002 No Money, Mo' Problems (my financial history) [story]

My journey to become financially stable is riddled with mistakes and a lot of shame.

2009-2013 - A serious decision not taken seriously

I decided to attend the University of Washington (UW) as an out-of-state student. Non-resident tuition that year was $24k. At that age, that didn’t matter. The expectation was to go to college, and UW was my favorite option, so I was going to go. I briefly remember discussing financial concerns with a close (and smart!) English teacher, who suggested I defer one year so I could work in Seattle to gain residency. I stubbornly dismissed the idea because I was so set on going to college for four years immediately after high school, and any other order would have been embarrassing.

While I qualified for FAFSA and a few grants, they didn’t cover the full amount. My mom graciously applied for the PLUS loan. My parents’ credit was not great at the time, so interest rates were around 7-8%, which I didn’t know was high.

As I received the money in quarterly installments, I spent with no regard. I was still a "frugal" person, so I would find deals, like renting textbooks from Chegg or scanning chapters in the library instead of buying new. However, I spent this money like I had earned it, with no consequence. Every quarter, I even used loan money to buy flights back home. Mind you, I always had some kind of job throughout college. It was another self-expectation to be employed; I had worked ever since I was 15. Some of the money spent was my own, but not proportionate to how much I was spending.

As financial aid applications rolled around each year, the process was always the same: I tried to get as much free money as I could via grants, then covered the rest with loans.

One key memory is the bad advice I heeded from a peer just because she sounded knowledgeable. I regret this greatly. It was the summer after freshman year, and we were having lunch with old high school friends back in my hometown. Student loans came up, and she claimed that Sallie Mae and other private lenders were a better option. I don’t even remember her argument, but I remember feeling impressed enough to switch to private loans from then on. Even writing this makes me frustrated with my younger self. My mom was involved in the financial choices I was making, but as immigrants, she hadn’t navigated funding for higher education. Thus, we proceeded with the loans, not realizing that I was signing up for loans with 8-10% interest due to poor credit.

By the time I graduated, I incurred over $130k in loans with interest rates as high as 10%.

2013-14 - Student loans as a financial and emotional setback

I graduated “on time,” four years later in June 2013 - just like I wanted and envisioned. I secured my first job as a sales rep for AmazonLocal: low salary of $37k but a high potential for commission. I was heading into the adult chapter of my life. Things were great.

I set my student loans on autopay with the minimum payment. I always had the “broke college student” mentality, so even with a $37k base salary, I had enough leftover for rent and personal spending. I joined Amazon with a college hire class - aka 30 new best friends - and we all felt fresh with freedom and a salary. Again, life was good. Similar to how I didn’t blink an eye spending loan money in college, I didn’t blink at repayment progress because autopay was set up. I knew it was a lot of money, but I didn’t want to acknowledge that part of my life.

Fast forward to some month in 2015. I’m pretty sure I checked my student loan balance at work, just to see. Casually looking at one statement turned into a gut punch so hard I couldn’t breathe for a few minutes. The principal for this particular loan was ~$20k. The amount I had paid so far was ~$20k. How much was left in the principal? $20k.

No movement. After two years. Paying tens of thousands of dollars.

I proceeded to check all of my student loan balances in greater detail and sure enough, I had only made a negligible dent in the principal. This harsh and shocking realization would become the catalyst in my student loan journey.

Snapshot of current loans on March 25, 2016, three years after graduation. I had difficulty finding my balance from the first servicer at the time.

2015-16 - I need to make a change

I don’t remember how I stumbled across the idea to refinance my loans. Maybe a kind friend or coworker who empathized with my situation. Maybe a commercial. Whatever it was, I knew it was what I needed to do. What else could I lose? I considered the risk that refinancing government loans would disqualify me from any future benefits (e.g., loan forgiveness like what we saw during COVID with paused payments). Still, I thought the trade-off in lower rates was worth the risk.

When I applied for a refinance in 2015, I got rejected. It turned out my credit score was under 600. Another gut punch. I had never really needed my credit score before, and I hadn’t had issues renting, so I wasn’t keeping track. The emotional pain and shame of being finally ready to take financial responsibility, and I couldn’t even take that first step. I was extremely discouraged and wanted to turn my head again but I knew that this wouldn’t go away. I reluctantly looked into my credit report and discovered I had thousands of dollars in medical debt in collections.

Why? Quick flashback to 2011-12. During that time, I developed intense acne that really affected me, and I was thankful when a doctor prescribed Accutane. While the acne cleared, what was left behind was the large bill. I don’t remember actively choosing not to pay, but I do remember choosing not to ask my parents for help because I didn’t want to burden them. So I ignored it and hoped it would go away.

2015 Tanya can tell you - it didn’t go away. And I’m proud that 2015 Tanya decided to buckle up and face her financial shame. I reprioritized where my paycheck was going and set out to clear my record. And I did! I paid my medical debt in full - I believe within a year. This was my first milestone of many. I eagerly awaited my credit report update and score increase. In time, it reached above 650. This allowed me to hit my second milestone: refinancing my high-interest loans through SoFi.

(At the time, I didn’t know you could call the collections company to negotiate a smaller bill. If anyone reading this has debt in collections, look into that! It would have fast-tracked my efforts.)

2018-19 - Momentum, and hope (22% to goal)

Within 1.5 years of the last snapshot, I paid down about $15k of the principal. On paper that’s a lot, but since I was overpaying the minimum, much more than $15k went to interest. Even assuming I paid just the minimum, that would indicate $15.6k/year. After four years of paying since college - $62.4k total - the balance had only gone down $29k.

Another snapshot found from November 14, 2017. One of my loans switched hands to Heartland ECSI, a servicer that charged a $1.00 processing fee atop the interest.

I attempted my second refinance application at the end of 2017, and in January 2018, I was approved to refinance $55,000 at 5.375% - targetting the top 3 interest rate loans noted above. I unfortunately couldn’t refinance the PLUS loan due to various reasons at the time. This monumental milestone allowed me to set my SoFi monthly payments to the minimum required so I could overpay the remaining high-interest loans on that spreadsheet.

2015-19 - A mix of luck, privilege, and hard work

Since the refinance, I saw how much progress I was making toward the principal. With the amount of money I could contribute to overpayment, calculators told me it would still take me 7-8 years to pay it all off. While a long horizon, it seemed manageable for once in my life?! I still led a frugal life and maintained a “broke college student” mentality, so that helped.

The refinance alone wasn’t how I got here, though. I have always been a very ambitious person and prioritized career progression. I was blessed with a combination of hard work and strokes of luck.

• My salary increased steadily as I moved roles, moved companies, and received promotions. I began making six figures in 2018, which helped immensely.

• When working at my second company, I was part of the company’s growth as it scaled from 20 people to 200 in six years. This came with generous annual bonuses and a stock payout from being acquired. For example, one year I received a $20K bonus that allowed me to pay down my principal further.

I also had some help from loved ones, which I recognize is a privilege.

• My parents contributed a bit during different parts of this journey.

• My wonderful partner also selflessly contributed when we had only been together for three years at the time. I asked him to stop after a year, as I had too much shame associated with it and felt like I needed to take care of this on my own.
  

2019 - The final milestone (72% to goal)

The next-to-final step in this journey was refinancing my student loans one final time. This was especially important, as my credit had improved even more by that point. I had two remaining loans totaling $36,000 with an average 5.19% interest rate. In September 2019, I successfully refinanced that amount to a mere 3.86%! It was a 5-year term with a $661/mo minimum payment, but I had goals to be done well before 2024!

2020 - Are we there yet? (100% to goal)

I’ll start this section with great news - I PAID MY STUDENT LOANS OFF IN DECEMBER 2020!!! My partner and I were saving cash in the event we wanted to buy a home one day. We made the decision to use some of it to fast-track payments. That large repayment, combined with my continued overpayment strategy over the five months following, led me to the moment I had been DREAMING of for years. One simple click of a button, and I could say I was DEBT-FREE! One click of a button, and I could say that I accomplished one of my 30 before 30 items: to pay my student loans off before I turned 30 (I was 29). One simple click would be the anti-climactic ending to years of shame, guilt, and regret. Bring it on, I’m here for it!

Balance over time (limited data input)

Interest rates over time (limited data input)

I acknowledge that there is privilege in this journey. To pay off the amount I had in seven years is not tangible for many people. You’ll hear in a lot of FI communities that one of the best ways to move forward is to increase income, and I can’t deny that this was a driving factor in my success.

While therapeutic to write about my financial past, I also hope it may prove useful or educational to others. Thank you for reading!