What would you do if you had about $40,000 in debt and no job?
Now, imagine if, added to unemployment, you and your spouse both battled chronic health conditions.
It’s tough out there for many Americans — and Abigail Perry and her husband, Tim, know that better than most.
When they found themselves with tens of thousands of dollars in student loan, credit card, and dental debt, they weren’t sure what to do. Abigail was on disability, and Tim had lost his job and was collecting unemployment.
Even in those circumstances, though, Abigail didn’t give up. She and her husband managed to pay off their debt in three years. Here’s how they did it under challenging circumstances — and how you can, too.
A string of medical issues
At age 19, Abigail almost died from Guillain-Barre syndrome, a rare neurological disease. The aftermath left her struggling with depression and chronic fatigue. In 2006, after trying to deal with the problem for nearly a decade, Abigail finally began receiving Social Security Disability Insurance checks.
That was the year she met her husband. At the time, Tim had $20,000 in student loan debt and a host of medical bills — including dental debt amounting to $12,000.
However, the conditions the Perrys were affected by weren’t severe enough to qualify them for Total and Permanent Disability Student Loan Forgiveness. And even though they had less than the $39,400 in education debt that affects the average student, their other debt more than made up the difference.
Two years later, in 2008, the two were ready to get married. They considered how to best tackle their debt and prepare for their modest nuptials. The wedding was set for June. In May, Tim was laid off. Suddenly, Abigail and Tim had no work income. Between student loans, medical bills, and credit cards, they had close to $40,000 in debt.
How would they pay all that off, especially when both were battling medical issues and neither of them could get work?
Ignoring ‘standard’ financial advice
In a perfect world, Abigail pointed out, you hear all about how to start a small emergency fund and the importance of stopping all credit card use as you demolish debt.
“There are monthly budgets and clever tactics,” Abigail said. “But none of them worked for us. How do you manage a traditional budget with two sick people who have unexpected costs?”
Rather than following the popular creeds, Abigail instead accepted that her situation was imperfect and that they would never be successful by trying to force themselves to follow what everyone else said they should do.
“We didn’t quit using credit cards and we didn’t set up an emergency fund,” Abigail said. “We knew we’d just deplete any emergency fund immediately with the next specialist visit so it was pointless.”
But that didn’t stop them from looking for a way to make it work.
Weekly budgeting on a fixed income
Rather than trying to budget for a whole month at a time, the Perrys focused on budgeting for each week.
“Even though we didn’t have much money coming in, we did know how much we’d have in any given month,” Abigail said.
She started a small side gig, but her disability didn’t allow her to grow it as fast as she wished. Between Abigail’s side hustle, the disability checks, and Tim’s unemployment checks, their income was right around $3,100 each month.
However, Tim’s high-risk insurance cost them $500 per month and their rent was $700. Right off the bat, those two fixed expenses reduced their discretionary income to $1,900 per month.
“Each week, I allocated a lump sum for what we had to live on, including groceries and other bills,” Abigail said. “Everything else went to debt repayment.”
Abigail kept the money in the bank and used a debit card for most expenses. They paid down debt as they could. However, larger obligations — such as doctor copays that sometimes amounted to more than $200 a month — went on the credit cards.
“It sounds weird, but we were making headway on our debt, even with using the cards for some costs,” Abigail said. “Because everything that didn’t go toward living went toward debt repayment, we were able to get ahead of the situation.”
Getting help and fighting over Slurpees
Even with the strict weekly budget, though, the Perrys relied on help from others. “My mom would drop off things she knew we couldn’t buy for ourselves,” Abigail said.
Additionally, her mother allowed them the use of her car. “That was huge,” Abigail continued. “We couldn’t afford to buy and maintain a car at the time, so getting around with my mom’s car mattered a lot.”
Sometimes, the Perrys lived so close to the bone that they fought over tiny expenses. One sore point was the Slurpee Tim bought after each visit to the doctor.
“We had epic fights about small sums,” Abigail said. “That $1.70 adds up and makes a huge impact when you have so little. You feel like you need to save every penny.”
These fights strained the relationship, but ultimately the couple stayed on track. They saw that their sacrifices and their payments were reducing their balances and it kept them motivated.
In the end, by putting a little more than $1,000 a month toward their debt, they were able to pay it all off in slightly more than three years.
A better quality of life
Today, the Perrys have a much better quality of life. After paying off their debt, Abigail found a job that allows her to work from home. Her boss is understanding of her condition and is flexible. Tim’s unemployment ran out years ago, but his medical issues still prevent him from work, so he’s on disability.
“We’re not wealthy by any means, but things are so much better now,” Abigail said. “We have a higher income and we have no debt except our mortgage.”
“We ultimately had to turn to the emergency savings account we’d been building up, but it was worth it,” Abigail said. “We’re going to drive that car as long as possible.”
Not only are the Perrys on much firmer financial footing today, but they’re also in a position to help others in small ways. Tim’s parents recently lost their home and have moved into the guesthouse on the Perrys’ property.
“It was really hard for a while,” Abigail said. “But things are vastly better now. My earning is significantly higher, we’re comfortable, and we’re able to help others. That’s success right there.”
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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 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% 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
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. 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. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
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.
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 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.57% – 6.97%1||Undergrad & Graduate|
|2.47% – 6.99%3||Undergrad & Graduate|
|2.68% – 8.77%4||Undergrad & Graduate|
|3.24% – 6.66%2||Undergrad & Graduate|
|2.61% – 7.35%5||Undergrad & Graduate|
|3.01% – 9.75%6||Undergrad & Graduate|