Most of us stuck with large amounts of student loan debt will make some sacrifices to make those repayments more quickly. Maybe you’ll downsize to a smaller apartment, sell some belongings, or lower your cost of living.
If you’re like Aja McClanahan however, you’d kick these changes up a notch.
To reduce her cost of living, Aja and her husband, along with their children, moved to a house where they could stay for free–in a crime-ridden Chicago neighborhood. They went an entire scorching summer without air conditioning just to save on monthly energy costs.
Most importantly, Aja and her family stopped splurging on everything and anything like it was a religion. What’s more, all of these major lifestyle changes got Aja’s family out of $120,000 in student loan debt in about six years.
But here’s the kicker: the whole financial experience made such a profound impact on the McClanahans that the family isn’t looking to return to their former spending habits anytime soon.
Staring $120,000 of debt in the face
In 2007, Aja and her husband Kelvin were saddled with $60,000 in combined student loan debt.
Then their debt doubled thanks to some luxurious “keeping up with the Joneses” lifestyle spending, sending their cost of living expenses sky-high.
“When we got married, it was definitely $60,000, and then after that, we financed a $30,000 car,” Aja says.
Shortly afterward, Aja began financing the expenses for her new business venture all on her credit cards.
“I needed an office, I needed furniture,” she recalls. “I put everything down on the credit card. I was paying [office] rent. It was an unwise way to start a business.”
This failed business venture led the McClanahans further into debt.
The need for a plan
So when the collectors came knocking, the couple knew they needed to re-adjust their priorities and lower their cost of living if they wanted to get back on track.
Both of their daughters were attending expensive private schools with tuitions around $13,000 a year, so the McClanahans knew that their financial status quo wasn’t sustainable.
“Things were very hopeless for us,” Aja says. “We had this big number staring us in the face. But when the number came, the plan came.”
“Bullet holes in the back door”
The family’s plan wasn’t simply finding ways to earn more money, or scaling down their housing costs.
Instead, the McClanahans made what Aja calls a “drastic” choice. The family relocated to Englewood, one of the most dangerous and crime-infested sections of Chicago.
According to Aja, a relative had inherited a house in the inner-city neighborhood. The four-bedroom, 2,000-square footer was already paid off, but they didn’t want to live there. So they offered it to the McClanahans.
“We’re not city kids, we’re not city people, this is a bad idea,” Aja says she and her husband told themselves. “But what could happen in our life with no rent, no mortgage? We could totally demolish our debt. So we moved to the inner city.”
“There were bullet holes in the back door, but we had no mortgage, no rent,” she adds. “We used that opportunity to go in hard on our debt.”
Aja estimates that the 2010 relocation freed up about $1,400 previously used for mortgage or rent payments.
Relocating didn’t come without its share of issues, of course.
It’s not uncommon in Chicago to see central air conditioning units protected in elevated metal cages. That’s because thieves have been known to steal copper and other precious metals to sell. One blisteringly hot summer in 2012, that’s exactly what happened to the McClanahans’ A/C unit.
But instead of charging a new one to their credit card, they simply went without climate control in the 90-100-degree heat. A family friend gave them a small window unit to use in the meantime.
“We’d all pile up in one room, all summer, the whole family, and go to sleep,” says Aja.
Lowering their cost of living
Apart from no monthly energy bill, the family continued living cheap, saving up, and paying down their debt by making small changes to their budget. They would order one meal at a restaurant and split it, or pass on the purchase of paper towels.
Aja also learned how to combine business with pleasure. If a client subsidized a business trip for her, her husband would come along. The travel would turn into a mini-vacation after hours since the couple only needed to pay his part of the airfare.
With this savings plan in place, the McClanahans aggressively tackled their collective debt. It wasn’t uncommon for the couple to make payments upward of $2,000 to $3,000 a month through 2012 into 2013.
By April 2013, the McClanahans had $20,000 in debt remaining. Aja struck a deal with her alma mater forgiving her of nearly $9,000 in accrued interest. Afterward, she owed only her principal of $3,700.
As her cloud consulting business grew, Aja forwarded most of the excess income towards debt payments. By the end of the year, the sale of an old laptop and some vintage silver coins helped finance the remaining $1,600 left to pay.
The family was finally debt free.
A house of cards is “not really wealth”
Aja says that she doesn’t miss the lifestyle she had previously.
Her daughters, who earn their own lucrative income through voice acting and modeling, are now home-schooled.
Aja and Kelvin own cars that are both over a decade old, maintaining a manageable cost of living. Apart from financing a new refrigerator, the family still lives in the same four-bedroom house in Chicago, where solutions — not problems — abound.
“It’s actually worked out because it’s one of those places where a lot of helping hands are needed,” she says. “We do a lot of volunteering and community service to stay plugged into the neighborhood.”
Frequently, Aja gives talks on financial literacy to residents. It’s an extension of McClanahan’s newfound pursuit as a personal finance blogger and expert through her website, Principles of Increase.
Now that the family found its way out of debt, they’ve mastered how to live cheap. But are they really not tempted to go back to comfortable suburban life and the cost of living it entails? According to Aja, it’s a matter of perspective.
“I think you have to get over yourself and realize that outward expressions of wealth, and what you have, is fake wealth, in some cases,” says Aja. Buying and spending for the sake of acquiring more stuff, she adds, is merely a house of cards built on a false foundation.
“It’s not really wealth,” she says. “I don’t care if I drive a 40-year-old car, as long as my bank account is tight. That’s what’s important.”
Light at the end of the tunnel
Aja hopes to encourage people struggling with similar financial problems to dig their way out of debt the same way she did: with a solid get out of debt plan in place.
“So many people ask us, ‘How did you do that? Can you show us?’” Aja says. “I would encourage anyone, someone who wants to get out of debt, to get a plan.”
“Once you get a plan, hope will come,” she adds. “Confidence will come.”
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
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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 firstname.lastname@example.org, 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|