After graduating from college, Maggie Germano moved to Washington D.C. for an internship to start her post-grad life. At the time, she was making $10 and hour for a total of $1,200 per month.
Living in D.C. wasn’t cheap either, so 50 percent of her paycheck ($600) went to sharing a studio apartment with a friend.
Yet, when her student loans were due and she realized she owed $300 per month, Maggie understandably panicked.
“I freaked out,” she explains. “It wasn’t tenable while also eating and taking the metro to work. So I was happy to take advantage of Income-Based Repayment for two years.”
In the early days of her student loan repayment, opting for an Income-Based Repayment (IBR) plan was a lifesaver. She ended up having $0 monthly payments for two years, which helped her out when her paycheck was going to bills like rent, food, and transportation.
Wondering what your student loan payments may look like on an IBR plan? Check out our calculator below to find out.
INCOME BASED REPAYMENT (IBR) CALCULATOR
Moving on up
Eventually, Maggie got a salaried job after her internship. At that point, she opted out of her IBR plan and started paying the full $300 per month toward her student loans.
However, since she hadn’t made student loan payments for two years, she still had her full $25,000 balance to pay back.
But with her higher salary, Maggie became motivated to pay off her student loans after realizing her money was not fully hers.
“I realized that I was paying interest to a company that didn’t have my best interest in mind,” she says. “I wanted my money to be my own and not something I was giving away every month for 10 years.”
Ultimately, Maggie says, “I wanted to have control over where my money was going and use it for my real goals.”
Overhauling her student loan payments
Going from $0 to $300 student loan payments certainly helped her make progress on her debt. But Maggie knew she had to do more.
So she started by paying more than just the minimum on her student loan payments.
“I did this by cutting costs like going out for happy hour, eating out for lunch, etc.,” Maggie explains. “I made paying off my debt a top priority.”
Maggie admits she turned into somewhat of a recluse, opting for staying in rather than going out in order to pay off debt. Additionally, she took the extra income from her new job to overhaul her student loan payments.
“I think the most important approach was avoiding income creep,” she says. “Income creep is real. And by making sure that I didn’t spend every extra cent I earned, I was able to pay down my debt and also build an emergency savings account.”
On top of her income increasing, she was able to lower her rent when her boyfriend moved in and split the rent.
But instead of spending the extra disposable income she now had, she was committed to putting it towards her student loan payments.
These moves essentially helped Maggie expedite her repayment. But there were still some struggles along the way.
How to stay on budget (without feeling isolated)
Maggie admits that cutting back on social activities in a place like D.C. was tough. Not only that but living there on the cheap is like an art.
“I had to really stick to a budget!” describes Maggie. “D.C. is an expensive city and people love to go to happy hour and brunch.”
“Basically, in order to be social, it is believed that you have to spend a lot of money,” she says.
Although the isolation affected Maggie emotionally, it encouraged her to do things differently. She found a way to do frugal activities with friends in order to socialize.
“I’ve figured out how to have fun with friends without spending a lot of money, which was a foreign concept before,” says Maggie.
Though there was tough times and sacrifice, Maggie was able to remain consistent with her student loan payments. She didn’t let income creep take over and she limited her expenses.
And thanks to her hard work and consistency, she was able to pay off her $25,000 student loan balance in just under four years.
Helping others get out of debt
Maggie now enjoys a life without debt and enthusiastically takes ownership of her money. She’s now able to travel and save at the same time.
“I feel like my money is truly mine now,” she says.
After becoming debt-free, Maggie was able to launch her business and help others with money. Maggie now works as a Certified Financial Education Instructor and financial coach for women.
What’s more, her journey towards debt freedom has now come full circle. She’s working to help others on their own journey out of debt.
One of best tips she has to offer for student loan borrowers looking to follow in her footsteps includes continuing to pay something if you can, even when times are hard.
Also, if you’re thinking of going back to school, she suggests only borrowing what you actually need. In the end, you’ll be paying all that money back anyways. So less is more.
For Maggie, paying off her student loans helped her get one step closer towards her vision of helping others. Imagine, what would living debt-free do for your life?
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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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 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% 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 firstname.lastname@example.org, 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% – 5.87%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|