How to Pay off $56,000 of Debt in 5 Years

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Jessica Garbarino has been enjoying the sweet taste of debt freedom since March 5, 2015. That was the day she finally put her $56,000 debt to rest and walked away from a life of owing money to others.

Although her journey to debt freedom was not an easy one, it went much more quickly than she could have imagined. Here’s everything you need to know about Jessica’s path to debt freedom, and how you can follow it yourself.

The lightbulb moment

It was when she was watching her grandmother balance her checkbook during a visit in January 2010 that Jessica realized how much she hated being in debt.

“My grandmother is so meticulous about keeping accurate financial records, and it made me remember all the sacrifices she and my grandfather made when coming to the US from Cuba in 1962,” Jessica recalls. “They worked long hours at jobs below their skill level, learned a new language, and started over from zero in their late 30s.”

“I realized I was throwing away the huge opportunities that were given to me by their sacrifice and that I needed to become more responsible with my money,” she adds.

Finding a debt-payoff system

Luckily for Jessica, her lightbulb moment coincided with a friend’s enrollment in the Dave Ramsey Financial Peace University program. After hearing her friend’s testimonial, Jessica purchased Dave Ramsey’s book and started following his advice.

She started by totaling up her debt and by her calculations she owed $56,000 (not including her mortgage). She then broke it down into $29,000 in student loans for her MBA, $14,000 in credit card debt, and a $13,000 car loan.

Even though it was a somewhat discouraging amount to face, Jessica was on fire to become debt free. She used the debt snowball method to pay off her loans, which meant paying off debts with the smallest balances first:

“I am a firm believer that the small wins help keep you motivated and help you to believe that paying off your large debt balance is possible–you just need to do so one bite at a time,” Jessica says. “I had been great at creating budgets in the past (I’m an accountant by trade) but I had never followed through.”

“Having these smaller debt payoff goals kept me motivated to stay on budget and watch the debt balance shrink,” explains Jessica. “In that first year, I paid off $26,000.”

When life gets messy

Unfortunately, very few debt payoff journeys are completely smooth sailing.

In February 2011, a year after her lightbulb moment, the same grandparents who so inspired Jessica needed some help, so she moved from her home in Minnesota to Florida to take care of them.

Even though Jessica was able to keep her previous job on a contract basis after her move, the hours dried up. She found herself without an income and scrambling to find work.

Not only did she have to put the brakes on her debt payoff, she also had to stop making the mortgage payments on her house in Minnesota. By the time she found a new job in Florida, she was so behind on her mortgage that her house went into foreclosure.

It was a tough time for Jessica.

“Needless to say, I lost motivation and over the next two years, I just lived normal life, paying minimums on my outstanding debts, only sometimes paying extra,” she says

Remembering her goals

During a friend’s Facebook challenge to share their goals publicly in August 2014, Jessica remembered her passion for becoming debt-free.

From that moment on, Jessica worked hard to get her debt to zero. She was able to eliminate it all a mere seven months later on March 5, 2015.

“I wish I had started earlier,” Jessica says. “I know hindsight is twenty-twenty but all those years that I avoided addressing my debt, I kick myself for not doing it sooner.”

“I am grateful that I did start when I did and I wish I had known the time would go by quicker than I imagined,” she adds. “It’s amazing how overwhelming the goal can seem until you get into a new normal. Suddenly a few years go by and you are making your last payment.”

Debt burdens of a “normal American life”

It was easy for Jessica to fall into debt without thinking about it because she lived what she describes as “a normal American life.” She was careless with credit card spending, took on a car loan, and decided to take out nearly $30,000 in student loans for an MBA that may or may not have been worth it.

“I don’t feel like I got any intrinsic value from the education I received, although I may never know what doors that degree opened for me,” Jessica explains.

“I think students need to think carefully about the investment they make into their education and personal development and determine if it really matches their long-term goals,” she says.

But it’s not just the debt of “normal American life” that can be a problem, according to Jessica. She is also worried about the fact that single people do not necessarily have a lot of role models to teach them how to handle money.

Much of the financial advice available is geared toward couples and families with children, but there is no one speaking up for the single person.

She has seen single women in particular who believe they don’t need to really start thinking about finances until they get married. Jessica has decided to fill that information gap.

“I started my site Every Single Dollar to be that resource of information, role modeling, and encouragement to single women everywhere,” she says.

Advice for student loan borrowers

For anyone facing student loans, Jessica’s advice is to look forward, rather than back.

“You finished school. It is a past achievement. Don’t let it follow you for years and encroach on your future goals,” she explains. “Start a plan now to pay off the loans – even if it means taking a part-time job to accelerate the payoff. Your future self will thank you.”

And who knows, perhaps one day you will inspire your grandchildren to reach for big financial goals, just like Jessica’s grandparents inspired her.

Interested in refinancing student loans?

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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.