In this series, we’re talking to people who’ve paid off their student loans, breaking down how they did it and what they learned.
Zina Kumok graduated from Indiana University in 2011 with a bachelor’s degree in journalism. She was fortunate: Her $24,000 in federal student loan debt was less than the average amount for her graduating class, and she didn’t have any other debt eating into her budget.
But since she was making $28,000 a year straight out of college, Kumok knew it was going to take serious dedication to pay off her debt. She turned to blogging to help keep herself on track. It worked — and by 2014 she had lived up to her blog’s name, Debt Free After Three, paying off $28,000 in student loans, accounting for interest, in three years.
Kumok, now married and living in Denver, is working as a freelance writer as she continues to share what she’s learned about managing money on her blog. Here’s her student loan story and advice.
What steps did you take to pay off your loans?
For the first time in my life, I started budgeting carefully. I created a budget in Excel and an account with Mint.com. I used both of those to project my expenses and track my spending. I also started putting extra money toward my loans. First I started only paying an extra $10 a month, but that increased the next year when I got a new job. I put the difference between my old salary and new one toward my loans. The year after, I moved in with my then-boyfriend and a friend of ours. That helped me save another $350 on my monthly expenses, which I immediately [put toward] my loans.
Did you make any lifestyle changes while paying down your student debt?
In college, I spent with abandon. It was no big deal to go shopping, order takeout or shop on Amazon. [After college] I radically changed how I was spending. I was only making $28,000 when I first started paying off my student loans, so I had to make my money stretch. I lived lean. I rarely ate out or went to the bars, borrowed movies and books from the library, and bought my clothes from Goodwill or other thrift stores. I invited friends over to watch “Sherlock” on Netflix and used credit cards with cash-back rewards.
Looking back, would you have done anything differently?
I was paying 6.8% interest on my loans, which is huge. I wish I had refinanced to a lower rate. Unless you’re trying to get your loans forgiven or have an unstable job, I recommend refinancing.
How did it feel to make that final payment?
It felt really surreal. I had spent so much time focusing on my debt that I struggled to really feel a difference. So many of the decisions I made on a daily basis were because of my student loans.
What advice would you give to other borrowers?
Track your spending. Almost everyone I talk to has no idea what they’re actually spending their money on, but they’re convinced they can’t pay off their loans early. Even if you only put an extra $10 a month like I did, you can make a difference. [And] don’t forget about retirement. I started saving for retirement when I became eligible for my company’s 401(k). … I put in enough to get the match. If you’re eligible for company match, read through the fine print to see how much you need to contribute to qualify. You have to balance saving for the future while paying off debt.
How you can get out of student debt, too
Kumok’s financial moves made sense for her situation and helped her reach the debt-free life. Your ideal debt-management strategy will depend on your circumstances.
If you’re having trouble with your monthly payments and you have federal loans, like Kumok, income-driven repayment plans can be a big help. Those cap your payments at a percentage of your income and extend your loan term to 20 or 25 years, depending on the plan. Any leftover balance is forgiven and taxed as income. You have to reapply every year to stay on an income-driven plan.
If you’re looking to save money and can afford your payments, student loan refinancing could be the right move for you. It lets you swap out your existing loans for a new one with terms based on your current finances. When you refinance, the lower your rate and the shorter your loan term, the more you stand to save. Refinancing federal loans means giving up borrower protections like income-driven replacement and forgiveness programs, so you might want to exclude those loans from your application.