Earlier this year, 28-year-old journalist Chadwick Matlin paid off his six-figure student loan debt – and it only took him 6 years. I asked him how he did it -– and why.
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Felix Salmon: Congratulations on the piece in Matter. Is this the first freelance piece where you feel you can actually spend the proceeds, rather than allocating them to paying down student loans?
Chadwick Matlin: Thanks. You're sort of right — it's the first time I've received a freelance check and felt like that money was aimless. But that doesn't mean I've spent it. Old habits die hard.
FS: At one point in the piece you talk about your "skulking fear of becoming my father.” Yet you seem to have an identical (and very rare) attitude to debt. Were you paying off your debt so quickly just so that you could keep one step ahead of him and ensure that he didn't pay off more than he already had?
CM: It was a complicated. Certainly, I've inherited some of my dad's personality around a host of things, money included. Until recently I didn't realize that it wasn't the norm for people not to buy a car until they had the cash to do it. But my taking on some of those personality tics was just the baseline for paying off the debt. The guilt I'd feel if they kept paying and I kept freeloading was the real driving factor. It seemed odd, especially once I had a salary, to expect my parents to pay for my education. Especially a very expensive one.
FS: Which leads me to one of my big questions: Why were all of those loans in your dad's name?
CM: Because no bank will make $120,000 of loans to a teenager! Or rather, they will, but the interest rates were so drastically lower for my dad that it made much more sense for them to be in his name. In a way that tied the two of our fates together even more than they'd be otherwise, and that's a big problem in family units that may be more strained than mine: The debt ends up being a kind of umbilical cord back to your parents, but this time there's often an expectation of nutrients going back and forth, not just parents to kids.
FS: You mean that in paying off loans which would otherwise have to be serviced by your dad, you were doing him a financial favor of some description?
CM: I'm more thinking outside my dad and me, [I mean] for families that have a more strained interpersonal dynamic. It could be that parents end up resenting their kids for the debt incurred in the kids' names, or that the kids end up resenting their parents for not paying as much as once promised.
FS: Tell me more about these loans. Was there a lot of father-son shopping going on? Were they joint, or were they in his name only?
CM: By the time I graduated, I had three loans totaling something north of $6,000; the rest were solely in his name, which meant his credit was on the line, he got the tax breaks, etc. While I was in school he handled all of it, and when I graduated, he still made the calls, but I would write the checks and watch the numbers go down. I remember when I was 21 or so I said I had a $10,000 lump sum I could send him, but before I did, I wanted to know what it would mean if I saved it. And he called the lenders, then called me back and reported that it'd save me $12,000 in the long term, which was when I really understood just how much better it would be to pay it down quickly.
FS: Did you wind up with rather more information about your dad's finances than most people get about their parents? You talked about how the grants from Tufts were highly correlated to your dad's income. Was that on a semester-by-semester or year-by-year basis?
CM: My parents' finances were certainly on my mind more than most college students. But a funny thing happened once I went to Tufts: My parents kept having better years financially, and I kept getting less and less financial aid as a result. The financial aid packages were handed out on a year by year basis, and by the time I left college I had stopped applying for it: We were right on cusp of upper middle class-hood for Tufts, where and Tufts assumed that all new money my parents were generating would be put towards school.
FS: It seems to me that because your dad took out the loan, and you felt that you owed it to *him* rather than to some evil bank, that this helped accelerate your repayment schedule and minimized your default probability.
CM: Sure, that's one way to look at it. The other was that I had no interest in the bank making an extra $100k or whatever it was over the 30-year course of my loan. It helps to be a little anti-corporate if you want to get your loans paid off quickly.
FS: I do wonder whether you're not quite an extreme outlier in this respect. Would you recommend this kind of personal-austerity program to others?
CM: Perhaps, if they're feeling trapped within their debt like I did. Though, if I can mix metaphors here, I actually felt like it was an anvil.
I felt more weighed down than trapped. It’s hard, for example, to decide to go into non-profit work or do a year of work abroad when you know that you have to be making more than just what it costs to live. I always needed to have a margin that could be put towards the debt. And it's not like I chose the highest-margin profession.
FS: You managed to repay something on the order of $40k in 2013 alone?
CM: Something like that, yeah. (Thanks Reuters buyout!) There were a few different moments that I got extremely lucky. For example, I belonged to a union that dropped money on me like it was manna because of an old contract they negotiated. There were moments of true unluckiness too: I was laid off, I freelanced without knowing how, etc. But yes, 2013 was a good year — I was still living with two roommates in a $900/month apartment, and I had a lot of extra cash coming in through freelancing and the job.
Throughout the past 6 years I would wait until my bank account hit $20k, and once it did I made a $10k lump sum payment, and then I just waited for it to hit $20k again.
FS: So you kept a $10k cash cushion, which, I assume, you rarely dipped into. And I also assume you were running zero revolving credit card debt or anything like that.
CM: Yes. When I was first laid off, from Slate, I had $5k in the bank and I saw how useful that was. I don't think I can ever go back now. As for credit card debt, I would pay that off every month. $1k of housing/utilities, maybe $400 in cash payments, and the rest went straight to the bank and sat there. (Aside from vacations here and there.)
FS: You’re living in NYC on $2400 a month.
CM: Sure: I know plenty of people who do it on less not to mention those who are forced to, etc. But I never felt poor, partly because $2400/month when you're single is a lot, and partly because your expectations for what you're owed are very limited (ideally, anyway).
Anyway, we all make weird, almost barter-like deals when we need to. The issue is when we have to return to a downscaled lifestyle after getting accustomed to whatever the upscale one is. I remember in the midst of the financial crisis there was someone writing for the Daily Beast about how now she'd had to take the subway and she never had before. I, still tens of thousands in the hole, found that fascinating: I hadn't realized just how unlimited many lives were, because I only had my own.
FS: There was that column in Slate by Victoria Floethe: "My small but helpful trust fund lost 40 percent all at once, and then another 20 percent, leaving me, practically speaking, destitute."
CM: Practically speaking!
A few months ago, my girlfriend and I moved into a new place together, and it is the first regular, monthly thing that feels like a small indulgence, in the sense that, if I lost my job I'd have to scramble a little harder than I would've if I were in my $900/month joint. And even though the loans were gone I still fretted.
FS: You have a kind of built-in frugality.
CM: Yes, probably; which brings us back to whether I'd recommend this to others. If you're frugal, yes, do it, especially if you can't guarantee a 4% return (or whatever your interest rate is) on your money elsewhere. But if you're not frugal, it's going to be much more psychologically draining than it was for me. In many ways frugality is my baseline lifestyle: It takes friends and a good chef to drag me beyond it.
FS: You were clearly hyper-aware of the magnitude of $100,000 even as a teenager. I think most kids going to college see that many zeroes and they just lose all meaning. Has your understanding of the meaning of $100,000 changed much, since then?
CM: Yeah, I think so. Now it's a down payment (or whatever a down payment costs) rather than an education. But money flows much differently than it did when I was 17. Then, I was being paid $100 a month from the local newspaper and it all went to gas money, and I would save and save for a new video game, trading in my old games for a new one (I was a geek). Now I spend $50 on dinner at least once a month.
FS: Let's say you had decided to go to Western Connecticut State and everything else is the same — the fellowship, Slate/Big Money/Reuters/538, the whole thing. Do you look at that counterfactual and feel that your life would have been significantly better in countless tiny ways?
CM: Not really — I mean, what's a house, anyway? Why is that the dream I would have been saving for rather than my education?
I've never been big on earning more money, just not spending what I have. So if I have an extra $100k right now, I don't know what the hell I would do with it. Probably feel uncomfortable with my privilege. At least the loans helped me feel a part of some larger struggle.
FS: I want to ask you about the "impossible" thing, too. Do you look at your relatively charmed professional career and say that much of it is a function of having gone to an elite university?
CM: All because of that fellowship, yes. It was only available at Tufts.
Would I have succeeded at UConn? Sure. But would I have been slingshotted out of school the same way? Doubtful. There are a lot of smart graduates, Felix. And sure, I probably would have washed up somewhere okay, but I hadn't ever heard of Slate when I interviewed for that fellowship. I certainly would have never thought to apply for a job there if I'd gone to UConn.
FS: So what we have is on the one hand you got a great education at Tufts, which gave you access to a career which you love. And on the other hand you ended up in massive debt, which "calcified into the defining parameter of my life," but which didn't actually end up changing the way you lived your life much at all.
CM: It may not have changed my life, but it doesn't mean it didn't affect it. Given my personality, I probably had to be fixated on something, and a massive financial goal happened to be my lot.
FS: For you, the debt caused little harm; if anything it was a goad to extra success.
CM: Right, and obviously that's not the case for a huge number of people. And this is part of what I'm curious about. For those who are single and relatively privileged, will a country of student loans force a change in fiscal responsibility in America? It’s different, obviously, for the vast numbers who are indebted with families of their own.
FS: I suspect the answer is no. Student loan default rates are already high and rising fast. And in general fiscal responsibility is inversely correlated to indebtedness.
CM: Good point, which brings us to the big question, the $100,000 question, even: what do we do about this mess?
FS: The ONLY answer is to bend the cost curve, somehow — to prevent colleges from inexorably increasing their fees and tuition at rates far higher than inflation. Clever new ways to finance exorbitant costs solve nothing, in the long term.
CM: Yes, but colleges, whether they're non-profits or otherwise, have a profit incentive. It’s up to the feds to stop underwriting it.
FS: Yes: The solution isn't cheaper loans, it's fewer loans, and smaller loans. Starve the beast! (Where the beast is Harvard.)
CM: But the beast isn't even Harvard! Harvard is so loaded! The beast is for-profit schools. The beast is a small podunk university that can't promise you a better education than a state school. The beast is a tax base and state house that don't want to send more money to higher-ed institutions, so they can't accept more students at lower rates. It's a remarkable tangle. I never expected that paying off my own loan would be easier than figuring out how to fix the system for everyone else, but that was youthful naivete.
FS: In any case, congratulations on getting out of debt, and on a great piece. And I genuinely hope you splurge some of the proceeds on something ridiculous.
CM: I have my eye on some rock climbing equipment — but I'm already trying to figure out if I can get it used rather than pay retail. Like I said, old habits…
FS: You are LITERALLY looking into paying money for old rope.