It was somewhat anticlimactic — a part of me wanted animated fireworks or a "Congratulations!" from the Department of Education website — but I've been feeling really good about it all week. This evening we're getting together with friends to hang out and celebrate.
Below is my entire payment history on my federal loans. It starts after I consolidated my loans. As you can see, I didn't pay the minimums for long: I paid off my private loan in May of 2012, and started paying this one off aggressively thereafter.
I mentioned in this post's title that I'm becoming a creditor. I've started investing with Lending Club. I first heard about Lending Club from Brave New Life, and most recently of course Mr. Money Mustache has taken the plunge. I decided that now my excess income has nowhere to go, I wanted to earmark most of it before it even shows up as a commitment device to keep saving and investing. One such commitment is $500 per month to Lending Club, which at $25 per note (the smallest amount you can invest at a time), means I can invest in 20 notes per month. This means I won't be fully diversified for quite a number of months, which is an additional risk. I am hoping to counteract this risk by being extra picky about which loans I fund — in this case, I intend to submit two or more questions per note I'm potentially interested in, and only fund the notes where I'm satisfied by the borrower's answers.
After building up a cash buffer of around $2k, I'm going to make a similar commitment of funds (probably via an automatic bank transfer) to a brokerage account. This way I won't burn a hole in my pocket, and I'll have spare cash around to jump on attractively-priced equities whenever an opportunity arises.
Paying off my loans is great, but it's one step in the journey. Now I can finally start focusing on asset accumulation which I've really been looking forward to. I'll also keep working on debt reduction since I feel like I won't feel truly free until I'm debt free. That will take a while but at this rate I know I'll get there.
Congratulations! Following your blog, it looks like it's been hard work but very much worth it!
ReplyDeleteThanks! The hard work was mostly at the beginning. After I developed my debt payoff habit, it basically took care of itself.
DeleteNice accomplishment. Of course there are always competing priorities when it comes to finances, but I'd encourage you to build off the momentum and pay off the credit cards ASAP, because you never know what the future holds. The fewer debt obligations you have, the more secure your financial picture will be. Then you could snowball that into the mortgage and before you know it, your debts will be history!
ReplyDeleteThanks. Good advice. I'm earmarking a few hundred dollars a month to build up an emergency fund, and after I have that I'll start making regular monthly contributions to the CC debt. I can't wait until my mortgage is my only debt :)
DeleteCongrats. Always good to eliminate a debt. Good luck with the credit card debt.
ReplyDeleteThanks!
DeleteCongratulations! This is quite the accomplishment, I can't wait to be writing the same post on my blog in a few years time. Good luck with the investing and keep marching towards FI!
ReplyDeleteThanks! It definitely feels good, but I've been surprised how quickly I want to move to the next thing.
DeleteI'm looking forward to following your journey. You've made great progress so far. Keep it up!
Congrats! I can imagine it must feel so good to pay those off. I never had student loans and happily never dealt with credit card debt either, but paying off car loans and other things has always felt good.
ReplyDeleteI have become interested in the Lending Club myself and hope to look into investing there soon. I am going to be following your and MMM's experience closely.
It is a big relief. I never liked how student loan debt can't be discharged in bankruptcy -- there's virtually no way to get rid of it besides paying it off. So now that's one less thing to worry about.
DeleteSo far so good with Lending Club, though the true results will take years to come in. But you'll hear about it as it happens :)
Acolyte,
ReplyDeleteGreat job! Congratulations on paying off the student loans. It must feel fantastic to get that monkey off your back.
I still have some student loan debt that I'm tackling at a fairly slow pace. The interest rate is low (sub 3%), of which is tax deductible. Also, if I were to ever lose my job I can defer payments and I can also put them on an IBR payment plan. So, options abound.
However, getting rid of debt..any kind of debt..is always a great decision! I applaud you. I know it's been an arduous journey.
Best wishes!
Hey DM! Thanks. If I had sub-3% tax-deductible debt I'd think long and hard before paying it off. And you have to keep building the Freedom Fund! For me, I'm not making plans yet to pay off the car loan (2%), but I'll consider it once I've got a few thousand dollars in liquid savings and a few investment vehicles rolling along.
DeleteKeep on stashing that cash :)
I don't know how I missed commenting on this but great job! I know the feeling of hitting that "pay" button for the last time. Now you will get to see interesting working for YOU in your future investments. Good luck!
ReplyDeleteThanks. The wind of compound interest will be at my back :)
DeleteI love reading stories about people paying off their student loans since I am still battling that beast. That being said... Didn't you really just move 9k of student loans to a credit card? If you put massive payments towards your loans and neglected paying other expenses that you had to put on a cc (regardless of interest rate) that is just moving the money around isn't it?
ReplyDeleteYou're right, it's just moving money around. That said, 1) my minimum monthly payments on that amount are much smaller (around $80/mo), 2) I'm not paying any interest, and thus 3) I have the breathing room to build up more of an emergency fund and start investing before I finish paying off my debt. It's a trade-off to be sure.
DeleteCongratulations! One thing you never learned in school: how to pay for it.
ReplyDeleteThat's a good one! I'm going to use it from now on.
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