These days, students aren’t just graduating from college with a diploma and four years of memories; more often than not, they’re leaving school with student loan debts. Since 2004, the total amount of student loan debt has increased by 302%, with the average person owing about $32,731.
While the number of people saddled with student loan debt is growing, so is the size of their debt. Three graduates, each with hefty debts, shared the unique and effective ways they made paying down their student loan debt a priority.
- The students: Josh and Lauren Hastings of Loudoun County, Va.
- Total Debt: $310,000 combined
- Estimated pay-off deadline: 2019
Josh and Lauren's story
Josh Hastings, 31, graduated from West Virginia University in 2009 with a B.S. in education. His wife, Lauren, graduated in 2011 with her B.S. in exercise science. They both went on to graduate school, with Josh getting his master’s in education from George Mason University, which was paid for by his school district and cash out of his own pocket. Lauren went on to receive a doctorate in physical therapy from Elon University. To date, the couple has paid $163,000 toward their principal debt, and another $30,000 has gone to pay off interest. Each month they aim to put between $4,000 and $5,000 toward their student loan debt.
To stick to their goal, the Hastingses—who run the personal finance website Moneylifewax.com—use a unique concept called “equity optimization,” which allows them to bypass big interest charges and make a larger dent in principal student loan debt. They do this by leveraging their home’s equity. “Our home has quite a bit of equity, which is a great asset at selling time,” said Josh. “However, when it’s sitting there, it is actually a dormant asset.” The Hastingses used a HELOC—or home equity line of credit—to start attacking their high-interest loans. “Common wisdom is to just refinance and consolidate [your student loans],” said Josh. But it was a choice the Hastingses were willing to make because it limited their cash flow and took away their option to look into federal loan benefits, like income-based repayment plans.
At the time, the couple had 17 different student loans, all managed by five different companies. “When your debt balance is high, attacking the principle is harder,” Josh said. “By having principles that are smaller, you can attack the smaller principles, and once those are paid off, roll the extra cash flow into the next, like the common debt snowball.” When the Hastingses initially took out a line of credit for $50,000, the HELOC interest rate was 3.75%, which was significantly lower than the 7.9% interest they were paying on their loans. They used $40,000 of that money to pay off their cars and three student loans in full, which left $1,000 in cash flow a month. “Using all positive monthly income, we paid off the line of credit in eight months,” said Josh. “We then washed, rinsed and repeated, targeting specific loans that were killing us in interest each month.”
Be open-minded. “When it comes to paying off multiple six figures of student loan debt, traditional means might not always work,” said Josh. Consolidation and refinancing are not always the best-case scenario—at least not for the Hastingses. “By rapidly dropping the principal [of our loans], the interest didn’t catch up as quickly, and monthly minimums started going toward the principal instead of just the interest,” he said. Josh also suggests looking into additional ways to bring in income. “We rent a room in our home to help with the mortgage, and we are tight with our lifestyle spending,” he said. “But, in 2020, we will take 12 vacations in one year!”
Taking advantage of every opportunity
- The student: Jesse Farmer of Albany, N.Y.
- Total Debt: $50,000
- Estimated pay-off deadline: 2021
Jesse Farmer, 29, graduated from the State University of New York at Albany in 2011 with a degree in sociology and about $50,000 in student loan debt. But by taking advantage of the federal programs available to certain students, Farmer expects to eliminate most of that debt in three years.
One of the programs Farmer is relying on is the Public Service Loan Forgiveness (PSLF) program, which will forgive federal student loans after you make 120 qualifying payments toward your balance. “Basically, the remainder of your student loan balance is forgiven after 10 years, as long as you make a qualifying payment each month,” said Farmer. Requirements for the program are that you work for a nonprofit, school or any federal, state or local government agency.
Farmer also saves with the Pay as You Earn repayment program. “It calculates your annual income and family size to determine a reasonable payment,” he said. “As of right now, my monthly payment is about $100 per month, which is much less than it should be.” He estimates that number would be closer to $400 to $500 per month if he weren’t enrolled in an income-driven repayment plan like PSLF. Thanks to these two programs, Farmer estimates that he’ll have shaved off about 10-plus years in payments, which is equivalent to approximately $40,000 in student loan forgiveness.
“When I first graduated from college, I had no idea about the income-driven repayment plans or the PSLF program,” said Jesse. “Luckily, my first job out of college was for a private nonprofit, and my coworkers recommended I sign up for it.” The bottom line: It never hurts to do research to find out what additional programs might be available based on your current job, income or other life factors to help you with your student loan debt. Because these programs weren’t well advertised, Jesse says he may have never known about options “if it wasn’t for my coworkers telling me about it.”
Working a side hustle (or three)
- The students: Amber and Danny Masters of Tulsa, Okla.
- Total Debt: $650,000 combined
- Estimated pay-off deadline: 2022
Amber and Danny's story
Amber Masters, 30, graduated from BYU Law School in 2015, and her husband, Danny, 33, graduated from dental school at Roseman University the following year. Their total combined debt after grad school was $650,000, but they managed to pay off $200,000 in about two years. Their secret? “Finding good income-generating side hustles has made all the difference,” said Amber. “Frugal living is also important, but when you are in debt as deep as we are, you really need a big shovel to get out. Focusing on increasing our income has been huge.”
In addition to Amber’s day job as a public service lawyer, she also has several side jobs to supplement her income. Her passion project is her personal finance website, Deeply in Debt, which she runs with her husband. She also runs a side business called The Contracts Counselor, where she drafts, negotiates and reviews contracts for people and businesses and runs the Pinterest account of another popular website. “Occasionally [I] do smaller things as well, like take online surveys for gift cards,” she said.
Amber estimates that she spends anywhere from 20 to 30 hours a week on her side hustles, and with the help of her day job (which she and her husband use to pay their everyday expenses) and Danny’s full-time job as a dentist, she says they are usually able to hit their goal of putting $12,000 toward their student loans every month. “I wake up a few hours before I have to be at my day job and before my son is awake and get some work on my side hustles done," she said. "Then at night when my son is asleep, I’ll do an hour or so more of work.” Amber will occasionally do a few hours of work on the weekends, but she tries to keep weekends for family time.
Since some of her side hustles require website upkeep and maintenance to grow, Amber aims to put 50% of her income toward student loans and 50% back into her businesses. “I always wanted to be a public service lawyer, and those jobs just don’t pay much,” she said. “In order to make even the minimum payments on our student loans, I knew I’d have to do something on the side to meet our goals.”
While student loan debt can often feel crippling, Amber believes hard work and ingenuity were the keys to overcoming her debt. “When I first graduated and felt the weight of my student loans, I literally lost a ton of sleep over it,” she said. “I would toss and turn at night, and during the day it felt like there was a big cloud over my head.” That burden only lifted when she put a repayment plan in place and prepared to “tackle that debt head-on.”