Day 8 | $0 paid | $90,717 till freedom
Why am I willing to make sacrifices to cut my costs and increase revenue to be student loan-free in 10 months?
To Have Freedom
I want to achieve my dream. My long-term goal has always been to own my own business, and that’s what I told the admissions counselor during my HBS interview. However, it’s hard enough to bootstrap a start-up with cash for everyday operations without adding student loan obligations to the mix. Imagine that for a minute–not being able to achieve the dreams that I hoped to achieve by going to HBS because of the financial obligation I owe to the creditors who allowed me to go to HBS. Ironic.
I want the option to get off the treadmill. The Verve put it best: “You’re a slave to money then you die.” By taking a stand against my debt, I’m demanding an exit from that treadmill. I like my job and I enjoy going to work every day, but I’ll bet there are a lot of jobs that don’t pay six-figures and are more fun than what I do now.
I don’t want to my job choice dictated by the salary so that I can maintain my lifestyle and still make monthly $1,057 student loan payments. I want to broaden my choices. I want to go to a start-up and see what’s it’s like before I take the plunge myself. The start-up jobs that I’ve heard about rarely pay six figures.
I want the option to get off treadmill in a major way. There is an extremely, extremely low probability that I would ever do it, but I want the ability to sell off all of my stuff and just leave, just walk away from everything. I’m guessing this desire stems from the fact that before I was 14 years old, I lived in five states, two countries, and moved seven times. The thought of having to stay in one place and work a six-figure job just to make ends meet, and cannot, at any one point, walk away from it all without getting into serious trouble with the government seems a bit…stifling. If I can shed the student loans, then I have options. The value of my house has stayed flat if not appreciated since I purchased it and started paying down the mortgage over a year ago, so I can cash out of that (and pay off the $8k new homebuyer credit) and walk away and not owe anybody anything. But as long as I have student loans–which I cannot directly cash out–I’m stuck.
To Save $42k in Interest
I borrowed $95,610k. The ten-year notes carry a monthly charge of $871, or $104,520 over the life of the loans. The 15-year notes carry a monthly charge of $186, or $$33,480. So once my loans are paid off, I will have paid $138,000 even, or $42,390 in interest.
$42k in today’s dollars, in tomorrow’s dollars, in 15 years from now’s dollars–it’s a lot. It’s the start of a solid college fund for my future kids. It’s a dent in my current mortgage. it’s a used Dodge Viper, a boat, or a down payment on a vacation house.
But right now, it’s all spoken for by the loans if I keep making my standard monthly payment.
What a waste.
To Pay for My Kids’ College Educations
I want to have kids by the time I’m 35. My parents started saving for my undergrad when I was born, and my only personal expenses at Michigan were related to entertainment. Mom and Dad picked up the tuition, living expenses, and the rowing team. Thanks, Mom and Dad!
I can’t imagine spending $1,057 every month on HBS when I’m 36 and have kids’ college accounts to fund. That money should be going to their college education, not mine.
To Do More
I have a buddy who makes about as much as I do. He owns a house near me and like me, he has two cars and a motorcycle. We make roughly the same. It took me a while to figure out how he can afford to take several international trips a year, and still party as much as he does. And then it dawned on me–he doesn’t pay $1,057 a month in student loans! Heck, if I took two months off of paying my student loans, $2,100 could buy a plane ticket to a fairly exotic country. Take another couple months off, and my vacation is fully funded! Do that three times, and I just went on three international vacations in a year!
To Pay Off an Intangible
Student loans are a strange animal. Unlike a payment towards a car loan or a mortgage, a student loan payment doesn’t go towards something that is benefitting me in a direct way. Yes, my salary basically doubled when I graduated from HBS and got a job because HBS provided me with the skills and knowledge that allow me to add more value in my career than I otherwise could have without HBS. And because my salary doubled, my lifestyle improved. But the connection between HBS, the student loan payment, and my lifestyle is a harder one to make than something as simple as “My $500 car payment allows me to drive my BMW this month.” (Not that a loan on a depreciating asset is ever a good idea.)