Conquer your student debt. Refinance now.
Like many high school students, Becky Blake dreamed of going to college away from home to enjoy her independence.
Despite her parents encouraging her to stay in-state to take advantage of a less expensive education, Becky decided to go to a private out-of-state university.
But by choosing a pricier school, Becky graduated with $98,400 in student loan debt. And thanks to the high-interest rates on some of her loans, that number would only grow.
“With that student loan balance, which I knew was only going to get larger with the minimum payments I was paying to the loan servicer, I was going to end up paying five-figures in interest over the length of the loan,” she said.
Even though she had a hefty student loan balance, Becky was focused on achieving financial freedom. By coming up with an aggressive debt repayment plan, she was able to pay off a huge chunk of her student debt — approximately $68,000 — in under two years. Here’s how she did it.
How Becky Ended up With Nearly Six-Figures of Student Loan Debt
When it came time to choose a college, Becky’s parents encouraged her to choose an in-state college. To save money, they recommended she attend a community college for two years to get her Associate’s degree, then transfer to a local state university to complete her Bachelor’s.
However, Becky was determined to go to school farther away. And although her parents cautioned her about taking on too much student loan debt, they supported her decision.
Becky applied for federal student loans on her own. However, the federal government has caps on how much undergraduate borrowers can take out in Direct Subsidized and Subsidized Loans each year. Becky needed more money to pay for her education, so her parents applied for Parent PLUS Loans.
Parent PLUS Loans allow parents to borrow up to the total cost of attendance. Parent PLUS Loans are entirely in the parents’ names; the student has no legal obligation to repay the loan. But in this situation, Becky agreed to repay those loans herself.
“We came to an agreement where those loans were my responsibility,” she said. “The Parent PLUS Loans were almost twice the balance of the loans under my name, and they were also at a much higher interest rate.”
Parent PLUS Loans tend to have the highest interest rate of any federal student loan. When Becky’s parents took out those loans, the interest rates were as high as 7.9%, causing the loan balance to grow rapidly.
When She Realized She Had to Make a Change
Although she had a large loan balance with some high-interest debt, it wasn’t until Becky sat down and reviewed her loan terms that she became motivated to accelerate her student loan repayment.
“I did some math and said, I want to get this over with,” she said. “I wanted to rip the Band-Aid off and get rid of the bulk of the loans that were going to cost me the most money in the long run.”
When she graduated from college, Becky had decided she planned on retiring early and pursuing financial freedom. But to do that, she realized she had to pay off her debt so she could focus on investing and growing her money.
“And that was why I really decided it was the best time to start, because if I waited, the student loan interest was just going to accrue,” she said. “It would ultimately take me longer to pay off.”
Accelerating Her Student Loan Repayment
To tackle her debt, Becky used the following strategies to pay down her student loans fast.
1. The debt avalanche method
Becky had a mix of Direct Unsubsidized, Subsidized, and Parent PLUS Loans, all federal loans. The Unsubsidized and Subsidized Loans had a much lower interest rate than the Parent PLUS Loans; some were as low as 3.4%.
To pay off her debt as quickly as possible, Becky used the debt avalanche method. With this strategy, she listed all of her debt from the loans with the highest interest rate to the loans with the lowest. She kept making the minimum payments on all of her loans, but put any extra money she had toward the loans with the highest interest rate. By tackling the more expensive debt first, she was able to cut down on interest charges and save more money.
2. Refinancing her high-interest debt
Because some of her loans had such high-interest rates — some as high as 7.9% — she decided to refinance some of her debt.
“What I decided to do was refinance all of my high-interest loans, which I counted as anything with a 6% interest rate or above,” Becky said. “That was all of the Parent PLUS Loans, and two of the federal Unsubsidized Loans in my name that were at 6.8%.”
Her parents helped her apply to refinance her high-interest loans to a private student loan, and she was able to qualify for a loan with a 4.71% interest rate on that debt — a significant improvement. Thanks to student loan refinancing, more of her monthly payment went against the principal of this new loan instead of the interest.
3. Keeping her expenses as low as possible
After graduating from college, Becky continued living on a college student’s budget.
“One thing that I did was I didn’t change my lifestyle at all after college,” she said. “There was no lifestyle inflation. So I essentially didn’t spend money on anything like clothing or going out to eat — what I would consider discretionary categories — because my whole philosophy is spending based on your goals and values.”
Because she lived in a high-cost area, she did live with her parents for nine months.
“It was really humbling to say, well, this decision that I made to have four years as an independent adult resulted in another period of my life that I have to live with my parents and be dependent,” she said. “That was kind of tough on my ego. But ultimately, it was very helpful for my financial goals.”
4. Side hustles
Becky did get a job right out of college as a consultant. Her starting salary was $47,500 — a solid income for a new graduate. But because she wanted to pay off her debt as quickly as possible, Becky focused on boosting her income so she could make extra payments.
“I got a part-time job as a public educator,” she said. “And I got into rewards points, mostly cashback rewards from credit cards and banks to make more money.”
By keeping her living expenses low, refinancing her debt, and working a side gig, Becky was able to put as much as $2,500 extra toward her loan payments every month.
In under two years, she was able to pay off approximately $68,000 of her high-interest loans. And by paying off her loans early, she was able to save about $24,000 in interest charges.
With the most expensive of her student loans paid off, Becky adjusted her financial plan.
“With the high-interest rate loans off my plate, I’ve figured out a hybrid approach to investing, saving, and debt repayment so I can move forward with my life,” she said.
By paying down debt and building her net worth, Becky was able to give herself the security and peace of mind she needed to pursue her next goal: starting her own business and working for herself. In January 2020, she left her full-time job to dedicate herself to her company Twenty Free.
“TwentyFree is all about financial independence and lifestyle design for 20-somethings,” Becky said. “I coach women about money and on lifestyle design. I think money is a tool that we can use to pursue our goals and to live in alignment with our values and priorities. So I always like to incorporate the idea of using money to create your ideal lifestyle.”
For people overwhelmed by their debt and unsure where to begin, Becky recommended that you face the hard facts right away.
“Make sure that you collect all of your debts and organize them, whether that’s on a spreadsheet or just on a piece of paper,” she said. “Know how much you owe, what the interest rates are, and what your minimum payments are. It’s scary to do. But once you have it all in one place, you can make a plan and figure out what direction you want to attack it from.”
Need help? Check out these nine strategies to pay off your student loans quickly.
Disclaimer: The opinions expressed by the interview subjects are not necessarily those of Earnest.