6 mistakes I made while paying off $81,000 of student loan debt

Courtesy of Melanie Lockert

Melanie Lockert.

• I borrowed a total of $81,000 in student loans for two degrees. Over a period of nine years, I paid it all off - and it wasn't easy.
• I made a lot of mistakes along the way. For one thing, I spent years paying only the minimum, even though I could have afforded to pay more.
• I also put off retirement savings, went without health insurance, and raided my emergency savings - all moves I'd later regret.
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Like many people, I had to resort to student loans to pay for college. I borrowed a total of $81,000 in student loans for two degrees. Over a period of nine years, I paid it all off - and it wasn't easy.

It took a lot of cutting back and earning more and staying focused. But I also made a lot of mistakes, too. In retrospect, I might have done a few things differently. Here are six mistakes I made while paying off my student loans.

1. I only paid the minimum

For the first five years of my student loan repayment, I only paid the minimum. I treated it like a bill and didn't let it bother me. Could I have afforded more? Yes. Ironically, it wasn't until I took on even more debt going to NYU - graduating with $68,000 left - did I start paying more than the minimum.

I struggled to make my payments after grad school and wish I had gotten ahead when I could have afforded it. If you can, pay more than the minimum.

2. I didn't save for retirement

Most of my career has been spent in the nonprofit sector. These jobs didn't offer any retirement matches, so I didn't contribute to a 403(b). I used this as an excuse to not save for retirement.

Then when I got serious about paying off my student loans after graduating from NYU, I decided to put all my focus on my debt. I didn't save for retirement. I felt fine about that decision. But when I paid off all my debt at age 31, I felt like I was starting all over. I was happy to be debt-free, but now felt the added pressure of being behind on my retirement savings.

3. I went without health insurance

In 2012, I cobbled together several temp jobs and I was trying to get by and pay off my debt. My income was scarce so I decided to go without health insurance. This was pre-ACA so there was no penalty, but I still felt anxious about not being covered.

One time I fell ill and went to the ER and faced a $1,600 bill. I was so stressed out, but my saving grace was the hospital's payment policy. I was able to show that I didn't have the means to pay the bill by submitting my pay stubs and tax returns. At that time, I was making so little that the hospital forgave the amount. But it was still a scary ordeal I don't wish to repeat and I probably should have just forked over $200 per month for health insurance.

4. I side hustled too much

When people ask me about how I paid off debt, the main thing I say is that I focused on earning more while keeping my expenses low. For context, my half of the rent was $400 for a studio apartment in Portland, Oregon. My initial income was low so I had to build my income to make the progress I needed to pay off debt.

So I side hustled like crazy. I found gigs on Craigslist, TaskRabbit, friends of friends. I pet sat, was a brand ambassador, event assistant and more. For several years, I worked several days a week. While I certainly was earning more, there were some consequences for side hustling this much.

First of all, my eating out expenses went up. I had zero energy coming home, and would eat out more often and buy coffee to stay afloat. My transportation costs went up going here and there.

While my income went up, almost imperceptibly my expenses went up to to be able to handle my lack of time and energy.

5. I used my emergency fund to pay down debt

Toward the end of my debt repayment, I saw that I had a few thousand dollars left. I was so eager to be debt-free that I tapped my emergency fund to pay off my debt. It felt great! I was done! While I was cash poor, I now had a positive net worth.

But several months later, this bit me in the butt. I ended up moving from Portland to Los Angeles, which was an expensive move. Also, I faced a surprise tax bill because I didn't realize I had made more money and went into a new tax bracket being self-employed. I ended up depleting all of my savings to deal with this and it took a while to build back up again.

6. I didn't understand how credit worked

Even though I took out $81,000 in student loans, I'm actually pretty debt-averse. Owing money or anything to anyone makes me anxious. So for a long time, I didn't have a credit card. I didn't get my first credit card until I was 28.

I knew that student loan payments had helped me to establish a credit score. But I didn't realize that there were different types of credit and that getting a credit card could help. For example, student loans are installment loans and credit cards are considered revolving credit.

When I got my first credit card, my credit score went up. Also, a funny thing happened when I paid off my student loans: My credit score went down a bit. Not a ton, but by 20 points or so. I was perplexed, but because the account was now closed it had affected my credit score. Not really understanding how credit or borrowing worked didn't help me.

I am so glad to be debt-free, but these six mistakes didn't help the process. If you're paying off debt, think twice about tapping savings or forgoing saving for retirement. Balance being smart financially while enjoying today and have a responsible plan for paying off debt.

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