Student debt: $5K down, $5K to go!

The last update I gave on my student debt was back in September and was also one of my very first posts on this blog. I am now happy to report that my outstanding debt has dropped from $10K to $5K! [Update: My debt is now completely paid off! Feel free to read the rest of this post for what it was like in the trenches, but you can read the post-debt recap here.]

Let me recap the situation. My parents made an agreement with me and my siblings that they would cover our first college degree, but were expected to pay them back for any additional education. The key words here are pay them back. One of the best gifts that my parents have given me to date (other than raising me to be a responsible adult, providing a roof over my head, and many other great things), is providing me with an interest-free loan for grad school. Not having the pressure of that debt made me free to focus on developing other parts of my financial well-being. Of course, being who I am, I’ve absolutely prioritized paying them off as fast as possible. The definition of “fast” has changed since I started over two years ago, but I’m now finally nearing the end. For my parents’ convenience, I’ve paid my parents off in sums of $5,000. I had no set due date for repayment, which means my monthly savings goals are dictated, and adjusted, by me.

In July 2014, I set up a Capital One 360 Savings Account to deposit my debt repayment money into. Every time I hit $6,000, I would transfer $5,000 back into my account and pay off a portion of my debt (I liked not having the amount in the account go completely to $0). My first transfer into the account was July 17th, 2014. Here’s what my repayment history looks like from there:

My debt repayment timeline

Summer 2014: My parents and I agreed upon a $35K repayment sum, which was the cost of my graduate school tuition, plus the month of traveling I did afterward, minus scholarships I received to cover tuition.

7/17/14 – I funded the account with $200 from my emergency fund.
7/18/14 – Go big or go home. I threw in another $300 from my emergency fund.
7/28/14 – A one-time deposit from my checking account of $300.
8/1/14 – Here’s where I started figuring things out. I set up a bi-monthly auto-deposit of $300.

10/15/14 – I increased the bi-monthly deposits to $350.

1/6/15 – Dropped in $1,000, which was likely from a work bonus. I also readjusted my bi-monthly deposits from the 15th onwards to $450.

2/2/15 – I made my first $5K payment! My account balance before this withdrawal was $6,311 (0.75% APR means I gained some interest).

2/23/15 – I made a deposit from my “Wedding Day” savings account in the sum of $2,000. I didn’t need to have so much into that account… yes, I am in a serious relationship, and yes, I want to get married one day, but even writing this post in 2017, that day is not coming up anytime soon. I was silly to think that I need that much money sitting aside for me in 2015. Money needs to work for me!

3/2/15 – I made another Wedding Day savings account transfer, this time in the amount of $303.96. I moved my money back and forth quite a bit between savings accounts in 2015.

3/16/15 – Time to pull the belt a little tighter – I increased my bi-monthly auto-deposit from $450 to $525.

4/1/15 – Scratch that, I realized I could do even more. $525 increased to $625. Much of the driving force between my ability to continually increase my auto-deposits this first year is due to the fact that I was still living at home at this time. Not having to pay for rent or groceries was a huge benefit in my ability to save money.

4/6/15 – Withdrawal of $4,000 for my second repayment, only two months after my first! This was timed after my first ever tax return of ~$1K came in, which went straight towards my student debt. 9 months into this process, I had paid off $10K of my $35K debt, which felt fantastic.

5/5/15 – A $529.34 transfer from my emergency fund. While student debt was prioritized for me, I was also making smaller, regular deposits into other savings accounts. If I felt that another account was at a comfortable place, I’d transfer some money into my student debt account to give it a small boost.

7/1/15 – I decreased my deposits from $625 bi-monthly to $600, the first decrease so far.

7/9/15 – Transferred a small “boost” from my emergency fund of $120.

8/4/15 – Payment number three! Only four months after the last one. At this point, I had only been working on this goal for 13 months, and I had paid off $15K out of $35K.

8/26/15 – Another “boost” from my emergency fund, this time $340.

9/14/15 – My first non-payment withdrawal! I took out $450 because I was starting to struggle with some cash flow issues. I was also preparing to sign a lease with some friends and finally move out from my parents’ place, which meant my costs were going to go up.

11/30/15 – I realized around this point that I couldn’t maintain putting away $1,200 a month towards student debt and still pay rent. I decreased my deposit amounts to $300 and $400 (why I made them different instead of $350 each, I don’t know).

4/16/16 – My next repayment, seven months after the last one. Oof. This withdrawal, like April 2015, relied on a tax return booster, so I only took $4,000 out of my savings account. At this point, I also crossed over the halfway mark of my student debt repayment.

6/15/16 – I increased my monthly total deposits from $700 to $800, which mean $400 bi-monthly. I had also moved to NYC at this point, although I was still in the process of figuring out how my cost of living netted out.

8/16/16 – A one-time “boost” from my checking account of $300. I also increased my bi-monthly auto-deposits to $450.

9/6/16 – Payment number five! $5K to my parents, which means my debt was down to $10K. This is the month that I started Cash Fasting.

3/31/17 – Increased bi-weekly deposits from $450 to $500.

4/4/17 – Second-to-last payment! I have $5,000 left in debt and a $1,286.67 balance in my savings account. With my current savings rate, I will have $4,787 by the end of July, so I’ll be officially all-clear August 1st (only one month after my planned payoff date).

Almost there!

To date, I’ve paid off $30,000 in debt in 2 years and 9 months. That’s an average of $900 a month towards debt, which was done while also building an emergency fund saving for retirement, and opening an investment account. There are tons of people out there who have paid off debt faster than me, but because my debt was interest-free, I’m glad I focused on building my wealth in other areas so I’m not starting from zero once this is all over.

The most important thing when it comes to debt is to constantly work at it. Yes, one-time boosts made a difference and helped speed up my repayment timeline, but my regular deposits did all the heavy lifting. I set up auto-deposits from my checking account that would withdraw money from my paycheck as soon as it entered my account. You can’t miss money that wasn’t really there in the first place (which I think is the secret to meeting any, if not all, financial goals).

When I do finally finish with this debt in a few more months, I think it will be a huge weight off my shoulds. I’m excited to update you all about it when that day comes!