3 People From Different Walks of Life on Conquering Student Loan Debt
Welcome to our new 3 People series, where we meet three professionals from diverse backgrounds, cities and careers, who open up about their finances, careers and overcoming student loan debt. Each person’s financial picture, student loans, and repayment strategy differs; however, each refinanced their student loans through SoFi to take control of student debt and pay off their loans faster.
The years following undergrad or grad school are filled with opportunities for you to own your career. Unfortunately for many, along with honing skills and making great connections comes a not-so-fun task: paying down student loan debt. On the plus side, since student loans represent investments in your future, they’re considered “good debt.” Yet, recent statistics put nearly 40 million Americans (including approximately 70% of bachelor degree recipients) in debt with student loans totaling about $1.2 trillion.
Rather than focus on problems, though, we prefer to propose solutions. While paying student loan debt on top of daily expenses is bound to be a burden for those still establishing careers, there are ways to lighten the load. Refinancing, for example, is one way to consolidate federal and private student loans to obtain lower interest rates and reduce the number of years needed to pay them off.
Meet three SoFi members who did just that. Their ages, career paths, and locations vary, and each has a unique story, but they all have one thing in common—they refinanced to help shape their financial futures for the better.
Here’s how they did it.
Name: Cornelius Davis
Relationship status: Single
Hometown: Gary, IN
Current Location: Atlanta, GA
Do you rent or own? I own, and have since 2007. I actually owned my place while I was still paying off my student loans.
What is your monthly mortgage payment? I’ve already paid it off.
From what school did you graduate? I received both an undergraduate and graduate degree from Jackson State University, Jackson, MS.
What was your major? Urban and Regional Planning
What is your career? Transportation Specialist with the U.S. Department of Transportation
Yearly Income: $86,000
What is the main reason you decided to go to college? My primary reason for going to college was to increase my earning potential and improve my chances of having a stable career. The investment absolutely paid off for me. I would not be working with the federal government had it not been for my education, and I don’t think I would be earning the same type of money if I had not gotten a degree. For students who are fortunate enough to know their passions at a relatively young age, college can be a great springboard.
Did you work throughout school? Yes, I worked as a substitute teacher, which enabled me to cover my day-to-day expenses, like rent, groceries, and gas.
How much debt were you in when you decided to refinance? My original student loan amount was $39,000 when I left school in December of 2000. However, I left my loan in forbearance for years, and the amount grew to $71,000 by 2012. Eventually, I got tired of looking at my statements and seeing how much of my monthly payment was just going toward interest. I refinanced in July of 2014 when I had $54,000 left to pay, and my interest rate went from 6.5% to 4.5%. It took me 19 ½ months to pay it off, but if I had kept going with my original plan, it would have taken me at least five years.
What has paying off your student loan debt earlier than expected allowed you to do? Paying off my loans has given me more financial options for my next big goals because, for the first time in my life, I feel like I am standing on solid financial ground, which is awesome. I’m currently saving for two big things. The first is to replace to my car, which I plan to do in early 2017 with cash. The second is purchasing an investment property, which I plan to do in late 2017 or early 2018. That will allow me to make money in my sleep and generate residual income, which is something I’ve always wanted but wasn’t in a financial position to do.
How has your quality of life changed since paying off your loans? It’s so exciting to know that when I get paid now, my money is truly my money, to use however I want. I used to put more than the monthly minimum toward my student loans, so now I put that money toward other things. I have more discretionary income to play around with.
Where do you see yourself financially in five years? I’d like to double my income. Half of that total can come from my salary, and the other half can come from investments I’ve made.
Are you currently saving for retirement? Yes, in a 401(K).
Do you have an emergency savings fund? Yes, and I have for a while. Even when I was paying student loans I’d saved up three months worth of living expenses, but I haven’t added to that since I paid off my loans. I could increase it to six months, but I don’t see that as a priority at this point.
What advice can you give to others who are struggling to pay down student loan debt?I’m passionate about helping people develop and meet their financial goals, so now that I’ve paid off my debts, I want to help others do the same by using my own story as inspiration. The first thing I’d say is pay off your loans sooner rather than later — I procrastinated and, because of the terms of my loan, paid a lot more in interest. In the beginning, if you can make some small concessions—live with your parents, find a roommate to keep living expenses low, or hold off on buying that car you want — you can put more money toward your loans. It’ll really pay off in the end. I kept my old vehicle while I was paying down my loans, and that saved me about $450 per month, which all went directly to paying off my debt.
Name: Meghan McMahon
Relationship status: Engaged
Hometown: Memphis, TN
Current location: Memphis, TN
Do you rent or own? Rent.
What is your monthly rent? $1,300
From what school did you graduate? I went to undergraduate at the University of Notre Dame, as well as Notre Dame Law School.
What was your major? Psychology and American Studies
What is your career? Litigation Attorney with Glankler Brown, PLLC
Yearly Income: $70,000-$90,000
What is the main reason you decided to go to graduate school? I have felt called most of my life to be a lawyer, so law school was a easy choice for me. When deciding between attending a state school or going to Notre Dame, a school that costs more but potentially offers more opportunity, I realized I didn’t just want a degree — I wanted to push myself and set myself apart from others. I wanted to go somewhere that, despite the large investment financially, would open more doors for me.
Did you work throughout school? I interned each summer at various jobs — a campus tour guide, sports writer for the newspaper, student athlete tutor, student hall monitor, and volunteer assistant cheerleading coach.
How much debt were you in when you decided to refinance? My original student loan debt was between $45,000 and $50,000, but by the time I graduated I owed nearly $55,000. All of the money I made while in school went toward off-campus rent and other living expenses; I didn’t start making payments on my loan until I graduated law school and was working full time. I cringed every time I made a student loan payment, because only a small percentage was actually going to the principal of the loan. I researched refinancing options after a friend told me what a great experience she had refinancing with SoFi. Her recommendation motivated me. My debt was $52,500 when I decided to refinance, and while my interest rate went down significantly— from 7.99% to 4.74%—my payments increased from $530 to $990 per month. But that’s a relatively small change when you’re converting a 30-year commitment to 5 years. Today my current principal balance is a little less than $40,000, and I will have everything paid off in less than four years, as opposed to the 28 years I had left on the original loan.
How will paying off your student loan debt earlier than expected change what you can do with your money? Over the lifetime of my loan, refinancing with SoFi will save me more than $75,000. Right now, saving for my upcoming wedding is the priority, but it will be much more important in the long run to save for retirement and my future children’s college funds. That $75,000 could be my child’s tuition.
How has your quality of life changed since refinancing? Before I refinanced, I had no idea how I’d ever manage to repay my loans in 30 years. I felt guilty about every penny I spent on rent, food, or just on myself in general, because it wasn’t going toward my debt. Plus, 30 years began to seem longer and longer. Now, knowing I’ll eliminate my debt in just five years, I can see the light at the end of the tunnel. Watching my principal balance change dramatically each month has given me peace of mind.
Where do you see yourself financially in five years? Absolutely free from student debt! My hope is to be able to live relatively comfortably but below my means, so I can save as much as possible for the future. My fiancé, who never had student loan debt, was able to buy a house that we’ll share when we’re married. We’ve agreed that I should pay off my loans while he pays the mortgage. Once my loan debt is eliminated, I’ll contribute more.
Are you currently saving for retirement? Yes, but not as much as I would like. I’ve made a conscious decision to make more modest contributions for the next four years, while prioritizing paying off my student loan debt.
Do you have an emergency fund? Yes. But, again, not as much as I’d like.
What advice can you give to others who might be struggling to pay down student loan debt? Before you take on a higher monthly payment that might come with a short-term loan, spend a couple of months putting that amount toward your loans to be sure you’ll be able to comfortably. Also remember, every little bit helps when it comes to paying down a loan. If you start small, stay within your comfort zone, and do your research, you’ll be totally fine.
Name: Matthew Harms
Relationship status: Single
Hometown: A tiny town in the middle of nowhere, also known as Pontiac, IL
Current Location: Chicago, IL
Do you rent or own? Rent.
What is your monthly rent? $1,500
From what school did you graduate? I attended Truman State University as an undergrad and received my MBA at University of Michigan’s Stephen M. Ross School of Business
What was your major? MBA
What is your career? Corporate strategy
What is the main reason you decided to go to graduate school? As an economics major in undergrad, I really only considered careers in the financial industry. After a few years working in finance, though, I was interested in doing something new, and going to business school — followed by my career in consulting — gave me access to projects across a wide range of industries. I wouldn’t be where I am today without my business school experience and the 2.5 years I spent with a top strategy consulting firm. For me, the loans were completely worth it, because I’m now in an industry and career that I find inspiring and that I love.
Did you work throughout school? No.
How much debt were you in when you decided to refinance? My original student loan was $155,000, and I refinanced immediately after graduating business school. Although I never made a single payment through Grad PLUS, I believe refinancing saved me hundreds of dollars per month in extra interest for each payment. It took me about three and a half years to pay it all off. I had my loans through the federal Grad PLUS program, which is designed for any borrower, no matter the risk or credit worthiness of each individual in the program. So all borrowers have to pay the same interest rate. What I love about SoFi is that they track down less risky borrowers, partner with them for life, and offer better rates and services.
What has paying down your student loan debt earlier than expected allowed you to do? I’m much more at ease knowing that I’m in better financial shape should the economy take a turn for the worst. Paying my loans off also changed what I can afford to do professionally. If I want to start my own business some day, or work for a start up, I’d likely earn a low starting salary, if anything at all. With my business school education fully paid off, though, I’m in a financial position to consider those kinds of riskier moves. In the short-term, I absolutely love my Logan Square neighborhood here in Chicago, and I would love to buy one of the beautiful, historic greystone walkups on a tree-lined boulevard, do some renovating, and live in my dream home.
How has your quality of life changed since paying off your loans? To be honest, I’ve been really lucky. I’m blessed with a name brand business school education. I received great employment opportunities after graduating, so I was never in too tight of a financial situation, even while paying down my student loans. Yes, I have certainly afforded myself some added luxuries, like some new furniture. But mainly I’ve been able to save much more than I was before, which makes me feel more at ease about my future.
Where do you see yourself financially in five years? Planning for an early retirement! In all seriousness, my background is in financial services, so in five years I look forward to opening up my monthly IRA and brokerage account statements and feeling much more at ease that I can look forward to a more comfortable retirement life.
Are you currently saving for retirement? Most definitely! 401(K), IRA, etc. Each is being utilized to the fullest.
Do you have an emergency savings fund? I do. I drew it down a little bit to pay off my student loans, but it’s growing again, now that I don’t have a four-figure student loan payment each month.
What advice can you give to people who might be struggling to pay down student loan debt? Hang in there! Those early years after graduating with debt are tight years for most people, but be vigilant while still enjoying life. With time, the financial stress will fade away, hopefully leaving memories of times you split hotel rooms four ways on road trips with friends, or the time you hopped across South America in hostels rather than luxury hotels. It will be worth it. Trust me.
No matter how much student loan debt you’re in or how many years you’ve been out of school, there are solutions to help you reach your financial goals more quickly than you could have imagined. Cornelius, Meghan and Matthew are just three examples of people who took back their financial futures by refinancing — imagine what you could do with your money when your own student loans are finally paid off.
Learn how SoFi can help you get started.