Today we’re hearing from Eric Rosenberg, a financial analyst who paid off the $40,000 in student loans that he incurred while getting his MBA. (Woohoo!)
Eric is the founder and editor of Personal Profitability. He’s worked in banking and wants to share what he learned to help you save time, money, and headache. His new project, Finance Lifestyle, focuses on the personal side of personal finance.
Let’s hear how he knocked out those loans.
First, tell us about your student loans…
I paid for my private school MBA with an estimated cost of $90,000 for the two year program. I paid my living expenses as I went, along with as much of the tuition as I could afford. I ended up with about $40,000 in student loans when I graduated, and paid those off in 736 days, almost exactly 2 years from graduation.
How did you go about paying them off?
I used a super focused payment plan to help me pay off the loans quickly. While working full time with a decent income, I still lived in a very cheap apartment and kept monthly recurring costs low. That gave me more free money to pay my loans as quickly as possible.
I setup automatic, recurring payments each payday for as much as I could afford. My minimum payment to pay off my loans in ten years was about $200 per month if memory serves, but my automatic payment was for $250 each pay period, 26 times per year.
In addition, I put my tax refund and bonus 100% into my loans, in addition to any extra money I earned on the side or was able to save.
It took a lot of dedication to keep paying at that level when I knew I could do things like go on fancy vacations or buy a new car, but I would rather live debt free, and I am very happy those loans are behind me.
How did you keep your recurring costs low while living in the cheap apartment?
While we are all tempted to live in fancy homes with all the bells and whistles, it isn’t hard to keep costs low, particularly when you are a full time worker and student. I didn’t have a lot of time for outside activities, so I didn’t have temptations to spend a whole lot extra.
I paid off my car so I didn’t have any recurring loan expenses and I always found a low-cost place to live, even when it wasn’t exactly living in luxury. I also put off getting a phone with a data plan, saving more than $30 per month, and didn’t get cable at home. Just the phone and cable savings alone were more than $100 per month.
What do you have to say to people who might counter that student loans are “good debt”?
I would say that student loans are certainly better than credit card debt or a car loan, but that doesn’t make them good debt. Student loans are a necessary evil in a time where a college education can easily cost more than a house.
Without my student loans, I would not have been able to afford the prestigious MBA I earned. Without that MBA, I definitely wouldn’t have found the next job I took after graduation, and likely wouldn’t have found my most recent job, which allowed me to move from Denver to Portland with a 40% raise.
In the long run, the MBA and student loans definitely paid for themselves, but I didn’t want to keep paying for my MBA for ten years.
Did you look into other ways of affording your MBA?
I already had a job when I applied for my MBA program, and when I started my employer had a program to help pay for tuition for further education related to my job. I did get about $5,000 from the program before it was closed by the company, but that wasn’t all that much compared to the cost of the degree.
At that time, the economy was pretty tough for finding a new finance job with the little experience I had, so I was just thankful to have a good job and an employer that didn’t mind my flex schedule to allow me to go to classes. I knew that having the degree would help my career, so I wanted to get it done as quickly as possible. I actually graduated early from the program.
What made you decide to pay off your student loans?
The interest on my students loans was pretty big, and I hate giving away money I don’t have to. At graduation, my interest costs were nearly $3,000 per year. Paying off early saved me a ton of money.
In addition, I thought I had a better use for the cash flow each month. I paid off my debt right around the time I bought my first home, and was much happier putting the money into home equity with a lower interest rate.
Here’s what really stood out for me in Eric’s debt payoff story. He:
- Graduated early and worked while going to school, saving money that way
- Used a super focused payment plan (debt snowball, anyone?)
- Found ways to earn extra money that then went straight to his student loans
- Kept monthly costs low
- Would rather live debt free
Thanks for sharing your story, Eric!