Five years ago when I first got the idea to attend business school I knew that undertaking that journey would lead to a lot of debt on my part. I already had significant debt from undergrad and, being that I was only 2 years out from undergrad and earning a salary of $42K in Canadian dollars, I did not have much savings to use towards business school. However, I had weighed my options. Business school was going to be my ticket out of a lower income. I would also use my expected high salary post-graduation to easily pay off my debts and then get to work on helping my family out of the working class.
I was lucky. I got into a top 20 business school in the US and, not only that, but I also got a $50K fellowship! That $50K was approximately equal to half tuition for b-school. I was beyond grateful for it. I still needed to borrow $83K though to cover living expenses and the rest of tuition for the two years.
My 2012 graduation date approached and I must confess that, unlike my few classmates who still didn’t have offers, I totally slacked off on trying to find a position. Most of the jobs that were coming to me (read: interviews I got) were jobs I wasn’t really interested in and the jobs I wanted I couldn’t get interviews for, mainly due to my lack of experience in the functional role I was trying to get.
Shortly after graduation, armed with my MBA, I changed cities to go live in a city I always wanted to live in. That city is also one of the most expensive cities in the US. There, with very little effort on my part, I managed to get a brief, part-time contract with an early-stage startup. The startup had little money so pay was meager. Rent alone ate up my earnings and more. Furthermore, brilliant me had decided to rent through Airbnb, i.e. using my credit card, and not pay off most of the balance. I did this because I wasn’t sure when next I would be employed and I wanted to ensure I had cash on hand for day-to-day expenses. I had never been one to carry a balance on my credit card but my unpaid credit card balances rose sharply in those months.
My contract ended in a couple months and it was back to the grind of the job search. To be honest, I wasn’t happy in that great American city. Actually, that entire first year post-graduation was stressful. I was also in the midst of an existential/personal crisis which had started pre-graduation and I wasn’t looking for a full-time job (or any job) even half as hard as I should have been looking during that time.
In December 2012, when I should have started paying off my b-school student loan AND restarted the payments on my undergraduate loan IN ADDITION TO continuing to make the monthly payments on my student line of credit from undergrad, I realized I couldn’t comfortably do so. So I called up the two student loan lenders and asked for a six-month extension for the repayment start date. What was another 6 months of accumulated interest when I was already six figures in debt, right?
Close to six months later I was nowhere closer to finding a job. However, it was the approach of that 6-month deadline that spurred me into action. I had to start focusing again! I moved back to Canada to live with my parents and decided to work for myself. A few weeks after that decision I landed my first decent-paying client. I was properly self-employed! Almost just in time too. I signed the contract just a couple weeks after my first loan payments were due.
I made the first loan payments with the money I had left in my savings account for that very purpose (to the detriment of my credit card balances of course). With a contract signed, my next step was to make a plan to start paying off my debt with the earnings I expected from that first contract.
Here was where things were last end of July:
|B-school loan||$96,800 USD* ($105,503 CAD)||8.25%|
|Ontario Student Assistance Program (OSAP) loan||$20,931 CAD||5.5%|
|Student Line of Credit (LOC)||$9,678 CAD||4.5%|
*The US total is an estimate as I didn’t start noting the balance until the end of August. It is likely a slight underestimate. And the amount I listed includes the accumulated interest up to that point (the principal balance was $92, 865, almost $10K more than I borrowed, thanks to the interest during deferment being capitalized). I used the current exchange rate for the conversion.
If you total that all up you will see that the total is $150,888 CAD. Rounded up that is $151K.
As a sidenote, I feel like during my entire three years in the US the Canadian dollar was, on average, higher than or at par with the US dollar. However, as soon as I came back and started earning actual Canadian dollars, it fell. Just my luck.
Anyways, I have a very strong motivation for paying off my debt. I want to be able to help my parents before they get too old. They have made countless sacrifices for me and my siblings and I want my mother especially, who is in her very late 50s, to not have to continue working at a physically exhausting job well into her 60s. Also, I want to be debt-free by the time I am 35 years old (I am 30 years old now). Partly because I may decide to have children and my biological clock is ticking. But mainly because I just want to ensure that I can enjoy my life (while I still have a little bit of youth in me) and not have to constantly be worrying about money, as I have done my entire life.
In my next post I will explain how I paid off more than $25K in the nine months since last end of July.