Life sometimes gets in the way of the plans we make, but for Jacob Wade, it enabled him to pay off $37,000 in student loan debt last month, in just under seven years.
Wade’s story is remarkable considering he received a sizable inheritance, spent it all before age 21, broke his neck in a serious car accident, racked up credit card debt, got married, took on his wife’s debt, had a family, bought a house, and lived through some lean times — and still emerged debt-free thanks to discipline and a lot of financial changes.
From $100,000 to zero
When Wade turned 18, he began receiving an inheritance from an annuity set aside in his name: $100,000, stemming from a lawsuit his family won after Wade’s father died of skin cancer that was initially misdiagnosed.
Wade blew through the entire sum of money in just under three years. First, he bought an expensive car for himself and then a Cadillac for his mother. He then paid $13,000 of his student loans — nearly half of his tuition — but ultimately spent the rest of the money and even racked up $3,000 in credit card debt.
“Whatever I felt like, I could just do,” Wade said was his reason. “I had nothing to show for it, but I lived on this money for two years.”
It was at this time Wade was also involved in a near-fatal car accident that broke his neck within an eighth of an inch of his life. A passenger in his friend’s car, the vehicle went over an embankment at 120 miles per hour, flipping six times and landing on the roof each time, crushing his head with each contact.
Luckily, Wade wasn’t paralyzed and made a swift recovery, but it may have prompted him to spend even more money as his lease on life was renewed.
No money, no budget, no problem
Though at one point, Wade had enough money to pay off his student loan and credit card debt, he now had zero dollars left and had just gotten married. The couple’s initial challenge was paying off his wife’s own $24,000 student debt — but with no money left, this was the least of Wade’s concerns.
He had no budget.
Wade began by listening to and reading the advice of money expert Dave Ramsey, which prompted Wade and his wife to start managing their money better, make cuts where needed, and live more frugally.
During her last year of school, he said, the couple took any cash available and put it towards her loan. Mustering up $3,000, it prevented them from borrowing further. The Wades also used her entire paycheck towards paying off the debt.
“You put your essentials at the top, and whatever you think you want in order of importance, below that,” said Wade. “Your goal is to dictate where your money goes.”
For a while, the Wades tried to avoid spending where they could, such as making handmade gifts on holidays, eating out less, and using their newfound budgeting skills to put money towards needs before wants.
Now that their finances were almost in order (they still had several thousand dollars in his wife’s student loan debt left), the Wades took a risk: the time was now or never to buy a house. According to Wade, they got an FHA loan with a small down payment.
“In most situations, it is not ideal to take out the biggest debt of your life while you’re still paying off debt.” Going against Ramsey’s basic advice, Wade reasoned that the equity since built up in the house made the purchase worth it, despite the very calculated riskiness of the buy.
Then, just as the Wades were getting ahead financially, his wife became pregnant. “We knew she was going to be at home and lose that income,” at least for several months pre and post birth, said Wade. So, the couple stopped paying extra towards her student loan debt, using their earnings to build up an emergency fund instead. Whatever was left over was paid in spurts towards the loan.
“We wanted to pay the debt down,” he said, “but this thing took precedence.”
At this point, Wade, an IT professional, started his personal finance blog iHeartBudgets as a side job, but also to start documenting his debt payoff story.
The extra income was buoyed by some smart credit card usage: instead of halting their credit altogether, the couple decided to leverage their credit card rewards and earn about $1,100 that Wade used to further cut down their debt.
He also used $3,000 in tax refund money towards the loan.
By late last year, Wade had estimated that the last of the debt would be paid off by next month. But the home stretch came quicker than the couple had thought and they managed to pay down the last remaining balance in January.
“Any windfall, any extra paycheck, any birthday money, if it wasn’t allocated towards something, let’s put it towards those loans and knock it down,” Wade said was their strategy. “Even though I didn’t have the income then, we were just chunking it down, instead of making the minimum payment.”
As a last step, the Wades also refinanced their house, allowing them to skip a mortgage payment that they put towards the debt. They also received an escrow refund from the company who serviced their prior mortgage.
Wade’s journey to becoming debt free comes with one important lesson: life’s struggles don’t have to get in the way of accomplishing one’s financial goals. In fact, they’re challenges that should be embraced.
“We made a couple of different choices that delayed it,” said Wade. “All of those pieces, those life things that can happen to people, where they say, ‘I’ll just keep those loans forever without making any progress.’ I was glad we always had that end goal in mind to pay off our debt quicker.”
Wade believes that personal obstacles, tragedies, and other circumstances shouldn’t be the triggers one needs to get their finances in order. “Most people I know, something stressful has to happen,” he said. “They just want to give up and look forward to bankruptcy, or whatever. Some people are just not willing to make the change.”
But, like life’s setbacks both major and minor, they don’t have to contribute to going into — or staying in — debt, according to Wade.
“Debt isn’t forever,” he said. “It’s only forever if you make it that way. If you keep that end goal in mind, you will get there.”
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1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.54% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of March 18, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 0318/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
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3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.5% effective February 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.54% – 7.12%3||Undergrad & Graduate|
|2.54% – 7.27%1||Undergrad & Graduate|
|2.67% – 8.96%4||Undergrad & Graduate|
|3.23% – 6.65%2||Undergrad & Graduate|
|2.69% – 7.43%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|