When Beth Walker graduated with her bachelor’s degree in 2008, she had $60,000 in student loan debt.
And when she got her MBA in 2010, she racked up an additional $15,000 in student loans, increasing her total debt to $75,000.
What’s more, Beth was only earning $35,000 from her first job out of college. A salary that would have been hard for anyone to make their minimum student loan payments.
But Beth was determined to make her payments. In fact, she thought she could do better. As a result, she expects to have her student loans paid off in full by January 2017.
Here’s how she did it.
1. Embrace the debt avalanche method
First, Beth consolidated six federal student loans into one – $25,000 at 6.80% APR.
She also had two private student loans – $39,000 at 3.90% APR and $10,000 at 2.50% APR.
Beth opted for the debt avalanche method: putting as much towards 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 Beth understands the appeal of the debt snowball method – paying off the lowest balance first, so that you see concrete results faster – she found the debt avalanche method offered a similar sense of accomplishment.
“I use the ReadyForZero app, which tells you exactly what your payoff date will be,” says Beth. “Plus, it shows my daily interest going down every day I open it. I see that go down and that’s what keeps me motivated.”
It definitely did the trick.
Beth has already paid off the $25,000 loan and is now focusing on the loan with the next-highest interest.
With just $2,500 left to pay on the $39,000 loan, and $7,000 left on the $10,000 loan, Beth expects to have everything paid off by January 2017.
2. Put yourself on a tight budget, and stay on it
“The whole time I was working on my MBA I lived with my parents and saved up my money,” says Beth. She also worked full-time.
With her first salary at $35,000 a year, her first priority was putting $1,000 a month towards her student loan debt.
Her second priority was allotting herself just $400 a month for her 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,” Beth explains. “When the money was gone, it was gone.”
Beth’s salary has doubled since then. But, she still sticks to the same budget.
The only thing that’s changed is her ability to double up on her student loan payments. Every time she gets a raise, she puts it towards her student loans.
“I live paycheck to paycheck, but it’s a choice because I have goals I’m focused on achieving,” she says.
Beth also keeps her other debts at a minimum. For instance, when she makes a big purchase with a credit card, she does so with an interest-free offer. Then she pays off the entire balance before the regular interest rate kicks in.
3. Buy a house and get roommates to pay the mortgage
“At first, I was just saving money to pay off the loans,” says Beth. “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.
4. Live where there’s lots of job opportunities and low living costs
“My plan would never work for someone who lives in a big city,” says Beth.
She depends on the relatively low cost of living in Raleigh, North Carolina. She also works in IT sales, and Raleigh is the perfect place to find work as an IT sales rep. 75 percent of IT companies have headquarters there.
“I know it’s a big deal to make a big move, but look at the cost of living in your area,” she says. “Would there be better job opportunities someplace else, where you could also live so much cheaper?”
5. Look beyond your student loans
Once her student loans are paid off, Beth will be free to pursue some of her other financial goals.
While her main focus continues to be paying off debt, Beth bought another house in January. She lives there and rents out the condo.
Once her student loans are paid off, Beth plans to put the extra money towards paying off both mortgages.
Beth is also thinking about buying a new car. However, new to her is really a used car. This is just one of the many ways Beth plans to continue living well below her means.
One area where Beth doesn’t cut corners is her retirement savings.
She contributes more than the minimum to her company’s match of her 401k. She also raises her contribution by one percent every year. When her student loans are paid off, she plans to raise the contribution even more.
“I won’t change my lifestyle too much when the loans are paid off,” says Beth. “You choose what’s important, and this is what’s important to me.”
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1 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 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.23% 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 Month/Day/Year, 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 08/21/18. 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.
© 2018 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.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
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.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 6.23%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|