How the Louies Paid off Over $100K of Debt on One Income

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Paying off $120,000 of debt in just two years may seem like a big stretch with a single middle-class income and a family to raise. For most people, such circumstances might even encourage more debt on top of what they already owe. Monica Louie not only managed to make this debt payoff happen, but it led her to become a financial coach helping young families do the same.

Like any good financial success story, hers is still a work in progress, as she and her husband Mike continue to tackle additional debt, with one big goal in mind: Eliminate all of her family’s remaining debt in five years, before they both reach age 40.

How to get out of debt: two years, one income, zero budget

The Louie family’s total debt load of $120,000 was a combination of a mortgage loan, a home equity line of credit, and $37,000 in student loans.

The Portland, Oregon-based Monica had graduated about a decade ago with a business administration degree from the University of Oregon, but up until a few years ago, had barely made a dent in her debt.

“I knew I’d be carrying that debt into my forties, and possibly my fifties,” she says. “I was ready to be done with those student loans.” Couple that with leaving her job to concentrate on stay-at-home motherhood and the Louie family was tasked with a six-figure debt balance on a single income, but no tangible plan for how to pay off debt fast.

This was in 2013; Monica’s husband, Mike, had managed to pay down a bit extra towards his own student loans — $13,000 — but the couple found that they were dipping too much into their savings without an actionable plan for how to get out of debt.

It wasn’t a sustainable way to live, notes Monica, not with two young children in the mix. “We didn’t really like going down that path when we knew we should be living on our income,” she says. “That what got us intentional with our spending habits.”

Around August of that year, Monica and Mike sat down to craft a detailed, living budget and a debt snowball plan that mapped out their course for the next few years. It would need to carefully track each expenditure the family made. Where was their money going, and what could they cut out?

Drastic debt calls for drastic measures

The first step in paring down was to reduce spending to only the necessities.

Using the budgeting app Mint, they allocated just $25 each for monthly spending and $20 towards miscellaneous purchases. Leftover money would be deposited into an emergency fund, and the couple, according to Monica, resolved to increase their monthly payments towards her student loans to $500.

The next step to garner extra income would be to sell off what belongings the Louies didn’t need (or want) any longer, the proceeds of which would go towards paying off their debt.

In late 2013, they netted $1,600 in a lucrative two-day garage sale. “We put everything out that we wouldn’t mind parting with,” Monica says.

Then they decided to sell Mike’s car. It held its resale value well, and they turned that revenue around to buy a cheaper, used car. Eventually, he sold his beloved motorcycle and a weight gym: major lifestyle sacrifices, but all for the good of the bigger debt picture.

Mike also began making other concessions to save money, like biking and taking public transportation to work and taking a temporary contract spot in another state to earn some overtime pay. In a nutshell, according to Monica, “We were just as intense as we possibly could be.”

In those first 11 months, the couple managed to pay down $65,000 of their debt, wiping out all remaining student loans. By May of 2015, they’d paid off nearly $90,000.

By the middle of last year, with their HELOC in mind, they decided to sell their house and downsized. With the proceeds from the sale, the Louies were able to pay off $30,000 more in debt, saving $40,000 more. By this year, $120,000 is paid off, including the entire HELOC. About $191,000 in mortgage debt — their last — remains.

Louie turned 35 this month; her husband is the same age. “Our plan is to be completely debt free by the time we turn 40,” she explains.

Helping others help themselves

“It’s still going to be a challenge,” says Monica, “because we’ve sold a lot of things, and there’s not a whole lot we can sell anymore.”

Over the course of her family’s debt payoff, Monica began blogging about her experience and leading a social media charge to share her story and teach others how to get out of debt. She also devotes her time to financial coaching, a career path shaped by her relationship with working towards getting out of debt.

It’s become a lesson that the family continues to live by. “Knowing we’ve done well, we continue to keep our eye on the ball,” she says.

Since the Louies are essentially still paying down a significant portion of their balance, they budget extensively — not just for monthly expenses but also for “budget busters,” surprise expenses like car repairs, and special event purchases for birthdays, wedding showers, and the like.

Monica believes that one of the biggest misconceptions people in debt often have is that they have no money when extra cash can be easily earned with some discipline and budgeting.

“I always felt I didn’t have money. I always felt broke,” she says. “I think that’s where people get tripped up; ‘I don’t have that extra money to pay the debt.’ But most people, if they really were to look at their numbers, where their money is going, and find a few places they can cut out, [they can] save up for something they really want.”

Her basic advice to people interested in getting out of debt is to keep a budget above all else, but also keep an open mind, since one never knows what expenses (or savings) the future may hold.

“Have a detailed budget, but look at the bigger picture of what’s coming,” Monica says. “Be clear on where your money is going. Make adjustments to those numbers, so you can put more money towards debt.”

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1 Important Disclosures for Laurel Road.

Laurel Road Disclosures

  1. VARIABLE APR – APR is subject to increase after consummation. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes.

2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student Loan RefinanceFixed rates from 3.999% APR to 7.804% APR (with AutoPay). Variable rates from 2.480% APR to 7.524% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.480% APR assumes current 1 month LIBOR rate of 2.07% plus 0.91% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

3 Important Disclosures for CommonBond.

CommonBond Disclosures

  1. Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). The following table displays the estimated monthly payment, total interest, and Annual Percentage Rates (APR) for a $10,000 loan. The Annual Percentage Rate (APR) shown for each in-school loan product reflects the accruing interest, the effect of one-time capitalization of interest at the end of a deferment period, a 2% origination fee, and the applicable Repayment Plan. All loans are eligible for a 0.25% reduction in interest rate by agreeing to automatic payment withdrawals once in repayment, which is reflected in the interest rates and APRs displayed. Variable rates may increase after consummation. All variable rates are based on a 1-month LIBOR assumption of 2.08% effective July 25, 2018.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Education Refinance Loan Rate DisclosureVariable rate, based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of August 1, 2018, the one-month LIBOR rate is 2.07%. Variable interest rates range from 2.72%-8.17% (2.72%-8.17% APR) and will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a cosigner. Fixed interest rates range from 3.50%-8.69% (3.50% – 8.69% APR) based on applicable terms, level of degree earned and presence of a cosigner. Lowest rates shown require application with a cosigner, are for eligible, creditworthy applicants with a graduate level degree, require a 5-year repayment term and include our Loyalty discount and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty and Automatic Payment Discount disclosures. The maximum variable rate on the Education Refinance Loan is the greater of 21.00% or Prime Rate plus 9.00%. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. Please note: Due to federal regulations, Citizens Bank is required to provide every potential borrower with disclosure information before they apply for a private student loan. The borrower will be presented with an Application Disclosure and an Approval Disclosure within the application process before they accept the terms and conditions of their loan.
  2. Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer with the Education Refinance Loan. Borrowers should carefully review their current benefits, especially if they work in public service, are in the military, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans and replace those with the benefits of the Education Refinance Loan. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision at http://www.citizensbank.com/EdRefinance, including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
  3. Citizens Bank Education Refinance Loan Eligibility: Eligible applicants may not be currently enrolled, must be in repayment of their existing student loan(s) and must make the minimum number of payments after leaving school. Primary borrowers must be a U.S. citizen, permanent resident or resident alien with a valid U.S. Social Security Number residing in the United States. Resident aliens must apply with a co-signer who is a U.S. citizen or permanent resident. The co-signer (if applicable) must be a U.S. citizen or permanent resident with a valid U.S. Social Security Number residing in the United States. For applicants who have not attained the age of majority in their state of residence, a co-signer will be required. Citizens Bank reserves the right to modify eligibility criteria at anytime. Interest rate ranges subject to change. Education Refinance Loans are subject to credit qualification, completion of a loan application/consumer credit agreement, verification of application information, certification of borrower’s student loan amount(s) and highest degree earned.
  4. Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  5. Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
  6. Co-signer Release: Borrowers may apply for co-signer release after making 36 consecutive on-time payments of principal and interest. For the purpose of the application for co-signer release, on-time payments are defined as payments received within 15 days of the due date. Interest only payments do not qualify. The borrower must meet certain credit and eligibility guidelines when applying for the co-signer release. Borrowers must complete an application for release and provide income verification documents as part of the review. Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release. The borrower applying for co-signer release must be a U.S. citizen or permanent resident. If an application for co-signer release is denied, the borrower may not reapply for co-signer release until at least one year from the date the application for co-signer release was received. Terms and conditions apply.
  7. Average savings based on 18,113 actual customers who refinanced their federal and private student loans through our Education Refinance Loan between January 1, 2017 and December 31, 2017. The calculation is derived by averaging the monthly savings of Education Refinance Loan customers whose payments decreased after refinancing, which is calculated by taking the monthly student loan payments prior to refinancing minus the monthly student loan payments after refinancing. The borrower’s savings might vary based on the interest rates, balances and remaining repayment term of the loans they are seeking to refinance. The borrower’s overall repayment amount may be higher than the loans they are refinancing even if their monthly payments are lower.
2.57% – 5.87%Undergrad
& Graduate
Visit Earnest
2.80% – 6.38%1Undergrad
& Graduate
Visit Laurel Road
2.48% – 7.52%2Undergrad
& Graduate
Visit SoFi
2.47% – 7.99%Undergrad
& Graduate
Visit Lendkey
2.57% – 6.65%3Undergrad
& Graduate
Visit CommonBond
2.72% – 8.17%4Undergrad
& Graduate
Visit Citizens
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.