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How We Paid off our Student Loans In One Lump Sum

October 10, 2016

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This post is sponsored by Regions Bank.

Did you have student loans while in college? How did you pay them off? Maybe you still are. A fresh fall semester just started here in the small university town where we live–which happens to be the same University Chris and I graduated from nearly ten years ago. While we may be in a different life stage now living here, we got married 2 semesters before finishing our degrees and we came into the marriage with two different college financial experiences. I had a full-ride scholarship so I had no student loans, about $300 of credit card debt (which I remember feeling like felt like so much!) and worked as a waitress all through college which allowed me to have some savings, but not a ton. Chris had accrued about $23,000 in student loans before we got married, had about $700 in his checking account and was the manager of the cell phone store in town where he earned about $19K a year (which, again, I remember feeling like like that was so much!). While we both believed that the student loans were a good investment in his future career, we wanted to make a plan to pay off the debt as soon as possible and start a good savings account. So how did we got from meager beginnings to paying off tens of THOUSANDS of dollars in one lump sum? Here’s how:

The first thing we did, (which is actually one tip Regions Bank recommends in this Money Tips article from Grads to Freshmen) was I applied for another scholarship. It was for upperclassmen and it ended up being enough money to cover both of our tuition bills that final year and even covered our living expenses which meant we were accruing no more debt.

college-days

Above: Our college days

2. We made a budget, tracked our finances and lived below our means–we’re talking $100 in groceries for the month and getting creative with date nights (we used to have “iron chef” cook-offs at our apartment) and even low-budget vacations (here’s a bunch of great ideas for those). This allowed us to save way more money while still in college. It’s also how we got into DIYing. ;)

3. Once we graduated we had to start paying off the loans, which, you may know first hand, was a blow. It felt like even with both of us working we were only able to barely pay the minimum payment every month, and it seemed to only cover the interest accrued. It felt like we were throwing our money away paying only interest and rent on top of that. So, we assessed whether buying a house was a better option for us versus renting and ultimately decided to buy a house to earn some equity.

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Above: Us at the closing of our first home!

4. We applied for grants for first-time homeowners, looked for a house that needed some TLC and was within our budget, and only put $1000 down of our own money (plus, $5000 grant money) on our very first home. We fixed up the home ourselves over two years (and yes, documented the whole thing through blogging), while we continued to make payments on our student loans. After 2 years, the principle on the loan had only gone down about $2000. But, in that same amount of time, we were very fortunate because our home and the work we put into it increased the value over $50,000!

first-house-laundry-room-band-a first-house-kitchen-banda first-house-lr-band-a

Read more about our first home’s transformation here

5. Although it came in the form of an unexpected job opportunity out of state, we sold our first home after 2 years and paid off our student loans, approximately $21,000, in one lump sum with the earned equity and still had enough money to put a sizable down payment on our second/current home…another fixer upper, of course.

Of course, this isn’t the only way to pay off student loans, and I know that the fast appreciation of our first home’s value is not typical, but I can’t tell you how amazing it felt being able to write that big check and remove the student loan weight from our shoulders, while also improving our former neighborhood’s home values. I’d do the exact same thing all over again. Buying and fixing up a home, however backwards it felt as poor, newly graduated college students, changed our whole financial life.

Before And After: Our Basement Family Room is Finished!

Whether you’re just starting college or graduate school, a young professional, a growing family, empty nester or retiree, I know you would benefit from checking out Regions Bank’s Personal Insights page here. It’s divided into life stages and I came away with lots of tips, innovative solutions and articles for our family and finances that I’m genuinely excited to implement. Check out www.regions.com for more information.

What do you think?

  1. Jenna says:

    Your situation was kind of similar to ours… my husband’s parents paid for his college, while I took out student loans to pay for mine… about $40,000 in total. After paying more than the minimum payment for a year, we decided that that SUCKED and it was going to take SO LONG, not to mention my interest rate was terrible (6.5% I think). So we decided to refinance our cars and use the equity to pay off my loans. In the end, I went from a 15 year, 6.5% loan to a 5 year, 0.99% loan, and now, NO MORE STUDENT LOANS! Definitely a great feeling. :)

  2. Nicole says:

    Thanks, this is a really interesting post and the links are helpful!

  3. Congrats Chris and Julia! Thanks for sharing this with us. It’s so awesome to see people I respect talking about finances and being responsible with money. Well done!!!

  4. Olivia says:

    Gosh this is so commendable! You guys really went for it and that risk and hard work paid off!
    I’m a recent graduate and I would love to get straight into the property market, but I’m in Australia and our banks require a minimum 10% deposit to secure a loan. Saving the $25-35k that is required for a down payment on a small house is proving to be tricky, particularly in a graduate position and as a single girl out on my own, but I am determined to do it and your post is very inspiring!

  5. CT says:

    My husband and I have paid off one and a half of our three student loans and are on an escalated/aggressive schedule to finish the remaining balances off. I think an important thing for anyone to consider is the interest rate. We paid off our higher interest rate items (credit cards) before moving on to our student loans. Our lowest interest rate item is our car so once we finish with the student loans, we will dump all the rest of the money we were paying monthly onto those loans. We’ve started using Mint.com to track all of our accounts, credit cards, 401ks and everything in one place. It even calculates your home value by pulling data from Zillow so it factors your home ownership into your net worth equation. Financial stuff is never super fun but you have to be sure to look out for yourself – no one else is going to take care of you as good as you are. Cheers – CT

  6. Kathy says:

    As someone who is planning on buying a house as soon as our lease is up in June of next year, this post is everything. I mean, it may not work for everyone–I only have $5K left in student loan debt that I’m not too worried about–but everything that you mentioned in here can be applied to other things. Like I didn’t know that we could apply for a first time homeowner grant! I really appreciate that you talk about this kind of stuff.

  7. Sara says:

    Great advice, we are in a similar situation! I feel like the key is buying and spending below your means. A lot of people have a hard time with that. Those bank pre approvals can really get people into trouble!

    • Julia says:

      Absolutely! We bought a home for less than half the amount we were approved for–twice now!

      • DK says:

        THANK YOU FOR SAYING THIS! Do NOT borrow however much the bank approves you for; CALCULATE what you can afford which can be 1/2 to 1/3 of what a bank will approve you for. Your monthly housing costs shouldn’t exceed 25% of your take home pay. And don’t get a 30 year loan; go for a 15 year loan and save hundreds of thousands of dollars in interest. Money you can save for retirement or your kids college funds.

  8. exactly how we paid my husband’s MBA off :) buying a house may seem so unattainable, but buying below your means/a fixer, putting sweat equity into it, and selling at a time when your home is valued more, is perhaps the best way for young folk with debt to climb out of it faster. you’ll just never get there paying the minimum each month! not to mention, if you do do that, over the life of the loan you’ll have paid the original principle multiple times over! just makes me sick. anyway, here’s to home ownership and making financial decisions like home buying, and working hard as a team to get in a better place. xo

  9. Tracie S says:

    That is great that that worked out for you, but I don’t necessarily think buying a house while in debt is the best idea. Houses don’t always go up in value. We bought a foreclosure right before the housing bubble burst and watched as the value of our house went down to about half of what we paid for it. We were finally able to sell it last year (8 years after we bought it), but we had to bring money to closing to pay off the house. How much did you spend fixing that house? If it was at least $20,000, you would have still been able to pay off that loan in the same amount of time without the risk of depending on a sometimes unpredictable real estate market. Just because it worked out for you does not mean it is the best idea for everyone.

    • Julia says:

      Absolutely! And I mentioned that in the post. However, our mortgage payment was less than our rental payment and we didn’t do many major renovations in that house–mostly cosmetic. For us, buying a home and earning equity made more sense than continuing to throw money at rent.

      • L says:

        We bought our house while we still had around $20k in student loans. Prices were we live in Canada are higher than Idaho but still manageable and our market is quite stable. We put a basement suite in and rented it out to tenants so we could comfortably afford the the mortgage, student loan payments, and save to pay down the student loan (and for other things, too). It was definitely a great financial decision for us!

    • Sandra says:

      Me too, Tracie. Except we are in metro Detroit which still hasn’t fully recovered, so it took 13 years for us to be able to sell it and we to had to bring $3,000 to closing on a $115k house that we paid $130k for thirteen years prior… And we were paying probably $600/mo more than what renting the same home would have cost, thanks to those robbery mortgages with arms and balloons that were all the rage in 2003. And we dropped $10k into it before the bubble burst… What I wouldn’t give to be out from under student loans right now. I have so many friends around this area that short sold or just walked away and bought another house at the bottom with their parents’ cash and I am so jealous at the financial shape they are in compared to us now.

      • Julia says:

        That’s truly tragic. We bought our first home in 2011, after the economy crashed. So we were able to buy it at rock bottom price which definitely helped. Timing and location were definitely on our side. Prices and interest rates in our area are pretty great right now which is why I decided to take this angle on the post.

  10. Tara S says:

    That’s great that this path has worked for you. You have an amazing house!! I’m just curious, what was the interest rate for Chris’ student loans compared to the interest rate on the new house? Money and loans is a crazy thing and we tend to get conflicting advice from various sources. It’s so tough for young families trying to make the right decisions. Obviously, you do not need to share detailed finance information with us at all. Our struggle was not having the 20% down for a house and had to go with a FHA loan. Which stinks because we are still paying MIP every month. If you were able to pay off Chris’ student loans AND still had enough to pay 20% down on the new house they you are in awesome shape. Also location plays a big part in the housing market. I live in NJ, cost of living and property taxes are extremely high.

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