The day my wife and I got married, January 2007, we had zero consumer debt. And in reality, we have never carried any consumer debt. By consumer debt, I mean any debt besides the house (credit cards, car loans, etc.). I think we both grew up in somewhat uncommon households, where our parents never carried much consumer debt themselves.
Although we did not have consumer debt, we did purchase a new townhome just before we got married. I lived in the townhome for about a month by myself prior to our marriage. Everyone applauded us for the purchase, saying it is so good that you can own something right out of the gate. The truth was, we didn't own anything. We purchased the townhome using an 80/20 loan, where 80% of the mortgage is covered by one bank, and 20% covered by another bank. Usually the 20% loan is at a much higher interest rate, 8.4% in our case! Why did no one tell us that this was a bad idea!?
After about 1.5 years of living in the townhome, I decided that I needed more education to reach my career goals. I had earned a Bachelor's degree in Bioinformatics. It seemed that everyone who was doing the type of Bioinformatics work that I wanted to do had at least a Masters degree. So, I started applying for Bioinformatics programs. I applied to several schools (Stanford, Georgia Tech, can't remember where else). I was accepted at Georgia Tech and started going to school there in August 2008. Looking back, it is a bit sad that I was so willing to pay out of state tuition without second guessing the decision.
During our time at Georgia Tech is when we racked up the majority of our debt. The total loan amount at the end of the 1.5 year program was $54,486.5. Wow, is right! How did we rack up that high of a student loan that fast you ask? Shortly after starting school, we had second child. With two young kids at home, and me at school full-time, we basically took out the maximum loan amount that they would allow so that we could make ends meet during that time. So a lot of the loan amount covered housing, food, and books, in addition to the tuition. Luckily, I was on a Research assistantship and/or Teaching assistantship most of the time we were there, which earned us reduced tuition. Otherwise, it would have even been higher.
In a nutshell, that is how we got into debt. The next few posts will show how we got out.