentiments of current society. I try not to complain about my debt, because it is something I willingly signed on for, as I believed it was worth it. If it wasn't a good investment, I had every ability to decline a loan, and with it my Loyola education. I'm a big believer in personal responsibility, but also a supporter of stretching your resources and energy to achieve something you deem worthwhile.

2. Spend your money before it spends itself. If I waited until the last day of the month to pay my loans, there wouldn't be any money left. Get your paycheck, pay your rent, pay your loans, put whatever % you can afford into savings, and what's left is what's left. Reading this post rang so true for me, because we used similar tactics to tackle debt (be careful, her blog is called "the hyperbalist" for a reason). If I didn't actively manage my finances through Mint and LearnVest, I would never have gotten this done. You don't need those tools, but they sure make it easy to track your spending over time, to zero in on problem areas, and to get the 30.000 foot view of your financial health. I endorse both programs whole-heartedly.

If you're concerned that my life will become listless and unfocused now that I don't have debt to tackle, never fear: I still have 5-figure debt with the feds, too. Bring it on (that one is for you, sister).

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