This report was originally published Aug. 15, 2016.
When Beth Walker graduated with her bachelor’s degree in 2008, she had $60,000 in student loan debt.
And when she got her Master of Business Administration (MBA) in 2010, she increased her total to almost $75,000 in student loan debt.
What’s more, Walker was only earning $35,000 a year from her first job out of college. But she was determined to make her payments. In fact, she thought she could do better. As a result, she made a plan to pay off her debt in January 2017. Here’s what she did.
- Embraced debt avalanche method to pay off almost $75K loan
- Put herself on a tight budget — and stayed on it
- Bought a house and got roommates to help with mortgage
- Lived where there were job opportunities, low living costs
- Looked beyond her student loans
First, Walker consolidated six federal student loans totaling $25,000 at an APR of 6.8%. She also had two private student loans — one for $39,000 with a 3.9% APR and another for $10,000 with a 2.5% APR.
She opted for the debt avalanche method, putting as much toward the highest-interest loan as possible while paying the minimum on the other two. That means she started paying off the $25,000 loan first.
Though Walker understands the appeal of the debt snowball method — paying off the lowest balance first so that you see concrete results faster — she found debt avalanche offered a similar sense of accomplishment.
Walker used the ReadyForZero app (which has since shut down) to determine her payoff date and see her daily interest. If you’re looking for another app, you could consider Mint, Debt Free (iOS) or Debt Payoff Planner (Android).
Once Walker had paid off the $25,000 loan, she began focusing on the loan with the next-highest interest. With just $2,500 left on the $39,000 loan and $7,000 on the $10,000 loan as of mid-2016, Walker aimed to pay everything off early in 2017.
“The whole time I was working on my MBA, I lived with my parents and saved up my money,” said Walker, who worked full time.
With her salary at $35,000 a year, her first priority was putting $1,000 a month toward her nearly $75,000 student loan debt. Her second priority was allotting just $400 a month for basic living expenses. Whatever was left, she put toward her savings.
“If I didn’t have enough money for something I wanted to do, then I just didn’t do it,” Walker said.
Sticking to a budget requires discipline, but Walker noted that it is essential to pay down debt in a timely manner and avoid additional interest charges. And even as Walker’s salary had doubled as of mid-2016, she still stuck to the same budget.
It’s easy to spend more money when your salary doubles, but you need to commit to not getting in additional debt or spending your increased salary on unnecessary expenses. And for Walker, the only thing that changed was her ability to double up on her student loan payments — every time she got a raise, she put it toward her student loans.
“I live paycheck to paycheck, but it’s a choice because I have goals I’m focused on achieving,” she said.
Walker also kept her other debts at a minimum. For instance, when she’d make a big purchase with a credit card, she does so with an interest-free offer. Then she’d pay off the entire balance before the introductory interest rate ends.
It can be tempting to buy a new car or go on a fancy vacation once your student loans are paid off, but by sticking to a tight budget and making a conscious choice to avoid more debt, you’ll be able to pay off your existing loans quickly and save money for your retirement.
“At first, I was just saving money to pay off the loans,” Walker said. “And then one day I just thought, I’m going to buy a house.”
While still living at her parents’ house — and without breaking the bank — she bought a condo. Then she got a couple of roommates to help cover most of the mortgage.
To keep her plan in order, Walker depended on the relatively low cost of living in Raleigh, N.C., to help, though she did acknowledge that “my plan would never work for someone who lives in a big city.”
In mid-2016, she was employed in IT sales, and suggested that North Carolina’s capital was a perfect place to find work as an IT sales rep.
“I know it’s a big deal to make a big move, but look at the cost of living in your area,” she said. “Would there be better job opportunities someplace else, where you could also live so much cheaper?”
Once her approximately $75,000 in student loans were to be paid off, Walker would be free to pursue some of her other financial goals.
But while her main focus continued to be paying off debt, Walker bought another house in January 2016 and lived there while she rented out the condo. After paying off her student loans, Walker planned to put the extra money toward paying off both mortgages.
She was also thinking about buying a new car — well, a used car. This was just one of the many ways she planned to continue living below her means.
One area where Walker wasn’t cutting corners is her retirement savings. She contributed more than the minimum to her company’s 401(k) match, and has also raised her contribution by 1% every year.
Back in 2016, Walker vowed to stay on that same track, even after she’d reached her goal: “I won’t change my lifestyle too much when the loans are paid off. You choose what’s important, and this is what’s important to me.”
Indeed, her extreme financial discipline allowed her to pay off $75,000 in student loans. She crushed her debt by sticking to a budget, living with relatives to avoid additional housing costs and eventually buying a home and renting it out to help with the mortgage.
Other ways to earn extra cash
Beyond the tips Walker provided, you could consider other ways to earn extra money to pay off student loans or debt.
Take Marie Kondo’s advice and declutter your home, but take it one step further and sell your items for extra money. Consider putting your items on eBay or Craigslist, whether that’s a bicycle or comic books.
Another way to earn extra money is to become a landlord or property manager. If you are able to purchase a home or condo and rent it out, you can make a substantial amount of additional money. But before you become a landlord, you’ll want to make sure the amount you make each month covers the mortgage and provides enough extra money to put toward your loans.
Lastly, consider taking on a side hustle. Like photography or music? Consider becoming a wedding photographer or DJ on the weekends. You can also look for part-time jobs with perks or benefits that will save you money. For example, if you work at a restaurant, you may get a discount on food or even a free meal. The money you save could go toward your student loan payments.
The additional work now will not only help pay off your loans more quickly, but it will pay off in the future if you’re living a debt-free life with little to no financial stress.
Sage Evans contributed to this report.
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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of October 1, 2020.
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 2.98% APR (with Auto Pay) to 5.49% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.34% 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 October 26, 2020, 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 10/26/2020. 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 protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of January 4, 2021. Information and rates are subject to change without notice.
4 Important Disclosures for SoFi.
5 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.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 12/07/2020 student loan refinancing rates range from 1.99% to 8.56% Variable APR with AutoPay and 2.95% to 8.77% Fixed APR with AutoPay.