This week is a truly momentous occasion in the life of my family, as in the one Dolly and I formed in June of 2016. After nineteen months of making huge payments and receiving one particularly incredible blessing, we are completely debt free! You can read Dolly’s perspective of all this on her blog.
For anyone who knows me personally, you know this is something close to my heart. I spent the first five years of my career doing web development for Dave Ramsey’s company. While there, I not only supported the business, I lived the debt-free lifestyle. Indeed, I was unbelievably blessed to finish college with no debt. The older I get, the more thankful I am for my diligent parents, academic scholarships, and God’s kindness toward me that allowed that to happen. I then saved up a down-payment over a few years, and with it I purchased my first home in January of 2015. Coincidentally, this is the exact time my now-wife Dolly entered the picture.
Over the course of our relationship that year, she slowly divulged to me that (like 71% of our generation) she had significant student loan debt. It wasn’t until we began moving toward marriage that she divulged the figure – $165,000. Altogether it was a mix of five loans (both federal and private), accrued through undergrad, grad school, and consolidations. Revealing this was a huge step in trust and intimacy for us. She saw the debt as a source of shame, especially in light of my financial position. At that same time, there was no denying it would be a huge challenge.
As a firm believer that two become one in marriage, I told Dolly that once we became husband and wife, this was our challenge to face together. It wasn’t “her problem,” it was ours. I don’t say that to garner any praise, but simply because I believe that is what the Bible teaches, and it is what my wonderful parents modeled for me. This meant having difficult budgeting discussions and decisions leading up to marriage, but we were ready to tackle it. Upon tying the knot, we began throwing huge chunks of money at the loans each month, primarily using the debt snowball method espoused by my former employer.
In these early stages, it was not uncommon to pay $2,400 toward the loans and see only $1,800 of progress. Yes, that means $600 (25%) was going toward interest every month. At this point, I really dug into the details and realized that this industry is far sleazier than I even thought possible – absolute scum. (I don’t typically curse, and I won’t here, but Dolly will tell you these guys were the only ones who could bring it out of me.) Here are some things we learned during this stage:
- The first thing I noticed was that some of the payment plans Navient had advised Dolly to use weren’t even covering the interest accrued each month. Let that sink in; the loan company had encouraged her to make payments that would drive her deeper into debt for the rest of her life! When I pointed this out to her, she said that of course they had never mentioned that to her, and they said they were trying to help her out by offering this option.
- Our first step was to change these payment plans, of course, but the accounts were locked into an auto-pay system that required a phone call to alter. Even though it was possible to access all account information and make one-off payments through the web, they really didn’t want you messing with the payment plans they set up for you.
- Upon calling to change the auto-pay, Dolly was advised that payments must be set up to occur at the end of the month. We wanted to change it to early in the month to help with budgeting, but that was not an option. As I racked my brain as to why they would be so strict about something seemingly arbitrary as the payment date, it hit me…
- Almost all loan servicing companies compound interest daily. (I’m convinced this is only because they don’t have the ability to compound it secondly.) Hence, you are not allowed to have an automatic payment occur until the absolute maximum amount of interest for the month has been squeezed out of you. Classy.
- In another instance, when Dolly called to change her name, she mentioned in passing that it was because she was now married. Keep in mind, despite our united front against these con artists, all accounts were left solely in her name. When the worker on the call discovered she was married, he stated that they would now raise her interest rate from 5.25% to 9%. As far as we could see, there was no stipulation in the loan agreement for this, but the banks get to set the rules (and rates). That loan became our primary target to wipe out as quickly as possible. We paid most of it off with a lower-rate HELOC and finished the rest in a couple of months, sticking it to them in a minuscule fashion by denying them a few thousand in interest.
- Although the employees in these call centers were generally pleasant, they work for truly terrible people who make them do truly terrible things as a matter of company policy. When I deride the companies, it is the higher-ups for whom I reserve the most wrath. I take no issue with anyone becoming wealthy off of a legitimate business. The executives constantly rewriting the rules to squeeze every penny from the indebted look more like payday lenders than legitimate businessmen.
These were just a few of the highlights from our first year of doing battle. Coming up on our anniversary in June of 2017, we had made decent progress down to $147,000 owed. Still, the end was nowhere in sight. Even in an ideal scenario, we were looking at another four years, and more likely five, even as we threw almost all of our “margin” each month toward the debts. On top of that, each time the Fed adjusted rates, the rates on the loans ticked up, adding months to our projected finish date.
One tired evening in July, I was mowing the lawn by streetlight. I had picked up an extra work project to put money toward the debt, and this was the first chance I had to mow in weeks. As I slogged through the humid night, I reflected how home ownership wasn’t all it’s cracked up to be. A thought, possibly divinely inspired, entered my mind: why don’t we sell the house? I wondered what it could be worth two years after purchase in Nashville’s booming housing market.
The next morning, I did pricing research and ran the numbers five different ways. If we sold the house for what these estimates said, we could be completely debt free in less than a year.
That evening I presented the plan to Dolly on a piece of printer paper, revealing each step of the plan line-by-line with a JoAnn Fabric flyer. “Imagine… We sell the house and walk away with this much profit… We immediately pay off this loan, this loan, and that loan… We can rent a place for this much each month and still have this much to pay toward debts… And we will have no debts in ten months.” She looked at me, nodded, and said, “I’m in. I’m in.” (I now wish I would have made an actual PowerPoint presentation, but I will treasure that piece of paper for the rest of my life.) In October, we closed on the sale, netting even more than we projected and leaving less than $20,000 left to pay.
Now here we are in January of 2018, owing not a dime to those snakes. Although we are starting over at zero, as it were, our family is free. We have options we never had before with our resources, our time, and even our calling, and for that we cannot thank God enough.
Our main takeaway and warning is clear: do not mess with these shysters. If you are beholden to them, get them out of your life as quickly as possible. Each month they get a chunk of your income is a month you are not free to steward as you see fit. When it comes to education, truly and deeply consider whether college is worth the price. Learning in any form is valuable, but I now believe there are vastly more cost-effective methods than the university system, especially in our technical age.
Never stop learning, but by all means, always live freely. You never know what paths may open up when you owe nothing to anyone.