Great Financial Decisions in DelMoniq History #3 - Takinng out Student Loans

These decisions aren't really in any particular order (other than the order in which I thought of them), so now we're going to take a little trip back in time and talk about student loans.

I mentioned a while back about my college years and how my parents were really awesome in paying for pretty much my entire undergraduate experience. So, there were no loans or anything from that time. What there was though was a crap-ton of credit card debt from my wonderful "pay for it later when I have a real job" attitude.

So, I graduated, moved across the country, and started graduate school. Again (I don't know how I keep doing this, but whatever), I lucked into an awesome situation. Two of my good friends from undergrad moved to the same city the year before I was moving there. They rented a two-bedroom apartment together. During my week-long drive cross-country with my dad (and two cats), one of my friends called me (I had been planning on staying with them while I found my own place) and said that the other friend was moving to Japan to teach English for a year or so. And she asked me if I wanted to take over her half of the apartment. YAY! I had a place to live AND an awesome roommate, and I had not even made it into the state yet. Okay, if I don't speed this up, I'll be writing a novel before I get to the point.

The point of the apartment story was that I lucked into a really cheap living situation in a really expensive city ($400/month, which dropped when we took on a 3rd roommate later on). During grad school, I kept up my frivolous college spending habits, and my credit card debt kept rising. (I could side note here another great decision involving Best Buy, my best friend, a bunch of martinis, and $2000, but I'll save that for later.)

Eventually (probably in my 3rd year), I hit the wall. My spending had maxed out my limits. My credit was GONE, and I couldn't get any more cards. I think that at the peak of my horrible-ness, I had 7 or 8 cards plus a Dell computer account. What's that you say? Where did my pay check go? Well... there was rent, food, and pretty much the rest of it went to paying the credit card payments. Pretty much, I was broke and barely keeping my head above water. And (not really learning my lesson yet at this point) once a card got paid down enough, I would just buy more crap or whatever and BOOM, card was maxed out again.

One day, my best friend, MsK (same from the Best Buy story) had a brilliant idea; she was in similar situation to myself; however, it was more dire for her. She lived alone and had her utilities cut off more than once (luckily, she's much better now). Her idea: take out student loans. Wha...????

Student loans are available to graduate students (like both me and MsK were at the time), and have a MUCH lower interest rate than credit cards. So, our plan was to take out the loans, which we didn't need for paying for school, and use them to pay off credit cards. The beauty of this was that this got the debt to go away, AND it put it all into a much "better" debt of the student loan, which would not require payments or accrue interest until we were out of school, which turned out to be another 3.5 years (for me).

The plan was GENIUS! With a few exceptions. (1) I couldn't be trusted with $5000 cash at one sitting and (2) I ended up moving a couple of times. So, here's what happened. Yes, a bulk of the credit card debt got paid off with student loans. But, not all of the loans were used to pay off credit card debt. I would venture to say that about half of the loans went to debt, and the other half was spent on buying stuff and moving expenses.

Overall, this was a GREAT decision. I wish that I had handled it a bit better, and paid off more debt with it AND that I was able to keep myself from USING the paid off cards. But all in all, I was able to pay down lots of debt, and get myself in a much better place financially for the next few years.

Now, I have been paying off the loans since 2004, which basically means I've been paying interest. And it isn't that bad. I've had ups and downs financially since then, and I am still working on getting all my other more pressing sources of debt (Taxes, credit cards, CitiLoan) paid off before majorly tackling the student loan. I just checked online, and my total student loan at this point is $39,254.02.

**shudder**

But I have faith that once my CitiLoan is gone and the credit cards are gone and the taxes are paid (not in that order, mind you) that I will be able to get this debt gone as well. Luckily, student loan interest is tax deductible.

I am a LONG way off from being 100% debt free, but taking out the student loans was definitely a GOOD idea. I just need to curb my spending and just keep plugging away.