The Truth about Your Debt
The truth is that your debt means nothing.
It’s literally numbers on a screen that have no meaning until you give them meaning. The issue is that the meaning you give your debt is likely negative.
You believe your debt is bad. You believe it’s “a lot.” You believe it’s overwhelming. None of these things are objectively true. They’re all your opinions.
We often treat our opinions as facts, but they’re not. The only fact here is the amount of debt you have. The actual number.
Everything else is your interpretation of that fact. Your opinion about it.
Your debt isn’t good or bad, a lot or a little, or overwhelming or manageable until you decide it is.
We know that’s true because different people can have different opinions about the exact same debt. Your perception truly is your reality.
My Debt Story
Like most lawyers, I graduated with six figures of student loan debt. Then I married a medical student, who had even more.
At the start of our money journey, my husband and I had more than $670,000 of debt, almost $500,000 of which was our student loans (the rest was our mortgage and a car loan).
Although many of my clients think their $150,000 to $200,000 of student loan debt is “a lot” or overwhelming—and maybe you’d agree—when my husband and I reached those figures in our debt payoff journey, we were ecstatic. It meant we were more than halfway to our goal of paying off those loans.
I share this example to underscore the point that no amount of debt is objectively bad, overwhelming, or any other descriptor.
The debt means nothing by itself. We give it meaning by the way we think about it, and the meaning we give it colors our experience with our student loans.
Your Experience of Your Debt
Because your experience of your debt starts with your thoughts about it, you literally get to choose how you experience it.
You can tell yourself that it’s a lot of debt and ruminate on what you’re going to do and how you got yourself into this mess.
You can resist it and believe you shouldn’t have as much debt as you do.
You can beat yourself up and tell yourself you should have made different choices.
You can tell yourself you’re never going to be able to pay it off.
All of these approaches are very common among lawyers, and they’re in line with how I thought about my debt at first, as well.
But at the end of the day, thinking about your debt this way only leads to feeling shame, overwhelm, defeat, and any number of other heavy-feeling negative emotions.
It doesn’t change the amount of debt you have. It doesn’t motivate you to do anything about it. And it only leads to you feeling bad.
What if, instead, you accept that you have X amount of debt rather than telling yourself you shouldn’t have it?
What if you believe that, even if you think it will be hard, you can pay it off? (After all, you can do hard things. You’re making it through law school, right?)
What if you show yourself some grace and acknowledge that you made the best financial decisions you could at the time, even if you would have made some different ones knowing what you know now?
What if you believe that you’re not a bad person or stupid for having debt and that you can still live a full life?
That approach will create a completely different experience for you than the first one.
Please note that I’m not suggesting that you just ignore your debt. You can accept that you have the amount of debt you have, not beat yourself up about it, and still make moves to pay it off.
I’m simply offering that you can create an experience where you’re not miserable the entire time you’re paying it off.
Before You Pay Off Student Loans
Now that we’ve talked about shifting your mindset about debt, let’s talk about practical steps you can take to manage your student loans.
So many people want to get straight to paying off their debt. But first, make sure you have a strong financial foundation. That starts with creating a budget.
Your budget is your plan for how you’ll use your money. A budget helps you intentionally direct your money toward your needs, wants, and goals. This allows you to ensure that you don’t overspend and end up not having money available to pay off your debt.
You also want to have an emergency fund in place. Your emergency fund is your cushion. It helps protect you from the unexpected things that inevitably pop up in life. Please don’t use all your money to pay off your student loans as quickly as possible when you have no safety net for yourself.
If an emergency pops up, you can’t just call up Navient or Great Lakes or whoever your student loan servicer is and ask them to send you that last payment back. They’re going to tell you to kick rocks—respectfully.
So before you get started, make sure you protect yourself by creating a budget and saving an emergency fund.
Paying Off Your Student Loans
Getting into the specifics of paying off your loans, the two most popular methods people use are the debt snowball and the debt avalanche.
The Debt Snowball
With this tactic, you list your loans from the smallest to the largest balance, and you pay the minimum on everything but the smallest one. Then you put every extra dollar you have each month toward that smallest loan until it’s paid off.
Once the smallest one is paid off, you use all the money you’d been paying toward that one to pay off the new smallest one while continuing to pay the minimums on the rest. Keep following that process with each successive loan until all your loans are paid off.
The biggest pro to this method is that you see progress faster because you’re paying off the smallest loans first, which motivates you to keep going. The biggest con, though, is that mathematically you could end up paying more money in interest.
The Debt Avalanche
This also-popular method involves a similar process. The difference is that, with the avalanche, you list your debts from the highest to lowest interest rate rather than the smallest to largest balance.
You pay the minimum on everything but the loan with the highest interest rate and put every extra dollar toward the highest interest rate loan until it’s paid off. Then you keep following that process until all your loans are paid off.
The biggest pro to this method is that you pay the least amount because you’re paying the most expensive loans—the ones with the highest interest rates—first. The biggest con, though, is that sometimes the loans with the biggest interest rates also have large balances, which means you don’t see progress as quickly and can sometimes lose motivation.
Deviating from the Plan
I say all the time that personal finance is personal, so you don’t have to follow any particular plan exactly. For example, some lawyers I work with have a particular loan that feels most bothersome to them, such as when someone co-signed the loan for them or when it has a notably higher interest rate than the others. They may choose to tackle that loan first and then use one of these methods for the remaining ones.
Another common situation that comes up is receiving a lump sum. If you have a loan that’s about the same amount as the lump sum you receive, you might decide to pay off that loan rather than paying off the next loans in line under the method you choose to use.
To illustrate, let’s say you’re using the debt snowball method. Your smallest loan balances are $2,000, $3,000, and $5,000, but you also have a $10,000 loan. If you receive a $10,000 lump sum, you might choose to pay off the $10,000 loan rather than paying off those three smaller loan balances. That’s perfectly fine.
Mindset in Action
The biggest key to managing your debt is the way you think about it. That will inform what you believe is possible for you and whether you actually take steps to pay it off.
When you have your mindset together, it truly doesn’t matter which strategy you choose. Ultimately, there’s no right or wrong. The best debt strategy is the one that works for you.
