When Jason Butler graduated from Savannah State University in 2008, he had about $32,000 in student loan debt split between federal and private loans.
Researching ways to save money and pay down his debt, he looked into student loan refinancing. However, he didn’t qualify for refinancing when he first applied. But Butler was determined, and worked to improve his credit score and income.
Two years later, he was finally able to qualify for a refinancing loan, helping him take charge of his finances. Here’s what he did to improve his application.
Taking on More Student Debt Than Expected
Like many college students, Butler didn’t realize how much debt he really had until after he graduated.
“My debt sort of snuck up on me,” he said. “My freshman year I didn’t take out any loans, but then I lost my scholarship and started taking them out. I never took out the full amount [offered], but it still added up.”
Once his grace period was up and he needed to start making payments, he was shocked by how much he owed each month.
“I went from being a student with not many bills, to a few months later worrying about paying rent, utilities, and student loans,” he said.
Even worse, it took him over 18 months to find a full-time job. Instead, he worked two jobs: one at a retail store and another at a restaurant, where he earned minimum wage at each. With his relatively low income, Butler couldn’t afford his loan payments. So, he entered into loan deferment, and interest continued to accrue on his debt.
Dealing with Student Debt
When Butler graduated, it was the height of the financial crisis that rocked the country. According to CNNMoney, job losses reached the highest level in 60 years.
With the economy is such a poor state, Butler knew his situation was bleak and that he needed to make changes.
“I started really paying attention to my finances and worked to get them in a better place,” he said. “I started reading personal finance blogs on paying off debt.”
Through those blogs, Butler learned about student loan refinancing — a process where a borrower works with a private lender like Earnest to take out a loan for their current debt. The new loan has different repayment terms, including interest rate, repayment term, and monthly payment. In some cases, refinancing can help borrowers save money or even pay their debt off sooner.
Butler decided to apply for a refinancing loan. Unfortunately, he wasn’t able to qualify.
“I wasn’t able to do it,” he said. “My credit score wasn’t high enough and I wasn’t making enough money.”
Improving His Credit
Discouraged, Butler’s loans remained in deferment. But, he decided to make serious changes to improve his credit score and boost his income.
“Basically, the first thing I did was make sure I was up to date on all of my debt, including credit cards, student loans, and personal loans,” he explained. “And I worked to get my credit card balance under 30% [of my available credit line]. When I did those two things, my credit shot up.”
It took time, but his hard work paid off. His credit score increased to 690. And, finally able to secure a higher-paying job, his income went up, too. With his finances in better shape, he decided to try refinancing again.
This time — nearly 10 years after he graduated — he applied for a refinancing loan through Earnest.
“I had read a few reviews about Earnest online, and it offered some good rates,” he said.
Earnest approved his loan application. He opted for a variable rate loan with a longer loan term to reduce his monthly payments. His payments went from $180 per month to $140 per month, giving him more breathing room in his budget.
“I extended the loan term because my plan is to pay the least amount possible each month,” he said. “As my income grows, I’ll throw extra money at it.”
Attacking His Debt with the Debt Snowball Method
While his student loans are a burden, they’re not Butler’s first priority just now. Butler is using the debt snowball method, where he makes extra payments toward his debt with the highest interest rates first. In his case, the highest interest debt he has is credit card debt. Once those are paid off, he’ll turn to the debt with the next highest interest rate: his student loans.
He’s focused on eliminating all of his debt as quickly as possible and increasing his income.
“I have a lot of things going on,” he said. “I have a new side-hustle, and a new part-time job.”
With more money coming on, Butler is confident he can overcome his debt.
Managing Student Loan Debt
Now that he’s refinanced his debt and is in better control of his finances, Butler is helping other people conquer their own financial issues on his blog My Money Chronicles. On his site, he talks about debt, side hustles, and his progress paying down his student loans and credit card balances.
For Butler, the most important advice he has for people facing debt is to simply get started as soon as possible.
“First thing they need to do is get their numbers in order so they understand how much they owe,” he said. “Then, they need to come up with a plan.”
Butler stressed the importance of increasing your income.
“In most cases, your plan needs to include a side hustle,” he said. “Unfortunately, most people don’t make enough from their full-time job to pay their student loans. You can take up freelance writing or sell things online — there’s hundreds of ways to make money.”
With the money you earn from your side hustle, you can make extra payments toward your debt. Your side gig can help you cut down on the amount of interest you pay and allow you to become debt-free sooner.
By taking an honest look at your finances, you can come up with a strategy to tackle your debt. And, if you decide that student loan refinancing is for you, you can get a quote from Earnest in just two minutes.
Disclaimer: The opinions expressed by the interview subject are not necessarily those of Earnest.