The decision to pay off $12,397.84 in student loans in one day

by Erika Torres

broken piggy bankSo just as I bragged about reaching the $10,000+ milestone in our house down payment fund, a new thought occurred to me.

I still had $12,397.84 in student loans that were costing me $80 a month or so in interest. We were making 0.5% interest in our savings account. Why don’t I pay off or refinance my student loans?

Once I get an idea into my head, I get obsessive about it. I could not stop thinking about it. I was so obsessed with my brand new idea that I couldn’t even wait for Eric to come home from a 72-hour shift, so I sent him like 20 text messages in a row explaining my thinking and asking for his approval.

Was it crazy? Was this nuts? Was I really going to hunker down 6 months of hard earned savings on one payment?

I debated the pros and cons of paying off my debt.  I knew that I would be able to roll the $250 in monthly student loan payments into our savings account, and that we would most likely be able to save another $10,000 by the end of the year.

Did it suck to start over? Yes. But the reality is that we have no intention of buying a house for a few years, we just want to be prepared in case the opportunity arises. Wouldn’t it be better to be debt free beforehand and have no other debt except a mortgage? In addition, I could now start really saving my side hustle income instead of using it to pay off debt.

I’ve often asked how people manage to pay for it all? Pay off debt, buy a house, buy a car, pay for everyday expenses, etc, etc. Maybe the answer is one step at a time.

So on Friday, when I got paid, and with my newest freelance check in my account, I took $12,296.09 and paid off my interest-accruing loans.

I feel lucky that I didn’t have to completely drain all our savings accounts to make this a reality. We still have our $1,000 emergency fund, plus additional funds in other accounts (Christmas, Car Insurance, Side hustle income, etc).

We are not debt free yet. I still have a $1,176.33 0% interest loan, with a $52 monthly payment. And we still have Eric’s $5,500 subsidized loans, with 0% interest until the first payment is due in December 2014.

While our new goal now is to rebuild our house down payment fund (and maybe start saving up for a new car?) , I have a feeling that we will be completely debt free by the end of this year. I don’t see $6,624.33 standing in my way.

I cannot express the amount of joy I feel being so close to debt freedom. I cannot express the emotion I feel knowing that we were so broke just two short years ago and seeing how far we’ve been able to come in such a short time.

We’ve been on this journey toward debt freedom for the entire three years of our marriage. And I can finally see the light at the end of the tunnel.

(I’ve updated our debt total accordingly…15% left!)


Hugo Shelley December 27, 2014 - 7:15 am

Now this is one risky move here.

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Do or Debt July 4, 2013 - 7:35 pm

Wow, that is awesome! I wish I had a similar amount in the bank to do that. You are right about one step at a time.

Catherine July 2, 2013 - 4:50 pm

I don’t know how I missed this. Congrats!!

Mrs. Pancakes July 2, 2013 - 6:58 am

congratulations…the hubby and i are in the process of doing this…and we are so close…im so excited!!

Michelle June 29, 2013 - 10:17 pm

Wow! Student loans suck. Am glad that yours are gone. Congrats.

Teacher Girl June 25, 2013 - 7:09 am

That. is. AMAZING!! Congrats!

American Debt Project June 21, 2013 - 1:54 pm

Wow!! That is so cool and great decision! I think you will be in an excellent place financially by the end of the year thanks to this huge payment!

Andy June 18, 2013 - 9:00 pm

Husband and I made similar decision last September ….we are finally seeing our savings back where it was…..ahhhhhhh worth it. Good job.

lola June 18, 2013 - 9:57 am

so awesome, congrats!

Army Amy June 18, 2013 - 8:32 am

Woah guy! That’s a big chunk of change! Congrats! I know how good it feels to pay down your debt, and doing a large amount at once feels even better. You have been working hard to make these big strides and it looks like it is paying off!

John June 18, 2013 - 5:58 am

Well done! I keep brushing mine under the carpet hoping they’ll go away. I long for the day when they’ll be clear, but think I need to be more pro-active like yourself.

Tina @ My Shiny Pennies June 17, 2013 - 9:10 pm

Congrats! I also borrowed from my house fund to pay off the remaining $10,000 in student loans and I don’t regret the decision one bit.

Budget & the Beach June 17, 2013 - 4:44 pm

Wow that is a HUGE chunk!! That must feel awesome! Congrats! Hmmm, how DO people do it all. wink wink. 🙂

One Frugal Girl June 17, 2013 - 12:49 pm

Congratulations! Your side hustles are really paying off!

Debt and the Girl June 17, 2013 - 11:34 am

Congrats! You are so close. Hopefully that debt free day will come soon 🙂

Thomas | Your Daily Finance June 17, 2013 - 11:21 am

I think you made the right decision if its what you wanted. I would have probably wanted to keep some of the money in the account for a rainy day but hey. I think not having student loans is a great thing and it was for a down payment for a home. Hopefully you are able to get something before the rates go back up again.

Jessica June 17, 2013 - 10:35 am

Congrats! I am very happy for you! I myself am struggling with this decision, I have 1500 in my EF and I owe $2600 in CC debt which I am dieing to pay off but I am not sure if I should drain my 1500 to lower that or just stop trying to save EF and pay debt at the same time ughhh choices choices!

Brittney June 17, 2013 - 10:12 am

Way to go!! You’re so close to debt free, it must feel awesome! I’m sure it stinks to feel like you’re starting over but whew, what a relief to have that loan off your back!

Michelle's Finance Journal June 17, 2013 - 10:07 am

Congratulations~!! The end of near for you.

Lisa @ Lisa the Vegetarian June 17, 2013 - 9:52 am

Congrats!! This is pretty much what I did at one point with my loans and I made the decision in exactly the same way as you – I got the idea into my head that I had enough sitting in my savings account and made a huge lump sum payment that was scary at the time.

And now here I am one more time (almost) emptying my savings again to put a down payment on a house. It’s definitely scary to see all that money go at once, but it’s worth it in the end!

Megan June 17, 2013 - 8:55 am

How awesome! I can’t wait until we pay off our debt too. So inspiring!

Ceci Bean June 17, 2013 - 8:51 am

Must feel so good to check another loan off! You guys have made amazing progress in such a short time. Soon you’ll be “Not-so-newlyweds Livin’ Large”! But, you know, on a budget and with a healthy savings account. 🙂

Erica June 17, 2013 - 8:28 am

Congrats, Erika! (I hope I spelled that right)

I am nowhere near in a position to do this, but I am always so encouraged to read these posts. It makes me feel like it is possible to do. I have about $35,000 in student loan debt, and I can only imagine what it would feel like not to have it hanging over my head anymore. Go you for deciding to get rid of that debt and not being afraid to let the money you had work for you ( instead of collecting less interest than your debt was accruing, probably).

CeCe @Frugalista Married June 17, 2013 - 8:24 am

Eeek!! Tough decision. It is so hard to watch a large chunk of money disappear for anything. It sounds like you thought it through though and if you felt relieved afterwards then it was the right choice.

LaReesa June 17, 2013 - 8:19 am

Amazing! I hope to be in your shoes within the next couple of years. You are such an inspiration!

Mrs PoP @ Planting Our Pennies June 17, 2013 - 8:11 am

Sometimes you just need to re-appropriate funds and do what feels right. Congrats on killing that big hunk of loans all at once and good luck rebuilding the savings! =)

Lizzi June 17, 2013 - 7:35 am

That’s awesome! I can’t begin to tell you the trials and tribulations of purchasing my first home AND having student loans over my head. My student loan was the only debt I had and I still had issues with the banks. I bought a short sale home & it was a whirlwind! I’m so happy for you! Yay!

Sara June 17, 2013 - 7:31 am

LOL on the string of 20 text messages. I do that to Liam all the time! And yay for the repayment!

Rob June 17, 2013 - 6:56 am

Congrats. I’m in the process of applying for a mortgage, and I’ve learned that the debt ratio is a pretty big deal–arguably more of a big deal than a downpayment (as long as you have enough to meet the minimum downpayment percentage)–so what you did may go a long way in helping you get that house.

Sanibel June 17, 2013 - 6:50 am

Way to go! What a relief I’m sure! It is such a good feeling and I think you made the right choice!

Megan June 17, 2013 - 6:20 am

That’s fantastic!!

Tanner June 17, 2013 - 6:10 am

I had just contemplated that scenario. My “car fund” would be sufficient by the end of the year to pay off all debts, but I was advised to wait. So I’ll wait and reconsider until I have all the money to pay it off at once. To be honest, I will probably pay debt and forgo that extra cushion (while keeping my EF and other saving funds), but I just want to be debt free so bad right now.

Akirah June 17, 2013 - 5:59 am

Wow. Congrats! I am totally jealous. Dan and I started Financial Peace University, so we have steps in place, but we definitely got a ways to go. But I think we can do it. Sometimes I think that as a social worker, I tell myself that I will be in debt and that’s okay because I don’t make that much in my profession. But I kinda feel like that’s the equivalent of settling. Right now I’m working on developing a side hustle (I’ll be sending you an email about that soon), aside from the work I put into the restaurant, and I am trying to recondition myself to believe that the sky is the limit. Thanks for the inspiration. XOXO!

Michelle June 17, 2013 - 5:31 am

This is awesome! My student loans will be gone this month and it is an awesome feeling.


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