Giving Debt the Middle Finger – I Finally Paid Off My Student Loans

I made my final payment on the student loans this past week. The remaining balance was the better part of $7k. After paying all the bills for June, I saw that I had the money in my checking account. And for some reason I have tortured myself with these loans. Despite aggressively paying extra principal each month, and despite refinancing them from 6.8% interest to under 4% interest, I was still never able to compartmentalize the phenomena of being responsible for these loans – every time I looked at the statements I felt compelled to throw more money at the debt, and the closer the balance reached zero the more I wanted to pay the fuckers off.

So after seeing I had the cash to cover this debt in my bank account, I decided to finish it off with one final key stroke.

I am writing this post on a Saturday, and I pulled the trigger earlier on Tuesday. The situation has begun to sink in, although it’s still not entirely “real” to me. It’s great not to have this balance needle at me any more, but I think it will be even greater to see money come into my checking account that is not immediately earmarked to pay off debt. Instead, that money can be used to acquire assets.

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For a moment there I almost felt guilty. In a way, this was a irrational decision. The interest rate was under 4% and I was at the tail end of the loan; the part where most of your payment goes to principal. The prevailing notion is that you can do better by playing interest rate arbitrage and investing in the stock market, real estate, peer to peer lending, etc. And there is also something to be said for liquidity. Cold hard cash to deploy when opportunity strikes or need arises. Once you pay off a loan, you can’t get that cash back if you need it. So there is an opportunity cost to paying off debt early. Aggressive investors play the arbitrage game, find higher returns elsewhere, and keep liquidity in mind if a good opportunity comes along.

That feeling of guilt has largely faded away. The debt was like a splinter under my fingernail, and I’m glad the day has come where I could finally pull it out. No real regrets at this point. I’ll let you know if that ever changes.

I think the exercise with the student loans and my desire, my borderline unnatural urge to pay them off, says a lot about my personality. Ever since I graduated and saw exactly how much I owed my burning desire has been to pay this debt off. As soon as I had the money available to pay more than the minimum payments I was paying extra towards these loans. This was before really exploring the personal finance blogosphere. It’s clear to me that I am not a huge fan of unsecured debt. I don’t plan on taking on any more in my lifetime.

I remember early on I was trying to figure out what was better: to pay off debt early or build up investment accounts. It was the exploration of that topic, the search for a bright line rule, that got me to some of the personal finance blogs that I now read regularly. The decision to use excess cash to pay off debt vs invest is a somewhat deep subject, and one I plan on discussing in further detail in its own stand-alone post. The bottom line is that there is no bright line rule. Everyone’s situation is different. In my case, while I aggressively paid down debt, I still decided to build up investment accounts to the extent that it made sense from a tax perspective.

Debt Paydown Over Time
A fairly accurate graph of my debt paydown path

I am glad that I also contributed to investment accounts during my debt pay down period, and I think there are 3 main benefits for doing so. First of all, I was able to realize some tax benefits by doing this. Secondly, I was able to get my nest egg snowball rolling a little by contributing to investment accounts over the past 3 years or so. Building long term wealth is all about time in the market, not timing the market, and the best time to start investing is 20 years ago. The second best time is 3 years ago. And my final reason is liquidity. Most of my money is locked away in IRAs, but I do have a modest taxable brokerage account, that I could liquidate if needed.

Of course, by contributing to these accounts I delayed the time it took to pay off my loans, but once again I don’t think I will regret the path I have taken. I’m pleased with paying these loans down in under 4 years and it feels great to have that entire ordeal behind me. I feel privileged to even have the choice of whether I make extra payments or contribute to investments. That is a first world problem of the highest order.

And ultimately, the loans served their purpose. It allowed me to finance an education to create a better future for myself. I still think there are problems with our education system and financial forces behind it, but ultimately the decision to go to school and take on debt was a decision I made. No one held a gun to my head. I consider myself lucky to escape with mostly graduate school debt, to have gone to a state school vs. a private one, and to have invested in a valuable degree. In retrospect I am not sure exactly what I would have done differently, but I will think on it and perhaps write further on the subject.

Looking Ahead

So now that my debts are mostly cleared (I still have a small car loan and small mortgage), I have a modest portfolio to build off of. The car loan will get paid off quickly. I have only made minimum payments on that loan (at 2.99% APR), and I’ll likely zap it over the next few months. The portfolio sits right around $75k. It’s a good start, but not near enough to provide any kind of real financial security.

As I look ahead my new goal is to be able to walk away from my day job in 10 years and 20x my portfolio. I’d like to also acquire more cash flowing real assets and build out my online business. The goal is to have my money work for me, rather than the other way around.

The practice of law is hard, and only getting harder. Like most people, I did not go to law school out of love for the law. I went because I was adrift in life, afraid of putting myself into the job market and failing, and thought it was my best shot at making decent money and ultimately finding happiness. I thought hitting the “snooze” button for 3 years and going to grad school would somehow weather the economic shit storm and avoid the pain of finding a good job. I was wrong. My problems were there to greet me the day I graduated, only now they had 70,000+ friends behind them.

The bar association is slowly gutting the legal profession, while technology is also driving many lawyers to obsolescence. I don’t mean to whine; just stating the facts. I have no problem with technology, and certainly there will continue to be a need for highly talented lawyers, but even if you were to not factor in the pressure on the industry, you still have the pressure of being a practicing attorney. It can be extremely stressful, especially if you are a trial lawyer, and the practice of law has chewed up plenty of people.

With all of that said, I have enjoyed practicing law. I think it’s a great privilege to be an attorney and I love being self employed and helping clients solve difficult legal problems. I also love being in Florida. Growing up my family moved around a lot for my Dad’s work, and I’m glad that I can stay in one place if I so choose. I don’t regret my decision to become a lawyer, and I think the entire exercise has made me a better person.

The legal markets will continue to evolve, but I plan on evolving as well. I started at the bottom with little. In fact, I started $120k in the hole. I also had poor self image, I was totally insecure, I had no money, no network, and no clue what I was really doing. I timidly put one foot in front of the other and started walking towards the light. The past 4 years have been an amazing journey of self discovery. Who would have guessed that beneath all the layers of self-loathing and neurosis there was actually something that resembled a spine and pair of balls. There was even a desire to get off my ass and make something happen. To finally face reality and become a man. Who would have known.

This first leg of the journey was all about laying the foundation. The next part is about building the empire.

Refinancing Student Loans with SoFi – My Experiences

What follows is my story leading up to refinancing my student debt with So-Fi. If you want to skip the background info and get straight to the review, please see the “Refinancing Through SoFi” section.

I managed to make it through 4.5 years of college at a private university with only $5,000.00 in debt. Between a generous scholarship, generous parents, and some summer jobs I banged my way through school and emerged with a dual major and a relatively decent balance sheet. I didn’t realize how lucky I was.

It was December of 2009 and I was clearing out my college apartment. I packed all of my worldly belongings into the back of a rental car and began the 16 hour drive to my parent’s house. On the road I reflected on my experience, and how I had little in the way of immediate career prospects or a real plan for the future. I had a finance degree and the thought of getting a corporate job was frankly pretty scary at the time. It was then that I made the decision to double down on my education and go to law school – presumably to graduate 3 years later into a vastly improved economy and walk into a cushy 6 figure job prosecuting patents or handling mergers and acquisitions of the 80th floor of some prestigious law firm. I commenced sharpening my pencils and seeking temporary employment so that I could take the LSAT, apply to law school, and with any luck join the starting class in August of 2009.

Fast forward to June of 2012. I graduated from a state law school with only $75,000 in student loan debt. From what I can tell I was again quite lucky. Although I funded my graduate school almost entirely though student loan debt (and again some summer jobs), many of my legal contemporaries waltzed away with much bigger student loan burdens. It is not uncommon to hear of law school graduate shouldering $150k+ in loan debt.

Still, these $75,000 in loans were no pittance, especially after logging in to the online loan servicing software and seeing this debt happily accrue interest at 6.8%. Holy Shit. At the time I still had no employment prospects to speak of, and the thought of paying down this obligation had me thinking about enlisting in the army, mowing lawns, or donating my bodily fluids to science – anything to get out from beneath the wheel. The economy was still on the mend and employers were not lining up to hire on brand new lawyers (especially brand new lawyers like me who graduated with a 3.1)

But as luck would have it I was in a new town. Though brute force, ignorance, and a lot of help from a mentor I managed to open my own law office. I started rendering legal services to anyone who would take a chance on a young lawyer with no experience, no money, and no real idea what the hell he was doing. It sounded daunting, even to me, but I was hungry and my lease was about to expire. The choice was to make this work or move back in with my parents across the state, and start prospecting for work all over again in yet another town. All at the tender age of 27. The perfect storm was brewing, and I was going to either capture lightning in a bottle or go down with the ship.

I hustled my ass off. I spent most of my time outside of the office, meeting with potential referral sources and marketing for clients. Pounding the pavement and pressing the flesh were my two biggest prerogatives. My overhead was low and my rates were competitive. I stumbled in to several under-served niches, and distinguished my practice. Within a few months I was break even. Quickly I became profitable. People asked how I was doing, and I would say “I’m still here.” That in itself was an accomplishment.

One of my first orders of business was to get my financial house in order. At this stage in my life, my foundation was built on debt.

At first the student loans scared me, but my fear soon turned to anger. The minimum payment was $700. I began chucking $1000.00 payments at my loan. Paying with my middle finger. The principal hardly budged at first, but I consistently poured money into the account. The needle began to move, but the 6.8% rate dismayed me. With Federal interest rates at an all time low, and the economy resting upon the backs of a new generation, I didn’t understand how the hell I could be the borrower on a 6.8% Federal loan. Frankly I still don’t. What is the public policy of making loads of interest on students? Probably the same public policy that is driving up the cost of education in the first place. But that is a subject of another article…

Refinancing Through SoFi

I looked into refinancing. I was about a year into my practice at the time and had heard of SoFi. I fired off a loan application and was promptly rejected. I didn’t take it personally. Without a single tax return under my belt and no one paying my salary I wouldn’t have refinanced me either. So I doubled down on my payments. I started paying the debt with my middle finger. I would make the minimum payment and then slide $1,000 on top of it. Then $1,500. Then $2,000. Whatever I could afford. I sold stuff. I lived off ramen noodles. I worked weekends. I further developed my side business. I would be damned if this interest rate got the better of me.

I decided to re-apply to SoFi in May of 2015. I my debt was down to about $36,000.00 at the time. I had a couple tax returns under my belt and had an amazing first quarter of business. I was feeling frisky. The loan application process was relatively straight forward. I filled out the online form and supplied tax returns, a payoff statement from Sallie Mae and whatever else they asked for (because I was self-employed they wanted to look at my books – which I promptly had my accountant prepare). When I had questions, or a problem with their loan application software, I was able to speak with a live person. Even over the weekend. The process wasn’t perfect (I had trouble uploading documents through their online application) but they seemed to want my business and get back to me in a timely manner, so I proceeded forward.

Amazingly, this time I was met with an approval letter. Now the choice became whether I refinanced into a fixed rate loan (I believe the rate was around 5.5%) or a 3.4% variable over 5 years. Interest rates are supposed to be on the rise, but I had made the decision to continue paying down the loans early, so I doubled down again and went for the ultra-low (but perhaps riskier) 3.4% variable option with auto pay. I figure even if interest rates rise sharply, it will be at the tail end of the loan when most of my principal is paid down. I should still end up on top, even if the interest rate ends up back at 6.8% or something stupid. I don’t necessarily advocate for this approach. There was no loan origination fee which made the decision even easier. I agreed to the variable loan and signed all of the necessary closing documentation electronically.

The loan funding process was relatively smooth. SoFi paid off my old debt and I opened an account with their new servicer. My payment is currently around $600 a month, with a good deal more going to principal thanks to the reduced rate. I got on their auto-pay program to save a little interest and I continue to pay this debt very aggressively despite the much lower rate. By my calculations, the refinance should save me $1,500 over the life of the loan assuming I continue to pay down aggressively. That number would be substantially higher if I just made minimum payments.

My advice to anyone seeking to refinance their student loans is to consider So-Fi. I had a good experience working with them. Had I been able to originally refinance my $75k from 6.8% to 3.4% from the beginning it would have saved thousands of dollars (tens of thousands if I just made the minimum payment). So-Fi is working for me and I give the company my personal endorsement.

If you sign up to refinance a student loan through SoFi using this link, you will get a $100.00 discount on your loan.

If you sign up for a personal loan through SoFi using this link, you will get a $100.00 discount on your loan.