Hello hello! Welcome back to Money Talks where I have open and honest conversations about money with other twenty-somethings.
Today we are joined by an anonymous 22-year-old recent college grad who I will refer to as Callie. I sat down with her last week to discuss her current financial situation—a situation that many can relate to especially amidst the current global pandemic.
Callie recently graduated a top 15 university as a liberal studies major. She had secured a job back in the fall with a healthcare consulting firm, but recently got the news that her start date would be postponed until January. With the prospect of eight long months doing nothing at home as well as the large burden of over $125k in student loans, she decided to go ahead and look for a part-time job so that she could at least pay the minimum payments on her debt once the grace period ends.
In addition to working a part-time job, Callie has been spending her time researching personal finance and creating her own plan for paying down her debt. Read on to find out more about how Callie plans to tackle almost half this debt in just 18 months.
We also discuss how her debt influenced her post-grad plans, whether she regrets the debt, and her thoughts on the financial side of the education system as a whole.
(Interview has been paraphrased for clarity and brevity)
What’s been the biggest disappointment or hurdle you’ve experienced after getting your start date moved for your full-time job?
My first initial panic was about my student loans. My grace period ends in November, so I was worried about being able to meet the minimum payments. Luckily, my parents assured me they would be able to help me at least until I started my job and could pay them back.
My second thought was that this would further postpone the point where I would be able to move out of my parent’s house. My plan is to live here for 18 months, so this will be adding another five months to my timeline. Eventually I want to move to NYC or Chicago. Now, I don’t feel as behind as I initially felt because a lot of my friends have also gotten their start dates postponed.
Can you give me an overview of your loans?
My loan situation is a mix between private and federal. I have $99,000 in private loans with Sallie May. The interest rates of these loans range between 9-11%. Additionally, I have $25,000 in federal loans with much lower interest rates.
I am looking into the process of refinancing these loans. My goal is to significantly lower the private loan interest rates. I think I can get them to be in the 3-4% range. I also want to lower the minimum monthly payment because it will help me get through these next eight months as well as provide security should I lose my job or work a lower paying job in the future.
My dad has been helpful in guiding me through this process and I’ve also been learning a lot from Nerd Wallet and other personal finance blogs. I think that I will use SoFi to refinance my loans since they are very user friendly and seem to offer reasonable rates.
In the fall when you were looking for jobs, was it a priority for you to find one that allowed you to live at home?
At first it was hard to think about living at home because there weren’t as many job opportunities where I live, so I did not make this a priority. Last semester, I was actually fully expecting to move to NYC or Chicago right out of college. I applied to everything everywhere.
I focused on what sounded interesting to me and what would make me the most money. There were some opportunities that were closed off for me because I knew I couldn’t handle the burden of my debt if I were to do something like a year of service or a teaching fellowship. I had to balance my interest in the position with financial considerations, so that’s what lead me to healthcare consulting.
Once I actually sat down with my salary offer, it made it more real when I did the calculations of how much I’d have leftover each month to pay down loans. It wasn’t until I was actually hired by my company that I realized living at home could be an option even though my office is not in my hometown. Since my job is 100% travel Mon-Thurs, they agreed that I could be based out of my hometown.
What is your debt paydown plan? How much money are you planning to allocate to debt each month?
| Monthly after-tax income | $4000 |
| Debt Payments | $2500-$3000 |
| Expenses | $500-$1200 |
| Savings | $300-$500 |
I plan to live at home for 18 months until Summer 2022. Luckily, I have very supportive parents, so I get to live at home rent-free and I’m not paying for food. During this period, I hope to build a low-cost lifestyle that I can continue even after I move out and continue the momentum of paying off debt.
How do you plan to balance the tradeoff between saving/investing and paying down debt?
Paying down debt is definitely my #1 priority; however, I disagree with debt paydown models like Dave Ramsey’s where you don’t save at all during the process. I want to take advantage of my ability to save while living at home. After debt and expenses, I should have around $300-500 to contribute towards savings. This will help me build up an emergency fund for when I’m living on my own. I also plan to take advantage of my 6% employer match in my 401k so I plan to contribute about 8-10% of my salary.
What are your long-term goals in terms of finances and career?
I am definitely interested in health care, so I’m excited to be in a health care consulting role so I can interact with a bunch of different healthcare professionals. This will hopefully help me to figure out what comes next. It scares me to think of going to graduate school and starting this whole debt paydown process again, but I am considering a Master of Public Health, Master of Public Administration, or even a clinical route like PA or MD. If I don’t need a graduate degree, I will not get one. If I do, I want to be sure it’s the right choice for me.
Do you regret your college decision at all given what you know now about your debt situation?
I don’t regret it at all. I had an incredible four years and I feel so educated. My school became a home for me and the friends that I made feel more like sisters. I don’t think that taking out student loans is automatically a terrible decision. It’s a very personal decision that is specific to each person. For me, the combination of the appeal of my school, my parent’s support, and my acknowledgement and full understanding of the consequences of taking out loans from the start allowed me to be confident in my decision. I’m also super privileged to have had parents who could help me at all with my education and I received generous scholarships from my school.
With that being said, I do believe that the financial aspect of the education system is flawed. If you come from a wealthy family, your parents can write a check out of pocket. If you come from a very low-income family and do well in school, you can get most of your tuition covered by scholarships. I was in the in-between. Some people assume my parents just didn’t know how to save or weren’t willing to help me. That’s not true. They did what they could. It just so happens that our expected family contribution was inaccurate for my family.
I don’t think it’s fair that society thinks I shouldn’t be able to go to my school even though I got in just because my parents can’t pay for it. I think this system creates an elite class that is only broken by very low-income students who are able to break a lot of barriers
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