My Student Loan & Debt Repayment Story
Recently I realized that I’ve been writing about finances, debt repayment and budgeting for over six months without revealing my own personal debt story. After my big debt repayment milestone earlier this week, I sat down and took a cold, hard look at my debt!
To recap, at the end of this month I will be officially less than $10,000 in debt for my student loan; a student loan that I’ve carried for almost a decade. My debt “adventure” began in 2003 as an undergrad and continued in 2011 with a post-graduate diploma. But before I reveal the full amount, let’s see how I got there.
Part One: Grade 12, Spring 2003
During my final year of high school, I didn’t worry too much about how to pay for university; I was more concerned with getting IN to university. I’d recently recovered from almost two years of mysterious chronic health problems. During my summer before Grade 12, I was bedridden for over five weeks, and I was sick enough to require emergency surgery midway through my final semester of high school, leaving me with only two weeks to get final grades in for universities. Therefore, while I did have a few part time jobs here and there, I only had a little bit of money saved and I was more concerned with keeping my grades up.
But I ALSO didn’t worry too much about it, because I was lead to believe that my undergraduate studies were covered through my RESP, and that I wouldn’t need to worry about it too much as long as I lived at home. Unfortunately when the acceptances came rolling in, I learned that the RESP which my parents had spent years putting money into, was ravaged by the Ontario double-cohort. When we learned about this disappointment, I immediately applied for OSAP but I was a month too late to claim my entrance scholarship which was valued at $3,000… it was a bit of a mess. Add a brand new step-parent to the mix, and one parent downsizing to a smaller home, and I decided to move into residence. Financially it wasn’t the most prudent decision, but it certainly aided my mental health.
Part Two: My Undergrad, September 2003 to May 2007
I went to the University of Toronto, and after four year I graduated with $25,122 worth of student loans. When you divide that up, it’s roughly $6280.50 per year. Keep in mind that I took summer courses as well, so this amount was eaten up by tuition and books alone. I also had residence fees and general living expenses, which were somewhat subsidized by the RESP (I honestly can’t remember how much it provided year to year, but it was never more than $2,000, some years way less so) and some help from the parents, but I was mostly on my own, and I liked it that way. I felt responsible for myself and I feel like I did quite well. I earned one scholarship of about $2,300 in my second year, which definitely didn’t hurt.
On the work side, I qualified and took work studies every semester, and had jobs every summer. Through those four years I had no spending “issues”, I wasn’t a shopaholic, I didn’t accrue massive credit card debt and I didn’t blow all my money on spring break. After I graduated, I was a bit daunted by the full amount that I owed on my student loans, but I felt OK about it, because back in the mid-00s, student debt was looked at as “good debt” (I’ll come back to this in another post). I definitely gained a lot from my education, and since I also knew people who owed much, much more. I couldn’t really complain.
Total of my Hon. B.A. = $25,122
Total of my Hon. B.A. after the 6 month “interest free” period = $26,154
I KNOWWWW, I should’ve thrown some money at it! But back then the rhetoric about student debt was that it was “good debt” and I’d pay it off eventually, right?
Part Three: 2007 and beyond.
I worked in arts administration, customer service, front of house management for festivals and theatres, data entry, as a clerk in a wine store, you name it, I did it. I was a bit aimless, but despite my MULTIPLE T4 slips every year, I managed to make a little bit of money. Never mind that I was working 50 hour weeks at multiple jobs to make it happen.
From December 2007 to August 2011 (I chose this date because I started my post-grad in September 2011), I paid down $9,663 on the principal of my loan and $4042.12 in interest. Let that sit for a moment. In interest and principal combined, I paid $13705.12. I know some people would be like “Hey girl, that’s great, what an accomplishment!” but let’s take a moment to analyze this. That’s about 45 months of repayment and averaged out? I was only paying $304 per month on my loan. That’s a pretty small amount. Let’s break it down further – I calculated how much income I made during that time period and as a total of my income, I was paying about 14%. The recommended repayment rate for debt is about 15%, but for quick repayment, more like 25%. Considering I had really low rent and had low commuting costs for most of those years, I didn’t have much of an excuse.
The reason I find this specific time-frame so interesting is that if I had been paying back my debt back then, at the rate I am doing now, I would’ve been out of debt by August 2011.
And I would’ve been repaying at about a 25% rate.
Realistically I know that for at least a good year and a half of my repayment period, I couldn’t have paid what I pay now (which varies from $650-$750 a month), but I definitely could have paid at least $500. So why didn’t I? A student loan was still considered, in my mind, “good debt” and it was better to not exhaust myself trying to pay it off. I lived in the mind-set that as an adult, I’ll always in debt to something, so as long as I was paying it back more than my minimum, I’d be fine.
Part Four: My post-grad, Fall 2011 to Spring 2012
Finally, in late 2010, I’d had enough. I decided I was going to re-skill and applied for postgraduate programs as soon as applications opened in the fall of 2010. I received two offers almost immediately and soon I was a student at Centennial College, the Corporate Communications and Public Relations program, intake of Fall 2011. It was here that I focused, honed my skills, and eventually found my full-time job (subsequently, with a company I already worked for part-time!)
Total cost of my post-grad = $13,296
Added to my undergrad = $25,122
Total student loan = $38,418
Debt relief = $5,996
Total after relief = $32,420
After I graduated and finished my internship in July of 2012, I vowed to get this stupid debt done by 2014. Ever since then, I’ve been on a frugal mission to live life, while also massively attacking this ridiculous burden on my back. As of March 30, I will owe $9900 (give or take a few dollars). Since starting this journey, my total interest paid to date is $4571.84 (gross!). In principal and interest, I’ve paid just over $27,000, and as you can see, a huge chunk of that just within the past year.
Part Five: The future!
At my current rate, depending on my travel plans, I should be completely debt free by the end of 2014. This is REALLY EXCITING because it means that I will spend the end of my twenties (the few months left) debt-free, and able to plan a new financial goal for myself. What will it beeee? A home? A GIGANTIC trip?
Retirement by 40?
It doesn’t really matter. All that matters is that it’s almost over. Despite the frustration I feel when I look at my previous self, I’m confident in the knowledge that when it came down to it? I took to saving and budgeting like a champ. I can help and inspire others (hello boyfriend!) and I know that my next large financial decision will go ahead just fine.
I think my biggest challenge through all of this has been the perception shift of finances and debt. I never had any financial role models or classes. I knew how interest worked and how to do my taxes, but I was never exposed to any real discussion about debt, savings or personal wealth management. The shift from “just pay it off eventually” to “taking control of my debt” was entirely self-motivated and it makes me confident that others can take matters into their own hands as well. I feel like a lot of us don’t have “extreme” stories about debt, but also suffer from a lack of knowledge about just how easy it can be to get things paid off. For a primer, take a look at my post: STOP WAITING! Five Personal Finance Tips for Right Now.
Please let me know if any math here seems off. I wrote this over the period of a few days and lost a CHUNK of edits when my cat put his big butt on the keyboard and killed my draft. Also, if you have any questions, I’ll do my best to answer them.