I’m extremely excited to bring you Destroy Student Debt: A Combat Guide to Freedom, a book I wrote to help people pay off their student debt early. After receiving hundreds of emails asking for tips and advice for dealing with student debt, I finally took the time to put pen to paper and offer a concise battle plan to defeat student loans. I regard this book as the capstone of my NMHD journey and I hope that it helps others find freedom like I did.
In the spirit of frugality and goodwill, I’ve decided to give the book away for free on Amazon until Friday. If you get a free copy, please leave a review on Amazon.com. I’ll be rolling DSD out to other devices after my exclusivity period with Amazon expires in three months.
Subtle tips and advice can be gleaned from my other ebook, a 440-page direct conversion of my self-reflective blog that I maintained while I was paying off my student loans, but I wrote this current book from the ground up to explicitly help others get out of debt. The themes are more universal, the tone is far more prescriptive, and the content includes only the essentials of what you really need to know to wage all-out war on your student debt and walk away victorious.
When CNN and WSJ and others wrote about my mission to pay off $90k of debt in seven months, I received countless emails from people asking me how I did it. I didn’t really know how to respond because I figured people could either get the details in my blog or read about the main points in the articles. During the past couple of months, however, it dawned on me that folks probably want something shorter than my blog, but longer than the articles and interviews, and they want something that’s more universally applicable and instructive, too. At 440 pages, the blog is too personal and long-winded, but at roughly 400 to 500 words, the articles are too short to be of much help.
Using my debt pay-off experience as a baseline, I’ve spent quite a few hours during the past couple of months drilling into what I believe leads most people to consume and the solutions and mindsets that individuals can employ to avoid these causes of consumption. This 110-page book is 100% fresh and written to target “the gainfully-employed-but-highly-indebted reckless spenders who recognize they have a spending problem and want to fight debt, but don’t know where to start.”
(This ebook is self-edited just like my blog-to-ebook, so please email me about any flagrant grammatical errors and I’ll be sure to fix them.)
Here’s the same preview that Amazon is currently providing on their site:
Destroy Student Debt
A Combat Guide to Freedom
By Joe Mihalic
Table of Contents
- Introduction | The Enemy: Student Debt
- Part 1 | Mission Briefing
- Ground Zero
- The Battle Plan
- Part 2 | Know the Enemy: Causes of Caustic Consumption
- The Enemy’s Plan of Attack
- CCC #1: Biological Warfare
- CCC #2: Psychological Warfare
- CCC #3: Propaganda
- CCC #4: Mind Manipulation
- Part 3 | Defeat the Enemy: Weapons against Consumption
- WaC #1: Retaliate Immediately
- WaC #2: Focus on Cash Flow
- WaC #3: Understand Hedonistic Adaptation
- WaC #4: Be Happy. Right Now.
- WaC #5: Return to Core Values
- WaC #6: Crystallize the Contrary
- WaC #7: Reevaluate Facebook
- WaC #8: Know When to Take Five
- Conclusion | Be Bold
- Appendix | Throw the First Punch
In the end, it is not the extraordinariness of the teacher which perplexes, intrigues, and deepens the student; it is the teacher’s utter ordinariness. Because he is just himself, he is a mirror for his students. When we are with him we feel our own strengths and shortcomings without any sense of praise or criticism for him. When we learn to let our own nature free, the boundaries between master and student disappear in a deep flow of being and joy in the unfolding of Buddha mind.
-Shunryu Suzuki, Zen Mind, Beginner’s Mind
I wrote this book to help you destroy your student debt. When CNN, WSJ, Yahoo!, Huffington Post and others covered my blog about my mission to destroy $90k of student debt in seven months, many of the message boards were filled out with outraged commenters asking why the media made a story out of a guy who paid his loans off early with a salary “in the low six figures.” To take that one step further, you might ask why you should read a personal finance book by somebody with such a salary. Do I really think that I can help people drowning in student debt?
In reality, the low six-figure salary was not something like $300k or even $200k—it was $103k, which is $74k after tax. In seven months—the amount of time it took me to pay down my $90k of debt—that’s $43k, and after my mortgage, that’s $33k. So I had $33k at my disposal for not only the $90k of debt, but for any living expenses outside of my mortgage, too. In other words, I wasn’t in a situation where I stopped taking my personal helicopter to work every day and had my chauffeur drive me in my Maybach so I could save money on jet fuel. I had to get aggressive with my spending habits, and the low six-figure salary wasn’t the key to my success.
A comment posted in response to the summary video I made at the end of my mission read,
LOL too funny, but i have to say, i am in a very similar situation except add +$30K & a different school but i have a kid and a wife too. I can’t do it in 7 months, but i am shooting for 24 months! good on him! I think its safe to say that this is many ppl problems.
Another comment read, “My income isn’t even close to this guy’s, but neither is my debt. This is an inspiration!” Similarly, a 23-year-old who has no savings, an enormous bank overdraft fee, and credit card and student debt referenced my story on his own blog and said, “If this guy can pay off $90k in 7 months, then I can pay off £4k in 12, no problem.” These are just three of the thousands of comments I received from inspired readers who didn’t allow my salary to excuse them from losing their own personal fight against debt.
Maybe it won’t be possible for most people to pay off $90k of debt in seven months, but just as these three individuals implied, it doesn’t have to take forever, either. I’m confident that this book will provide you with a battle plan that will enable you to destroy your student debt at an aggressively accelerated rate, regardless of what your salary is.
Chapter 1 | The Enemy: Student Debt
As long as we have some definite idea about or some hope in the future, we cannot really be serious with the moment that exists right now. Some might say, “I can do it tomorrow, or next year,” believing that something that exists today will exist tomorrow. Even though you are not trying so hard, you expect that some promising thing will come, as long as you follow a certain way. But there is no certain way that exists permanently. There is no way set up for us. Moment after moment we have to find our own way. Some idea of perfection, or some perfect way which is set up by someone else, is not the true way for us.
-Shunryu Suzuki, Zen Mind, Beginner’s Mind
Make no mistake about it: student debt has trapped many recent grads and it’s limiting their freedom. This conflict isn’t a minor inconvenience, a big problem, or even a full-blown national crisis—it’s straight-up war. As is often the case with war, the blame lies with several parties. In this case, we can point the finger at the schools that keep raising the price of tuition, the students who keep asking the banks for money for tuition, and the banks that keep funding the tuition.
The private student loan market has grown from less than $5 billion in 2001 to over $20 billion in 2008, and in 2012, combined student debt stands at $1 trillion. Similarly, from 2010 to 2011, in-state tuition and fees plus room and board charges exceeded $17k at four-year public institutions, a tremendous 6% increase from only one year earlier. These days, the average student graduates with $25k of student loans.
Student loan debt now exceeds credit card debt, and many experts believe that as students take on more and more debt to fund their educations, we’re creating a student loan bubble that will pop when students default on their loans and will devalue creditors’ portfolios everywhere and create a recession as bad, if not worse, than the one created by the subprime mortgage crisis in 2008.
This book won’t offer solutions for the banks that are giving away money too freely, and it won’t attempt to fix the colleges that have dramatically increased their costs over the years. It will instead start with you, the reader of this book and the debtor of these student loans, and it will establish a battle plan to free yourself from the death grip of student debt.
With an average debt of $25k, many recent grads are diving into a life of consumerism without understanding the long-term implications of their actions. They don’t appreciate just how little control and freedom they have when a significant portion of their income is going towards their student loans, and instead, they buy things they want and pay down their student loans at the minimum rate for years and years rather than buying only what they need and paying down their student loans as quickly as possible. Student debt is like a schoolyard bully forcing them to give up their lunch money every day, but it’s so subtle that recent grads aren’t even aware that they’re being extorted by it.
Student loans have become the credit card of the 21st century. They’ve enabled recent high school graduates, uncertain about their futures, to borrow tens of thousands of dollars at a high interest rate for an education that leads to a career in a field that they might not really be interested in when they graduate four years later, let alone fifteen years later when they finally make their last loan payment on the standard repayment plan. The career they landed with their debt-funded college degree has allowed them to be active consumers and buy things they want, but they still have a huge amount student debt that they owe to the banks and the government over the course of 10, 15, sometimes even 25 years.
The last thing creditors want is for you to pay your student debt off immediately. The longer you let your student debt live, the more money it sucks out your pocket, in the form of interest, and puts into the pocket of the bankers who gave you the loans in the first place. For example, you might take out $50k at 5% interest for a ten-year term to pay for tuition. You’ll pay $16,639 in interest over the life of the loan, and some of that will offset inflation, some of it will pay for the processing of paperwork that’s required to transact the loan, but most of it will go to the bankers’ pockets.
If you inherit $50k from a long-lost relative the day after you take out the loan and you really want to show debt that you’re not to be trifled with, you should immediately take that money to the bank and repay your loan. Not enough interest has collected on the loan to profit the bank or even pay for the people who processed your loan. When you beat the debt into submission that badly, you win and save $16k in interest charges. The bank hates it when you beat debt that badly, just like they hated it when I destroyed my $90k of debt in seven months and deprived them of $30k in interest.
Make no mistake about it: student loans are public enemy #1 and they’ll trap you into a life without options until you beat them down. Unlike credit card debt, student loans can’t be easily discharged through bankruptcy proceedings. Let’s say you’re working away at your job as a lawyer. You graduated from law school a year ago and walked away with $120k in debt. You’ve been making really good money as an attorney, so you bought a fancy new car and new clothes and you’re living in the best area of town. You feel good that you’re able to keep up with the standard payments on your student debt and still afford such a luxurious life.
For whatever reason, however, you don’t really feel fulfilled. You weren’t sure what kind of a career you wanted to have when you graduated from college, so you took the LSAT and made it into law school. All the lawyers you knew at the time seem to have really plush lives, and you wanted to join their ranks.
In an attempt to improve its public image, the partners at your office recently took on a pro-bono engagement at Teach for America, the non-profit organization that puts teachers in low-income communities throughout the country in an attempt to reduce educational inequality. The partners chose you to head the project, and one day, while you’re meeting with a teacher and learning more about what they do, you have an epiphany and realize that you want to be teacher. In your newly opened eyes, nothing seems more fulfilling than giving underprivileged children a solid education and being a role model for them. You already have a relationship with TFA and they think you have great leadership skills, so they offer you a job. You quit your job as a lawyer and you start teaching at a school in an impoverished neighborhood. You love your new job and realize that this is what you were born to do.
The only problem is that teachers don’t make the kind of money that you made as a lawyer, and you still have a mountain of student debt to pay off.
If you can no longer afford to drive your Ferrari and you think a Honda Civic would be the way to go, you can always sell the Ferrari and get rid of your auto loan at no cost, assuming the Ferrari hasn’t depreciated to a value below what you owe on the auto loan. Likewise, if you can no longer afford to live in a mansion and you think a one-bedroom apartment would be cozier, you can always sell the mansion assuming you don’t owe more on the mortgage than the contract price net of realtor fees.
Unfortunately, if you’re no longer benefiting from the education you borrowed so much money to fund, you can’t sell the piece of paper that serves as your college diploma; you owe the money for that education no matter what. Due to the nature of student loans and bankruptcy laws, you still won’t be able to erase your student debt even if you sell off all of your assets and claim bankruptcy. The creditors of student loans have been known to be ruthless. I remember when I got personal calls—not automated calls, but personal calls—from the bank on the same day every single month asking me why I hadn’t yet made my monthly payment on my student loan. They didn’t realize that it took my bank a day or two to clear the transaction and transfer the funds to them, so they’d call always call and hassle me about my “overdue” payment.
So how do today’s lawyers who want to be tomorrow’s high school teachers (or skydiving instructors or musicians or artists, etc.) avoid getting into serious trouble with the banks for not paying for the degree they no longer value? The answer is to never treat student loans like a credit card in the first place.
When I graduated from grad school with $101k of debt, I bought things like my TV and furniture with my credit card. I paid that credit card off every month, though, and I thought that I was being a fiscally responsible consumer. As long as I didn’t have credit card debt, I reasoned, I was doing just fine.
In reality, I did have credit card debt, albeit indirectly in the form of my student loans. It’s no coincidence that student debt now exceeds credit card debt in the US. My student debt had funded my education which allowed me to land a job with a $103k salary which allowed me to buy things I didn’t need on credit and pay off the balance of my credit card every month. I wrongly assumed that since I wasn’t racking up the 20% interest rate on my credit card, I was being a responsible consumer. In reality, I was just being a less irresponsible consumer. I still had student loans, the initial debt that landed me a high-paying job and facilitated the lifestyle I was living at the time. By having indirect consumer debt in the form of student loans, I was incurring interest of up to 7.9%, the interest rate on my student loans. That’s not 20% like my credit card interest rate, but it’s still significant. If I had taken my student loans—my 21st century credit card debt—to full term, I would have paid $42k in interest. That’s not fiscal responsibility; that’s a trap that prevented me from switching careers if I ever found something more fulfilling to do.
As people continue to consume things they don’t need and pay down their student loans at the minimum rate, they remain trapped by their debt and their options in life remain severely limited. Not only are career changes a non-starter for people burdened by student loans, but The Washington Times recently reported that student debt is forcing recent grads to postpone standard life events like getting married, buying a house, and starting a family. (And for those who have already married, student debt can even lead to failed marriages; the number one reason for divorce is money problems.) Indeed, career changes and life events that Americans take for granted will forever remain elusive to those who don’t stop consuming things they don’t need and start paying down their student loans aggressively.
By becoming debt-free as quickly as possible, you can get onto a path that leads to freedom and a brighter future that you can fully control. In this book, I’ll teach you the hand-to-hand combat techniques that I learned in my own personal fight with the $90k of student debt that I paid off in seven months. I’ve met the enemy, studied it, learned its ways, and I’ll help you defeat the enemy.
Part 1 | Mission Briefing
Chapter 2 | Ground Zero
In order not to leave any traces when you do something, you should do it with your whole body and mind; you should be concentrated on what you do. You should do it completely, like a good bonfire. You should not be a smoky fire. You should burn yourself completely. If you do not burn yourself completely, a trace of yourself will be left in what you do. You will have something remaining which is not completely burned out. Zen activity is activity which is completely burned out, with nothing remaining but ashes. This is the goal of our practice. This is what Dogen meant when he said, ‘Ashes do not come back to firewood.’
-Shunryu Suzuki, Zen Mind, Beginner’s Mind
They say that hindsight is 20/20 and I have to agree. Our thoughts and actions are not always clear when we’re going through a challenging time and the heat of the moment is scalding hot. We often lack self-awareness during these times and we don’t always know why or how we came to think or do certain things. And since practice makes perfect, we usually find that there’s a better way to do something after trying it even just one time.
Rapidly paying off debt was a foreign practice to me when I challenged myself in August 2011 to pay off $90k of student debt in ten months. Sometimes, it felt like I was fighting debt with a blindfold over my eyes and one hand tied behind my back. It was difficult for me to lay out a coherent battle plan when I was fighting in the thick fog of war.
For reasons I’ll go into later, I used to be very materialistic and extremely money-hungry. As a high school student, my singular life-goal was to make an annual salary of $100k as soon as possible. In 2009, at the age of 26, I graduated from Harvard with my MBA, $101k of student loans, and a tech job with a base salary of $97k and a signing bonus of $17k. I had achieved my life’s dream and I immediately started spending money, beginning with the purchase of a BMW M3 before I even graduated from Harvard. In the first two years after graduation, I bought a three-bedroom house, furniture, entertainment system, a second car, a motorcycle, and a carbon fiber road bike. I spent $800 to $1,300 per month on entertainment—going out with friends, dinner dates, and traveling. I spent the money on things and experiences to feel better, to make life easier and more fun, to make sure I experienced all the “right” things, to fit in, and to impress friends and strangers. In a way, I was trying to make up for all the times I ate my lunch alone in the library during high school instead of with friends in the cafeteria. (I’ll talk more on that last point later in the book.)
I was living at the very edge of my means. Every dollar I made was completely allocated to paying off my student loans at the regular rate, zeroing out my monthly credit card balance, and putting 10% of my salary towards my 401k.
One day in August 2011, I checked my student loan balance. In the past 22 months, I had spent over $22k on my loans ($1,057 per month) and had chipped away only $10K of the $101k principal, putting the loan balance at $91k. It would take 15 more years to clear the debt if I continued to make only the minimum monthly payments.
That night, while struggling to fall asleep, I came to the realization that unless I made some extreme lifestyle changes and paid off my debt, I would remain trapped in my current life. I was living at my means and I couldn’t afford to start a family, change careers, start a business, buy a business and turn it around, or even take a year off from work and backpack around the world. I wasn’t sure that the 50+ hours per week I spent at the office in my current job was something I wanted to keep doing, and I wanted the freedom to try other options. At a bare minimum, I wanted to stop feeling like student debt had me pinned down to the mat with the referee standing over me and counting to ten…
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