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I am Debt Free as of Today!

This article was written by in Debt Reduction. 35 comments.

For several years, interest rates on high-yield savings accounts were high enough to justify choosing to leave extra money in savings accounts rather than using that money to pay off certain debts faster. I was paying only the minimum payment on my consolidated student loan. The loan’s interest rate was 4.25% and I had been earning a little more than that in savings after taxes.

At that time, there was no urgency to pay off the low-interest debt, but the financial climate started to change at the end of last year. Interest available on high-yield savings accounts began to dwindle. By the end of 2007, I decided to eliminate my student loan, my only debt, by the end of 2008. At that time, I had about $13,000 remaining on the loan and had been making payments of my minimum, less than $150, each month.

I had enough cash available at that time to write one check for the $13,000 to eliminate the loan entirely, but I decided it was important for me to keep cash in the bank for flexibility. In January, February, and March, I doubled my monthly payment to $250 to cover interest and principal. In April and May, I paid $500 towards the student loan. For the rest of 2008, I continued to increase my payments through September. In October, with about $6,300 left on the loan, I directed half of the remaining balance to the student loan, leaving about $3,150. I again sliced the remaining debt in half in November.

On Friday, I paid off the remaining $1,500. The payment has cleared today, so I am officially out of debt.

At least for the time being.

If I’ve learned anything from television and other debt-focused blogs it is that I should be jumping up and down with excitement. The fight against debt is often a struggle, especially when that debt is acquired through poor choices. But I feel mostly ambivalent about the achievement. It has helped that I’m earning more than just my day job salary, and thanks to this extra income, I did not have to sacrifice much in order to achieve my target of paying off this debt by the end of 2008. Unlike many struggling with debt, my pursuit is not due to excessive spending. My treatment of debt was not perfect, however.

I graduated in January 1998, but by August 2003, I still had about $4,000 left of my undergraduate student loan. In 2003, I decided to pursue a master’s degree in business. 90% of the tuition (and 0% of the additional fees) would be covered by my employer. Rather than having the company pay the university directly, I allowed the school’s financial aid adviser to convince me to open a loan and use my company’s reimbursements to pay back that loan.

With a long-term view, it was a poor decision. I wonder if the university’s financial aid adviser is instructed to suggest the loan even when expenses are reimbursed because the university makes more money with that option.

With a short-term view, it may have been necessary. At the time, I was not earning much money outside of my day job — my blogging activities didn’t begin earning money until 2004 — and my level of expenses dangerously approached my level of income on a regular basis.

Rather than using my reimbursements to repay the loan, I occasionally deposited the checks into my checking or savings account, allowing the loan to grow. If I had skipped the loan option and decided to have the company pay the school directly, I would have had a tough time with my cash flow for a few years but I might have paid off my remaining student loan much quicker.

As I mentioned, this state of being debt-free is likely only temporary. I do not have a mortgage. I’ve been a renter as long as I’ve been living on my own, and I expect I will continue to rent until I make some decisions about where to live in a more permanent state of being. I expect that I will, at some point, own a house and require financing. Perhaps the feeling of euphoria and excitement that seems to be associated with debt elimination will come once I’ve acquired and conquered a mortgage.

Those who have been following Consumerism Commentary may remember that I also had a car loan. In 2004, I purchased a new Honda Civic — the price differential between “new” and “acceptably used” was negligible — and opted to finance most of the purchase. A loan from family helped me stay away from high interest rates and fees. I paid this loan off within three years.

According to the government, for the first time ever, American household debt has decreased since the same figure was measured three months ago. Don’t get too excited. Americans aren’t suddenly becoming more financially secure. Over the past few months, credit has been harder to come by. Thanks to the state of the economy, car loans, mortgages, and other types of financing for large purchases have been less available. But perhaps there are more people like me who used this year’s declining benefit of savings account interest as an opportunity to pay off debt.

Photo credit: mudpig

Updated January 16, 2010 and originally published December 15, 2008.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 35 comments… read them below or add one }

avatar 1 Anonymous

Congrats! I know its a good feeling. Just think nothing but bills to pay now and those are generally for things you have yet to consume rather than the pesky credit card and loan debt that are for things you’ve already consumed! I’m sure at some point in the future you’ll have a mortgage – which isn’t all bad. I, myself, only pay a house note each month – its a great feeling having no other debt – you feel like you have way more freedom in this world.

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avatar 2 Anonymous

Congratulations Flexo. And absolutely that financial aid advisor was looking after his interest and those of the school, not you. There were probably financial incentives from the lender involved. The college student loan business is a racket through and through.

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avatar 3 Anonymous

congratulations….I expect to be there this next year.

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avatar 4 Anonymous

Congrats man! I follow your blog all the time. I’m slowing paying down my student loans because that’s all the debt I have besides my mortgage. When it’s gone I will be SO excited!!!

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avatar 5 Smithee
avatar 6 Anonymous

Congratulations! It’s a great feeling, isn’t it? I hope you can stay debt free for a while and then secure a reasonable mortgage, if you haven’t saved enough cash to buy a home outright. The housing market will probably only continue to improve from a buyer’s perspective.

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avatar 7 Anonymous

Congratulations! What a nice feeling that must be! Enjoy knowing that debt doesn’t own you right now. Awesome. :)

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avatar 8 Anonymous

Congratulations Flexo! I wish I could be as debt-free as you! Rejoice! Rejoice! :)

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avatar 9 Anonymous

Congrats Flexo. That is absolutely awesome. I recently paid off all my debts except my mortgage and it feels great. I’m even hoping to have my mortgage taken care of within 5-6 years. Stories like yours inspire me and encourage me to keep working towards that goal.

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avatar 10 Anonymous

Awesome, that’s a huge accomplishment. I haven’t finished paying off my student loan for similar reasons, but it should be paid off in January. I’m tired of the monthly payment. What do you plan to do with the extra money each month, roll it into savings? I paid off a car loan a few months ago and was so excited about having extra money to save and invest, of course life had to throw some big expenses my way instead.

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avatar 11 Anonymous

Congrats, Flexo. I actually am a big fan of the “debt off” state, because even if it doesn’t always make perfect economic state, I have to recognize that there is tremendous psychological costs associated with debt. I paid off my student loans, all $16,000, in one year by working 80 hours a week at two careers (psychologist and window system administrator). My friends thought I was nuts, given the interest rates at the time – they don’t think I’m so nuts these days.

The psychological freedom that comes with being debt free is truly worthwhile, because even if you’re just paying a bit of interest each month on your loan, you’re still taking that hit every month. Prospect theory tells us that it is better to have one big loss than many small ones – that bleeding down feeling is terrible.

Once again, congrats Flexo!

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avatar 12 Anonymous

Congratulations! Did you dance a jig?

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avatar 13 Anonymous

That is awesome, by the end of the year I’ll be on your team also…

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avatar 14 Anonymous

Congrats, Flexo. I think being debt free is a big accomplishment. There are so many people who are not able to say that. It takes self control and the right mindset to avoid consumer debt – especially with all the media and advertisements prompting you to spend, spend, spend!

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avatar 15 Anonymous


Congratulations! I’ll be joining the party in 13 years.
Are you going to throw a post-debt party?

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avatar 16 Anonymous

YOU ARE DA MAN!!! Congrats bro!!

My advise is now that your’re out of debt, STAY out of debt.

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avatar 17 Anonymous

Congratulations on being debt free!!!! It must feel awesome.

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avatar 18 Anonymous

Like KC, I’m also debt free, (except for my mortgage). The only problem is that I’m living in another city so I have rent to pay and the rent I’m receiving doesn’t cover my mortgage. I do think mortgages are good from a tax perspective and now we’re finding that they also minimize risk to some degree. I would have to do a comparison based on paper loss for paying cash versus my mortgage with interest losses net of mortgage interest tax deductions. I’m thinking that if I sold my house today, I would have lost more had I payed cash than with my loan.

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avatar 19 Anonymous

You know, pretty soon all that profit’s going to be aggravating and you’ll be looking for some more debt to complain about. Factor in the current real estate market and that can only mean one thing: it’s house-buying time, chum.

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avatar 20 Anonymous

That’s got to be a good feeling. Remember like it was yesterday when I made my final credit card and student loans payments. Wow! Never felt more free in my life. Congrats!

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avatar 21 Luke Landes

Thanks for all the supportive comments!

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avatar 22 Anonymous

That is AWESOME! When I read the title I felt a sense of relief. I think I’ll have everything paid off (sans mortgage) by late February. That will be $65,000 in three years … paid off and GONE! I cannot wait!

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avatar 23 Anonymous

This is just great. I love hearing stories about people winning the way against debt, especially in such hard times. You’re an encouragement to all of us.

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avatar 24 Anonymous

Congrats to you! One day I will achieve such feats!

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avatar 25 Anonymous

I’ve been mulling doing this for some time…I have more than enough cash to pay off my 8k in student loans, but am concerned about how it will affect my credit score when I buy a house in the next few years. I know one factor in calculation is length of credit and my student loan is a solid 7 years longer than any other credit history I have. I’m nervous that my decision to save a few hundred bucks will end up costing me a few thousand on my mortgage. Any insight on how paying these off will affect your credit score?

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avatar 26 Anonymous

I am happy for you. I am going through something similar. My only debt is my student loan. I have about $11,500 left, down from $40,000 in 2001. My degree is in a dead field (journalism), so it’s extra frustrating to still have this debt hanging over me when it’s not exactly landed me the professional life I had hoped for. That said, I’ve decided this is the year to pay it off. Ok, so I probably won’t do it in one year, but I am hoping to make double payments all year, and then any extra money I make will go to the balance as well. Thanks for the story. I hope I am as successful as you are.

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avatar 27 Anonymous


That is GREAT! I feel like that is so far away for me. Have to keep chugging along.

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avatar 28 Anonymous

Congratulations! I can only imagine the feeling of elation I will have once I have paid off my student loans. Now that I’m in grad school it’s even more pressure…hopefully it’s worth it. Cheers!

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avatar 29 Anonymous

I think it’s easier to get out of debt than it is to STAY out of debt. Staying out of debt is harder for me than paying it off

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avatar 30 Anonymous

CONGRATULATIONS!! I know the feeling and it’s GRRRRRREAT!!

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avatar 31 Anonymous

Congratz – that is great. What a wonderful feeling to be out of debt. This blog is a helpful place for folks who want to stay out of debt or get out of debt :)

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avatar 32 Anonymous

Congrats on eliminating your debt! And a student loan of all loans! :)

I cannot wait until that day! But, I have far to go as I just recieved my first bill in the mail. I am on the start of the student loan elimination journey.

Happy Holidays!

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avatar 33 Anonymous


I hope to say the same thing in two years. I think I can pay off consumer debt this year, but I’ll still have student loans after that.

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avatar 34 Anonymous

Congratulations! What a great feeling :)

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avatar 35 Anonymous

Congratulations! Now you can truly walk with a spring in your step and a smile on your face.

A great way to start the New Year!

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