Thanks to strong academic performance as an undergrad, Kate of the blog Goodnight Debt got a full tuition scholarship for law school. However, she took out $45,330 in federal student loans to cover her living expenses, which she’d originally hoped pay off in 3.5 years.
Thanks to Kate and her husband’s frugal lifestyle, they managed to destroy that debt in only 15 months.
“I do” to debt
Kate’s motivation came in part from her husband’s debt story. “On his own, he paid off $35,000 in credit card debt right before we met,” she said.
“It didn’t feel fair that he’d worked so hard to be debt-free, and now he was dating, engaged to, and then marrying me with more debt than he ever had. I wanted to respect his accomplishment by getting rid of my debt as fast as possible,” Kate explained.
She hadn’t borrowed money for her undergraduate degree, so her aversion to paying interest also kept her focused on her goal. “I played around with a few loan payoff calculators and the amount of interest I would have paid over 10 years was terrifying and incredibly motivating,” she added. “My student loans were an anchor to my days in school. I wanted to be an adult and do other things.”
A low-key lifestyle
While Kate completed law school, the couple lived off her husband’s income and some of her student loans. Then once she graduated and started working, they avoided lifestyle inflation and continued living a similar lifestyle (with the exception of a trip to London; Kate admits she has the travel bug) so that any extra money went towards her loans.
“We did all of the normal frugal things: we prepare our own meals, don’t buy take-out coffee or snacks from the gas station, obtain most of our entertainment from the library,” she said. “All of these things are small by themselves, but they add up to impressive sums.”
Even though Kate planned to aggressively pay down her loans, she switched from Standard Repayment (10 years with the same payment every month) to Graduated Repayment (10 years where the payment starts low and increase every two years).
Her minimum payments dropped from $525 to $311 as a result. That way if any emergency expenses popped up, she’d have more flexibility in her monthly budget. Fortunately, she didn’t need that wiggle room.
The plan of attack
Since all her loans carried the same interest rate, Kate used the debt snowball method to attack the smallest loans first and build momentum. When one loan was paid off, she’d divert that money to the next smallest loan.
The couple made four to six (sometimes small) payments each month, so tracking progress on her blog through recaps helped her stay motivated. “Each month was energizing to see what I had done, all in one place,” she said.
The blog also helped her connect with others with similar goals, since she still doesn’t know any aggressive debt-payers in real life. “Through the blog, I met some fantastic debt slayers from all over the world,” she said. “It helped to chat with other people who were aggressively paying off their debt and what they were going through.”
While Kate initially viewed the loans as hers alone, her husband helped her understand the importance working towards financial goals together. “About halfway through the process, Hubs and I had a discussion about whose debt this was,” she said. “He convinced me that it was ours. Having a unified effort made a huge difference in what we could accomplish.”
Kate made her final student loan payment last spring and she’s now maxing out her retirement plans and saving towards a down payment on a home, which they hope to purchase when their lease is up early next year.
“The biggest thing that I’ve taken away from all of this is that money is a tool that should be used,” she explained. “By thinking about it as a tool, I’m now able to use it for the future and not pay for the past.”
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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.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
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.
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Citizens Bank Disclosures
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