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How Student Loan Refinancing Helped This Family Buy a House

Mark Parrett and his wife, Amelia are high achievers. He went to business school to become a financial planner, and she went through medical school to become a doctor. While their education helped prepare them for careers with excellent earning potential, it also led them to six figures of student debt.

Mark and Amelia realized how serious that debt burden was, and came up with a repayment plan. With hard work—and the help of student loan refinancing—they were able to pay off their debt in just four years. Here’s how they did it. 

Evaluating Their Debt

Parrett and his wife credit their parents with helping them with their education costs for their undergraduate degrees. But when they decided to go to business school and medical school, they needed to find other financing options. 

“The debt we took out was mainly my wife’s,” said Parrett. “It totaled about $220,000 at its peak.”

The Parretts had exclusively used federal loans to pay for school. The debt was made up of a mix of both unsubsidized and subsidized loans. Unfortunately, they took out their loans when interest rates were quite high; most of the debt was at 6.875%, which caused the loan balances to grow faster.  

“We had a neighbor who was a physician who had finished his degree at a time when loans were at just 1.85%,” Parrett said. “We completely missed the boat [on low interest rates].”

At first, the Parretts just made the minimum payments on their loans to give them time to explore federal programs, such as income-driven repayment plans or Public Service Loan Forgiveness (PSLF). 

“During her residency, we wanted to make sure she could take advantage of any of the repay programs or programs that would involve some degree of loan forgiveness,” Parrett said. “After she completed her residency, she joined a private practice that wasn’t eligible for PSLF.”

Without a need for federal loan benefits, the Parretts began to research other options.

Looking into Student Loan Refinancing

With such a high rate on their student loans, the Parretts knew they were paying thousands in interest. 

“Once she finished her residency, it became clear that we could do better [in terms of interest rates],” explained Parrett. 

They began looking into student loan refinancing. They looked at a few different lenders, but soon found Earnest. 

“Earnest uses an algorithm that looked a bit more holistically at the whole financial picture and risk profile,” Parrett said. “Although we had a great credit score, our spending profile was even better. We were living way inside of our means.”

Earnest offered them a competitive rate, and Parrett found the lender to be the most user-friendly. 

“Earnest had the slickest interface and easiest walkthrough [through the loan application process], so it was a combination of ease of use and low rates that made us choose them,” he said. 

The Parretts opted for a fixed-rate loan and qualified for a rate of 4.61%. However, they decided to extend their loan term to get the lowest payment possible. They paid off some of their smaller loans, and refinanced the biggest one. By paying off the lower balances and refinancing, their total monthly payments dropped from over $3,000 per month to just $925 per month.

“Even though we planned on paying off these loans within a few years, the option of paying a lower monthly payment was pretty valuable,” he said. “We were doing some real estate investing at the time, but we weren’t 100% sure it was all going to pan out. I wanted to backstop the potential risk of some of the stuff we were doing with our money by making sure we were completely positive we could cover the monthly payments.”

How Refinancing Helped Them Achieve Their Goals

With a plan in place for their student loans, the Parretts decided to take a big risk. 

“We decided to roll the dice on buying a house in a really nice part of Salt Lake City,” said Parrett. “We had some past experience flipping houses, and we decided to take a risk here with our real estate investing and found a killer deal.”

Parrett credits student loan refinancing with making his real estate investment possible.

“The only reason we could [invest in real estate] is because we had refinanced our loans and lowered our payments to the point where, if things didn’t go as planned and we had to stay in the house rather than sell it, we could still afford the monthly payments going forward,” he said.

The Parretts lived in the home for just three years, doing some of the labor themselves and hiring professionals to help with renovations. In the end, they were able to resell the home for twice what they paid for it. 

With the profits from the sale, they were able to completely pay off their student loans years ahead of schedule. 

Managing Student Loan Debt

With his experience as a financial planner, Parrett started a finance company Outpost Advisors, where he helps people grow their resources. 

For those burdened with student loan debt, Parrett recommended evaluating all of your options before coming up with a repayment strategy. 

“My first recommendation as far as student loans go is to make sure you don’t want to take advantage of programs like income-driven repayment plans or loan forgiveness,” he said. “Those go away once you refinance your loans, but they only work for a small slice of people.”

“My first recommendation as far as student loans go is to make sure you don’t want to take advantage of programs like income-driven repayment plans or loan forgiveness,” he said. “Those go away once you refinance your loans, but they only work for a small slice of people.”

By utilizing student loan refinancing, they were able to tackle their debt head-on, saving money in interest payments and paying off their loans ahead of schedule. And, with his own experience tackling debt, he’s better prepared to help clients manage their money and pursue their financial goals. 

Disclaimer: The opinions expressed by the interview subject are not necessarily those of Earnest and their results may not be typical. 

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.