How One Woman Paid Off Student Debt In Well Under A Decade

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slide1Illustrated by Anna Sudit.
The Billfold — which, mind you, is not another personal finance site — aims to do away with the misbelief that talking about difficult money issues is uncomfortable. Instead, they've created a space to have an honest conversation about how we save, spend and repay our debts. Or, why we'll buy a dozen oysters before we pay our rent.

Marnie Gallowy! The Internets told me that last week — eight years after you graduated from our ol’ alma mater — that you paid off the last of your $48,000 in student loan debt. Is that true? Are you a wizard?
"Hey JShine — you found me out, I’m a wizard! My student loan debt totaled $48,000 and change ($33K-ish from undergrad, and $15K from a poorly advised year in grad school). The bulk of my undergrad debt was federal student loans, but bundled in there was a nasty $8K Sallie Mae with a 12 percent interest rate. My grad school debt was also a mix of federal and private, but the private loans I got at that time were comparatively reasonable."

You paid it off in eight years! How did you do this!?
"Really we weren’t in a position to start paying off anything but the minimum on our debt until after we got married in 2010, so jeez, all of this was paid off actually in about four years?

For my first year out of college, my mom helped pay for my student loans. She had just landed the first well-paying job of her career, so she wanted to help out, and I was grateful for the time to figure out what I was doing with my life. After that year when she was paying the minimum contribution and I picked the payment back up, my partner Tom (now husband) and I looked at the balance compared to what it was when I graduated and were shocked that it was higher than before. The minimum wasn’t even paying off the interest.

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In 2007 we moved to Chicago because Tom got into a great Ph.D. program, and I got another secretary job. We were living exclusively off my $25K/year income, pinching pennies and eating a lot of rice and beans. After a year of that, I decided that my way out of secretary life was to start an MFA program to be an artist, so there was a year when neither of us were making money other than my part-time job in the department and Tom’s funding."

Okay, so four years ago you and Tom decided to go after your student loan debt. What did that look like?
"After we both had more predictable income, we made a plan to prioritize paying off debt. That year when we weren’t even paying the interest made me vengeful, and Tom has always felt insulted by debt — he’d rant to anyone listening that it’s a tax on our future. We decided that we were able to live just fine at $25k/year, so that was what we lived on even though we were making more. Everything extra we made went straight into savings, and then every few months we’d throw a big chunk of that savings into the debt hole. (First to go — adios, Sallie!) We fought really hard against lifestyle inflation — kept cutting our own hair, buying things second-hand, taking an eight-hour Megabus trip instead of flying, etc., even though we could afford not to. We don’t have a car, but even public transit started feeling like too much — I realized I could save $100/month on train fare by biking to work instead of taking the el.

In the last two years we both lucked out and got pretty solid jobs — I got a full-time job in design, and he was King of the Adjuncts (teaching eight classes at a time) before he got a totally sweet research job last September. That really helped — we were still living off our mega-condensed budget, and suddenly had a lot more money to throw at debt. Last fall we were taking a train back from a wedding in St. Louis and realized kind of unexpectedly that we had enough money gathered among all our savings-buckets for a down payment for a house — or enough to obliterate my debt, which was about $18K at the time. It was scary to think about moving all that money, so we waited a little longer. This month, we upturned those buckets and finished the debt off once and for all."

Holy crap.
"I do want to say, the last thing I want is for this to sound like a bootstraps story — “We were able to pay off a boat load of debt, so anyone could!” Nope. We had a hell of a lot of luck and privilege. Neither of us got sick or have chronic illnesses; neither of us had huge family crises that required us to stop working. We’ve been together for years, so we’ve been able to share expenses and lean on each other when jobs disappear. We live in Chicago, which has super affordable neighborhoods and jobs that pay enough so that people can live in the nicer neighborhoods, you know? We both have pretty elite educations, so the jobs we were able to get when we finally found footing in the job market have been pretty well paid. Frankly, having the choice to live under our means is a luxury, and one that we realized might not always be around."

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Did you have health insurance during this time, either/both of you?
"Tom was without insurance for the year that he was without funding, but the rest of the time we both had some kind of coverage. I paid for an emergency-only policy out of pocket during the years when I was working multiple part-time jobs. I got my policy through Fractured Atlas, which is kind of a union for artists, so the insurance I got was pretty affordable — like $75/month? I never went to the doctor, though, which is partially habit from having grown up without health insurance. I got the coverage in case I got hit by a bus or doored when biking around town; it was more for peace of mind than actually getting health care. When I got my full-time design job it came with full benefits and because we were married I was able to get Tom on my policy, so we’ve both had pretty nice insurance for the last year and a half or so. It was so great to be able to get new glasses!"
slide2Illustrated by Anna Sudit.
It sounds like you gave up a lot or delayed or deprived yourselves a fair amount. Is that true?
"Good and tricky question! We try very openly and conscientiously to orient ourselves toward life and money in a positive way rather than negative. [Sometimes it was] really rough. There were periods when we were both really demoralized and depressed from working so many late hours and early mornings without feeling like we were getting anything out of it. [But] we made lifestyle choices to build toward what we want — to pay off debt and have the ability to be generous — rather than what we were willing to give up. I mean, would I love to spend a few weeks in Mexico? Totally. But, looking at the past few years, I’m really happy and don’t feel deprived. Materially we did go without a lot of conveniences, but again it doesn’t feel like a loss, just a choice."

About that $33K logic/philosophy degree. If you could actually go back in time and tell Youthful Marnie what to do, would you advise her to make a different choice about college? If you talked to Youthful Marnie about student loans and how SRS BIZNESS they are, would YM have even understood/gotten/bought it?
"Ugh, good question. I think about this a lot. I am really, really happy with where I am in my life and that is of course a result of having made the choices I did, so I don’t think I’d advise my younger self to do anything differently. The logic/philosophy degree gave me a lot of confidence as a writer and as a debater, which is a broadly applicable skill set. I might not have a job that directly relates to that training, but I’ve gotten every arts grant and fellowship I’ve ever applied for and I don’t think that’s because I’m particularly talented — I just know how to craft a really strong argument for myself. One of those grants helped to boost my visibility in the arts field I am working in, which has opened a lot of doors for me. And the graduate program I went to for a year, which was very expensive and very disappointing, helped me realize that that I don’t need an institution’s permission to make the work that I want to make. That was extraordinarily liberating. I also met great friends and colleagues who inspire me to make better work, to keep challenging myself, which remains hugely valuable.

I do wish that someone — time-traveling adult Marnie, or better yet a financial counselor — had been available to help me really learn about money when I was younger, maybe even younger than college. We both grew up in homes with instability, barely making it paycheck-to-paycheck, and, boy, do I respect what a challenge that must have been for our parents. But that means that neither of us [had] an intuitive grasp on how to think about big-picture finances other than 'be frugal and try not to panic.' We’ve tried to teach ourselves, but I see the fluency in which some friends think about money and it’s baffling. I don’t think that my teenaged self would really understand what a burden $48K in debt would be; it seems like such an impossible number. All I knew was that I wanted to go to college, and I’d sign whatever paper they gave me that would let me keep studying."

I think that’s the case for a lot of students. How did you finally start to acquire those financial management skills?
"When I graduated from college in 2006, I had absolutely no understanding of how to deal with money. I had been mostly financially independent for the past four years, but with the mentality of, 'If I don’t look at my balance and don’t spend money, I should be okay! La la la!' When I got my first job as an entry-level secretary at a university HR department I was given a form to fill out for my 401(k) and I had no idea what that was. That made me feel like an idiot, which I resented. I spent the next few months apprenticing myself to every personal finance blog I could find and obsessing over my Mint.com charts and graphs, which became a mindless hobby. Check email, check Facebook, check Mint. Lather, rinse, repeat."

So our alma mater’s vaunted financial literacy program didn’t make a dent while you were in school, huh?
"Ha! No, it sure didn’t. But now that you mention it, I do remember getting a lot of flyers in my mailbox and email blasts about those events. Maybe instead of Time-Traveling Future Self or Personal Financial Advisor I should have wished for someone to shake me and tell me that I should take advantage of free programs instead of feeling too intimidated/embarrassed to ask for help?"

And how did the finance stuff work in your relationship? What was your household budgeting like in your years of deprivation & penny-pinching? How did you and Tom do that?
"In those years of super-tight finances, strategizing about money started feeling like a sport — we were battling a behemoth, and had to strategize our best move. It totally became a game. 'If we do X a little cheaper, we could pay off that much more!'

Tom and I are both big advocates of putting money right in to savings; our strategies are a little different, but in ways that are complementary. Every paycheck he would put 10% into emergency savings, 10% into retirement, 10% for charity, 10% into a savings fund for family, stuff like that. My savings were more directed towards specific predicted expenses, like 'Thanksgiving travel' or 'book printing' or 'my computer is crap and will die any minute.' (That was actually the name of my savings account; the stupid computer was crap and did eventually die, and I had enough money to go buy a new computer. The system worked!) I think at one point I had 16 different savings accounts? A few times a year we touch base and spend an hour or two looking at Mint together (which has all of our accounts linked up) to be sure we are on the same page about things, and make adjustments then.

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Auto-debit is absolutely my best friend. On the days my paycheck is set to deposit I have money scheduled to be transferred into my various goals: $15 here, $20 there, for every dollar beyond what my monthly expenses require. They are all slow to accumulate because I don’t have a lot to put in, and that little bit is divided in a lot of directions, but it's helped me feel like I was building toward something. That strategy definitely helped me stay on budget — if I needed something beyond what we had allocated, I had to go out of my way to transfer money out of my savings. That was usually enough friction to keep me from impulse-buying a new dress or something."

Now that you’ve gotten rid of this burden, how will your financial lives change (or not change)?
"You say burden metaphorically, but it has been two weeks since I closed out my student loan account and it honestly feels like a physical weight has been lifted. Before it felt like we were walking on leaves and branches draped over a pit trap, and any misstep would mean falling into disaster. Now we’re on even ground. That difference, that stability, feels momentous. I don’t think we’ll change our spending or savings habits. They’re pretty well ingrained now, but we’ll be able to keep the savings we slowly accumulate instead of throwing it into the pit. Good riddance, pit!

I think the biggest change is how I feel about risk. I have been as financially risk-avoidant as anyone in a creative career can be, which has worked out well in this arena but has put a bit of a damper on building momentum in my creative life. I’ve prioritized work with a predictable income over time to work on my art practice, which has meant a herky-jerky output. I think I’m going to switch that order around; it feels like a safe time to take a big risk. Now if I stumble, I’m still on solid ground, you know? (Pit Metaphor!) I think 2014 is going to be a good year."

The Billfold — which, mind you, is not another personal finance site — aims to do away with the misbelief that talking about difficult money issues is uncomfortable. Instead, they've created a space to have an honest conversation about how we save, spend and repay our debts. Or, why we'll buy a dozen oysters before we pay our rent.