End of the Year Reflection - My 7 Stages of Debt Repayment

After I wrote about how I'm no longer underwater on my student loans, I marveled how my debt repayment process was awfully similar to that of the 7-stages of grief.

1. Shock (1998-1999) and Denial (1998-2007)
When I graduated from law school in 1998, I knew I was graduating with a big debt ($106,925, to be exact), but I never paid attention to exactly how much and never gave much thought on how I was going to pay back the loans.

When the grace-period after graduation expired, my reaction was, “Oh my God, I don’t know how I’m going to repay this. But I’m sure it’ll all work out somehow.”

I’m not sure exactly why I thought things were going to "work out somehow", since I didn’t have a budget or a plan.




During this time, I “borrowed” (read: took accepted) money from my parents and lived on credit cards. Whenever I was short on money (which was always), I sought and received forebearances on my student loans. I lived in complete and utter denial.

It seems like other people experience this type of denial as well. This article from MSN Money highlights the story of Sophia Wallace:

The 28-year-old New York resident has a master's degree from a prestigious university, a successful career in photography, stamps in her passport from around the globe and, until recently, personal finances that were out of control.

When Wallace graduated with a student-loan debt of $60,000, she found herself overwhelmed to the point of financial paralysis. She tore through a $5,000 loan from her dad as bills stacked up. She had no idea where her money was going -- despite making what she defines as a good salary. The sense of powerlessness crippled her.

2. Pain and Guilt (1999-2001)
As I was (barely) making my minimum monthly student loan payments and digging myself deeper into credit card debt, I kept thinking to myself, “What have I done? Why didn’t I study harder during undergrad so that I could get scholarships? Why didn’t I research whether I qualified for grants? Why am I not independently wealthy? Why, why, whyyyyyyy????”

I wallowed in self-pity for about 2 years, conveniently disregarding the fact that I got myself into this whole mess.


3. Anger and Bargaining (2001)
Despite the fact that I was taking accepting money from my parents to make ends meet, I found myself getting angry at my parents for not being rich enough to pay for my law school education.

Some of my classmates/friends lived in Beverly Hills and their parents funded their education 100%. Although some of these classmates were earning the same amount as I, they were living a much more extravagant lifestyle since they had no student loans to pay back.

I grumbled that I too could be living the "high life" had my parents paid for my law school education. I cursed my parents for not being rich. (Talk about misdirected anger!)

I also bought lots of Lotto tickets, praying to God, “If you let me win just enough to pay off my student loans, I promise I will do pro bono legal work for the poor and needy…” I don’t know exactly how much I spent on Lotto tickets, but that money probably would’ve been better spent paying off my debt, don't you think?


4. Depression, Reflection and Loneliness (2001-2007)
I was depressed and withdrew from many of my friends. They were all buying houses and I was still living in a rented 1 BR apartment (and still am). They were driving fancy cars and I was still driving my mom’s hand-me down, beater Toyota Corolla.

I was already $157,000+ in debt and went through a downward spiral of spending binges on cars, fancy designer clothes and accessories, and fancy vacations.

I may not be rich, but at least I can spend like one.

In 2003, I fell behind on my student loan and some credit card payments. I came to accept the fact that I was going to die with my debts. Who cares about my credit score? I'll never be able to buy a house anyways.


5. The Upward Turn (2007)
(Earlier this month, FruGal was very kind enough to highlight me in her “Five Minutes With” series. The following is from the interview.) My lightbulb moment came when I got rejected for an American Express Clear Card.

I was desperate to transfer some of my high-interest credit card balance to a 0% interest card. American Express instantly rejected me for: 1) serious delinquent payment history and 2.) excessive debt-to-credit ratio.

I’d never been rejected for a credit card so this was a horrible slap in the face. I knew I needed to do something. But what? How?


6. Reconstruction and Working Through (2007-present)
After the rejection, I tallied up my debt payments and I discovered, to my horror, that my monthly expenses were $500 over my monthly income. I had no choice but to: (a) increase my income by taking a second job and/or (b) reduce my debt.

My second job as a telemarketer for a cheesy timeshare didn’t last for a month. So I chose option (b).

In 2007, I liquidated most of my employee stock option account, my savings and my Roth IRA to pay down $17,000 of my credit card debt immediately. I also stopped contributing to my 401k (i.e., tax-deferred, employer sponsored retirement account) for 7 months to increase my cash flow. At the time, liquidating my assets was the hardest and scariest thing I’d ever done.

I was also ruing the lost opportunity of not contributing to my 401k, but as they say, things happen for a reason. This was the smartest move I ever made since I'd stopped contributing during the height of the stock market bubble and paid down my debts instead.

Anyhow, during this time, I did the next scariest thing – I created a budget for the first time in my life.


7. Acceptance and Hope (2008) [My Current Stage!!]
Up until mid-2008, I was still pretty depressed since I was upside-down on my debt and I didn't think I could pay off my debt ever.

But when I plugged the numbers in a debt reduction calculator and into my spreadsheet, I discovered that I could pay off my entire debt in 6 years and 5 months. I thought, "That’s totally do-able AND I’ll still be in my early 40s when that happens!" A ray of light.

Well… the rest is documented in my blog that I started in August 2008 with the encouragement of Sallie's Niece.

I still have a long journey ahead of me and my blog is helping me be honest and accountable. I am grateful for all the tips, support, encouragement, and yes, criticism, the PF blogging community has given me in 2008.

Thank you all and have a blessed 2009! Go PF Bloggers!