How This Student Loan Borrower Went From Default to Almost Debt-Free

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Credit: Sara Burgess Photography, courtesy of Heather Taylor

When Heather Taylor graduated from California Lutheran University in the middle of the Great Recession, she didn’t have an easy time finding employment.

“It took me at least six months to find a job — 2010 was a poor economic climate all around for work — and that job paid me minimum wage,” Taylor said.

So when repayment kicked in on her $45,000 in student loans, Taylor struggled to keep up. She eventually went into default on some of her loans and ended up adding thousands more in interest to her debt.

It took years of “sacrifice, a lot of hard work and side hustles on top of a full-time job, and tears at 5 a.m. on the phone with Navient,” but she finally got her loans back into good standing and paid off a huge chunk of her balance.

Here’s how Taylor triumphed over her difficult financial situation and is on track to paying off her burdensome student loan debt in its entirety.

Graduating $45k in debt

Originally from Missouri, Taylor went to a private college in California, where she studied communications and journalism. To finance her education, Taylor accessed both federal and private student loans, including a $40,000 loan from Sallie Mae.

“There were seven loans altogether taken out for my undergraduate degree — three private loans with the highest interest rate at 8% and four federal loans with interest rates ranging from 4% to 6%,” said Taylor.

After graduation (and with student loan repayment looming), Taylor searched high and low for a job, but had trouble finding one that paid more than minimum wage. So when full repayment kicked in on her loans, she chose to postpone payments on several of them.

“By then, the loans were demanding much larger payments out of me,” said Taylor. “I deferred repayments for a long time because I simply didn’t earn enough to make the payments required of me.”

But pausing payments doesn’t stop interest from accruing, and Taylor saw her $45,000 balance balloon to more than $56,000.

Struggling to keep up with payments

With a minimum-wage job, followed by a nine-month period of unemployment in 2015, Taylor ultimately fell behind on her student loan payments.

“My ‘strategy’ was the worst possible cautionary tale — a series of deferments, making payments here and there when possible (which was never enough for the loan provider), and eventually defaulting on all three private loans,” said Taylor.

Not only did interest continue to add up, but her variable interest rates rose over time, resulting in an even larger balance. As Taylor puts it, “it was a total nightmare.”

While her debt grew, the pressure also took a toll on her physical and mental health.

“It has made me physically sick for a really long time,” said Taylor. “I have had terrible stomach issues for years because of the amount of stress this debt has put on me.”

Fortunately, she’s been able to turn her financial situation around and is starting to feel healthier as a result.

Getting student loans out of default (by paying them off in full)

One major turning point for Taylor was securing a full-time job at MyCorporation, an online company that helps entrepreneurs start new businesses. She also started freelance writing on the side, authoring a column about brand mascots called PopIcon for Advertising Week.

As she felt more secure in her income, Taylor took a unique approach to dealing with her loans — building up a series of nest eggs. After meeting a big savings goal, she would throw the entire amount at her loans.

“Much of these nest eggs would go towards paying off loans in full, rather than make minimum payments over the course of each month, which wasn’t getting me anywhere,” said Taylor.

There are a few different ways to get student loans out of default, and paying off the balance in full is one of them. But while this approach probably isn’t realistic for most borrowers, Taylor said it was right for her.

She was able to pay off two of her defaulted loans in one fell swoop and get another back into good standing. She also paid off the entire balance of two of her smaller federal student loans, making sure to target loans with the highest interest rates first to save the most money.

Making moves to regain financial control

Along with increasing her income by working a side hustle on top of her full-time job, Taylor also made other lifestyle choices that helped her to repay her debt.

For one thing, she held her spending to a minimum, relying on public transport instead of having a car and renting a room in a shared house.

“I keep my overhead expenses as low as humanly possible,” said Taylor. “It was total spartan behavior, the manner in which I budgeted and lived, and still very much is.”

She also reached out to a financial advisor she saw speak about the student loan crisis on CNBC.

“I wrote down his name and Googled him to see if he could help me out on a pro bono basis with questions I had about my loan,” said Taylor. “He did an awesome job, and his help meant the world to me.”

By increasing her income, reducing expenses and getting professional advice, Taylor was able to pull her loans out of default, slash her student loan balance and take giant leaps toward a debt-free life.

Getting off social media to maintain a positive mindset

Along with changing her financial situation, Taylor made another useful decision: She got off social media.

“One of the most absolutely grueling aspects of repaying student loan debt, especially if you’re doing it alone, is that social media is this ever-constant reminder that seemingly everyone around you has no financial problems,” she said.

Paying off debt can be grueling, as Taylor noted, and it can help your mental health to delete, or at least take a break from, your social media accounts.

“It is very hard to maintain the mindset of giving everything up when all you can see (literally — these websites exist as highlight reels) are your peers having expensive weddings, going on vacations, eating and drinking out and buying homes, while you are chained to the ground with a loan,” said Taylor, encouraging people to remember that almost all of us have challenges when it comes to money, even if it doesn’t appear that way.

“Everyone has financial problems,” said Taylor. “We just don’t discuss them out loud.”

Racing toward the finish line of student loan repayment

As of March 2019, Taylor had gotten her student loan balance down to just $13,000, which she feels confident she can repay within the year.

“What drives me is the push to take back my own life,” said Taylor. “There are so many things I want to do, see, and be with my life, but I will not get anywhere if I do not repay the debt in full and fast.”

While Taylor has had a long road of financial struggle due to her loans, conquering her debt on her own has made her feel empowered.

“[I had] no parents bankrolling me, no cosigners, no spouse and nobody but myself to dig me out of my hole,” she said. “It’s a lonely place, but I am getting there.”

She encourages other borrowers not to give up hope and to realize they can manage their debt on their own, too.

“I’ve been rowing a leaking boat for several years now and somehow always seem to make it to shore, in spite of the odds,” said Taylor. “At the end of the day, the only person who is going to save you is you.”

Interested in refinancing student loans?

Here are the top 6 lenders of 2020!
LenderVariable APREligible Degrees 
1.99% – 7.10%1Undergrad
& Graduate

Visit Splash

1.99% – 6.65%2Undergrad
& Graduate

Visit Laurel Road

1.99% – 6.24%3Undergrad
& Graduate

Visit SoFi

2.39% – 6.01%Undergrad
& Graduate

Visit Elfi

1.99% – 5.64%4Undergrad
& Graduate

Visit Earnest

3.18% – 6.06%5Undergrad
& Graduate

Visit CommonBond

Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.

The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.

You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.

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 May 1, 2020.

Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
The Rate will not change during the term. Repayment examples are for illustrative purposes only. The following Fixed Rate examples are based on a $10,000 loan amount using the lowest APR for each application term listed above. All student loan rates used in calculating the examples are shown without the autopay discount (.25%). There are no application or origination fees, and no prepayment penalties. The monthly payment for a sample $10,000 loan with an APR of 2.88% per year for a 5-year term would be $179.15. The monthly payment for a sample $10,000 loan with an APR of 3.40% for a 7-year term would be $134.17. The monthly payment for a sample $10,000 loan with an APR of 3.45% for a 8-year term would be $119.35. The monthly payment for a sample $10,000 with an APR of 3.89% for a 10-year term would be $100.72. The monthly payment for a sample $10,000 with an APR of 4.18% for a 12-year term would be $88.43. The monthly payment for a sample $10,000 loan with an APR of 4.20% for a 15-year term would be $74.98. The monthly payment for a sample $10,000 loan with an APR of 4.51% for a 20-year term would be from $63.32.

Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is 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 April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates 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 co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are 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.
Variable APRs and amounts subject to increase or decrease. Variable rates are indexed to the one-month LIBOR rate. The following Variable Rate examples are based on a $10,000 loan amount. Repayment examples are for illustrative purposes only. All student loan rates below are shown without the autopay discount (.25%). There are no application or origination fees, and no prepayment penalties. The monthly payment for a sample $10,000 loan with an APR of 2.01% per year for a 5-year term would be $175.32. The monthly payment for a sample $10,000 loan with an APR of 4.00% for a 7-year term would be $136.69. The monthly payment for a sample $10,000 loan with an APR of 2.09% for a 8-year term would be $113.21. The monthly payment for a sample $10,000 with an APR of 4.25% for a 10-year term would be $102.44. The monthly payment for a sample $10,000 with an APR of 2.67% for a 12-year term would be $81.24. The monthly payment for a sample $10,000 loan with an APR of 3.44% for a 15-year term would be $71.19. The monthly payment for a sample $10,000 loan with an APR of 4.75% for a 20-year term would be from $64.62. The monthly payment for a sample $10,000 loan with an APR of 5.14% for a 25-year term would be from $59.28.

 


2 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.

  1. Checking your rate with Laurel Road only requires a soft credit pull, 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.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
  4. Automatic Payment (“AutoPay”) Discount: if the borrower chooses to make monthly payments automatically from a bank account, the interest rate will decrease by 0.25% and will increase back if the borrower stops making (or we stop accepting) monthly payments automatically from the borrower’s bank account. The 0.25% AutoPay discount will not reduce the monthly payment; instead, the discount is applied to the principal to help pay the loan down faster.

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 June 23, 2020. Information and rates are subject to change without notice.
 


3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 2.99% APR to 6.24% APR (with AutoPay). Variable rates from 1.99% APR to 6.24% 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 1.99% APR assumes current 1 month LIBOR rate of 0.18% plus 3.06% 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. See eligibility details. 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. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. 

4 Important Disclosures for Earnest.

Earnest Disclosures

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 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% 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 July 31, 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 7/31/2020. 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.


5 Important Disclosures for CommonBond.

CommonBond Disclosures

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 0.18% effective July 10, 2020.

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. 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 to help you understand what you are buying. Be sure to consult with 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.