Even an $800 medical bill or a balance of $376 on a Macy’s account can seem like an overwhelming amount of debt. Regular monthly responsibilities and life’s tendency to throw in a good dose of unexpected expenses have a way of making it difficult to make extra payments on lingering bills and get out of debt once and for all. But it’s certainly possible – just ask Ashanka Iddya, who graduated with an MBA from Duke’s Fuqua School of Business with a monster-sized loan weighing in at $145,000.
And she paid it off in just two years.
To be fair, Iddya did walk into a pretty sweet gig as a solutions specialist with Microsoft once earning her MBA. But her story isn’t about being “rich enough” to get out of debt. There was a lot of sacrificing and discipline involved in her budget battle, and her ultimate success is a message of inspiration and encouragement that should resonate with everyone – regardless of income level. Read on for more from Iddya, as told to us at MadameNoire Business.
How I ended up with so much debt
I applied to Duke University’s Fuqua School of Business while living in India, where I grew up, and when I got admission I had to come to the US. I obviously did not have a lot of funds to cover my education, so I basically took the whole thing on loan. I got a student loan provided by the university for international students. This loan covered living and tuition, but the interest rates are higher than federal student loans that US citizens get because it’s for international students, and we’re considered riskier borrowers. So the whole thing came to $145,000.
My “a-ha” moment
After the six-month grace period following graduation, the bank told me they needed a minimum payment, which was around $1,100. So in November of 2011, I started sending the minimum payment, but I noticed that my loan amount was not going down by much – just $200 or $300. I called the bank and asked how long it would take me to repay the loan if I kept paying the minimum, and they said it would take 16 years or so. The most important thing was seeing how much interest I was paying back, and it was almost like one more year of additional tuition. I realized that was totally unacceptable.
I started paying back more than the bank asked me to. Basically, any extra money that I had, I would just put it on the loan. The biggest change that I made was not having much savings because I knew that my savings were not growing at the same rate that the loan was accruing interest. There was no point of saving when the loan was costing me more. So for those two years, my savings was sometimes only $100 or $50 per month. It was sad to see my savings account like that, but I made sure that every little liquidity that I had was going straight into my loan. And that helped because I could just see the principal coming down and, because of that, the amount of interest I had to pay would come down drastically, too.
And making sacrifices
My company does gift stock, and whenever the stock rested (which is generally after a year), I would sell the stock. I would not hold on to it, even though some people say that you hold on to stock so it makes money. Any way I could get liquidity, I would put it into my loan. I also reduced my 401K contribution because, again, it’s the same kind of logic as saving. You want to make sure that if you’re investing in your 401K that it’s growing faster than the rate that your loan is growing. But my 401K was also growing very slowly, so I only made the minimum contribution required by my company and I just used the rest to pay my loan.
I cut out discretionary spending and realized that it was actually good for me that I was not buying things that I really did not need. When I saw a new pair of shoes or jeans that I wanted, my test was to see if it stayed with me for two weeks. If after two weeks I was still thinking about the shoes, I sort of figured out a way to buy them. It reduced impulse purchases a lot, but it’s all because of knowing how much money was coming in and how much money was going out that I was able to balance everything. The biggest thing I learned was how to have enough fiscal discipline to say, “I am going to contribute $2,500 this month to my loan, and everything else is secondary.”
Mom knows best
My mother was a big role model for me. She’s a research scientist with a Phd in molecular biology, and she was very good with her investments and managing the money and budget for out family. That made a big impression on me and really brought in that financial discipline. I definitely talked to her before coming to the US for my education because it was a massive loan, and if you looked at the economy, you weren’t really sure as an international student if you’d even get a job. But she really encouraged me to pursue my dreams and come to the United States and study. It was something that I really wanted to do, and she knew that I’d be able to figure out a way to get rid of the loan. Her influence was immense in terms of figuring out my battle plan.
Getting out of debt is not as hard as it seems
When I started paying down my loan, I was sometimes scared to even go to my bank account because I didn’t want to know what my numbers were or how much I was spending because I felt guilty about spending so much. But I think logging into your bank account really gives you an idea of what your spending habits are and gives you a clue of where you can eliminate discretionary spending so you can put that extra money toward your debts. I think it’s the one thing most people don’t do, and that is crazy to me because it is your financial health. You should be maintaining some sort of financial discipline, and I want to tell people that it’s really not that hard. It’s like going on a diet. And if you do it for a long time, it becomes a habit.
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