Congrats you have a shiny new degree – now what? Let’s sum it up: you just spent the last four years of your life getting a college degree, you’ve put on the cap and gown and now it’s time to start your new life in the real world. But how can you do that if you graduated with a ton of student loan debt?
The reality of student loan debt in America
For many college students loans are a part of life. According to Forbes the total student loan debt in America is over $1 trillion. “Two-thirds of students graduating from American colleges and universities are graduating with some level of debt.”
It’s great to have financial assistance while studying and some students wouldn’t be able to afford their education without student loans. However the cost of student loans can add up very quickly. “The average borrower will graduate $26,600 in the red (and) one in 10 graduates accumulate more than $40,000” according to Forbes.
How can recent grads keep their cool while paying off student loan debt? Take a page from Krystal Yee’s book.
One woman’s journey to becoming debt free
In 2006 Yee graduated with $14,000 in student loan debt and another $6,000 in credit card debt. Yee admits that graduating with debt was both stressful and depressing. She was working part time, making minimum payments on all her debt and borrowing money from her boyfriend.
Yee knew her financial situation wasn’t ideal but she didn’t know just how bad it was until she saw it in black and white. What she saw was shocking. Right there on the spot she decided that she didn’t want to live like that for very long. “I (wanted) to become financially independent so I don’t have to live my life relying on someone else to bail me out. I needed a life change, and as scary as it sounded, I decided not to hide from my debt any longer.”
Taking 3 steps towards financial freedom
Her personal finance blog Give Me Back My Five Bucks was born. Yee decided to chronicle her journey of becoming debt free. The first thing she did was move back into her parents house to save on rent. She went from paying $650 per month plus utilities to only paying $150 with utilities included. Yee put the extra $500 per month towards paying off her credit card debt.
The next thing Yee did was cut down her spending – drastically. “I knew my first course of action was to make a budget and stick to it.” She stopped partying with friends, started clipping coupons and only bought items she needed to live…and only if they were on sale. Once again more money saved to allocate towards paying off her debt.
“So it was onto my student loans next. All $14k of it. That much money was intimidating as hell, and I knew I needed to adjust my priorities. So, I sold my car and bought a scooter. It was a little drastic, but drastic times called for drastic measures. Not only did my insurance drop from $80/month down to $15, but I only paid $5 to fill up my scooter every week. It was a great decision, and yes I missed my car (and it sucked having to ride in the pouring rain), but I knew it would be worth it in the end. I saw the BF with $450 car payments every month, and I was so glad I didn’t have anything like that to deal with. I also implemented a very strict budget on myself. But that still wasn’t enough. I needed to do something more extreme – so I started applying for a new job.
Miraculously, in mid-November, I landed a great opportunity in my line of work with another organization. It was a one-year maternity leave position, and although it wasn’t a permanent thing, it would give me the mid-level experience I needed within government. I also started a part-time job, and was able to step up my debt reduction to $2,000/month!
It was around this time that I really started counting my pennies. I literally threw every last cent I had at my debt. I kept within a $30/month dining out budget, and never let my groceries creep above $25/week for my share (I lived with my BF at the time, and we split the groceries evenly). I also learned little tips and tidbits on how to save money on the little things. I got a ton of heat from people about being too “extreme” about my budget and not having a life because they thought I was afraid to spend money … I guess everyone has their own way of dealing with debt, but the way I saw it was: I got myself into debt, so I didn’t deserve the niceties I was so used to spending on myself until I got myself out of debt. It seemed fair to me, anyway.“
Just like that Yee become debt free a year after graduation and she never looked back! Her path to financial freedom was clear and every dome earned moving forward was hers to keep!
Tahnya Kristina is a certified financial planner and personal finance blogger. With over a decade of experience in the financial services industry she enjoys helping people manage their money wisely, become debt free and find financial happiness. You can follow her on Twitter @TahnyaKristina.