5 Steps I Took To Conquer $107,000 In Student Loan Debt (2024)

The road to paying off my student loans was a rough one. I even defaulted on two of them – and by the time my student loan debt reached its peak, I owed more than $107,000.

Few things are as demoralizing as defaulting on your student loans. To this day, I still remember how frustrated I was when I found out two of my loans were in default. But it wasn’t the end of the road for me – and it doesn’t have to be for you either.

This is the story of how I managed to overcome student loan default, a credit score of 470, and six figures in debt. If you’re facing any of these struggles, I hope the lessons I learned along the way can be helpful to you.

1. I Rehabilitated My Defaulted Student Loans

First of all, if you’re facing student loan default, know that you’re not alone. In 2016, federal student loan defaults grew by 14%, according to the Consumer Federation of America.

When I went into default, I didn’t even know it at first. It was 2013 and I moved to Asia for work. I had a detailed spreadsheet to keep track of all my federal and private student loans. One day, I was contacted by a debt collector and found out I had two federal loans in default.

Because I kept such detailed records of my student loans, I thought it was a scam. The two student loans in question weren’t listed on my credit report, nor did I have any record of them. But after several phone calls and requests for information, I realized their claims were true. I couldn’t believe how I lost track of my student loans.

After a brief period of sulking, I enrolled the defaulted loans into the federal student loan rehabilitation program. The rules on student loan rehabilitation vary, but generally speaking, you’re required to make nine payments within 10 months to get back into good standing.

During the rehabilitation process I was able to enroll in an income-driven repayment plan. This made payments easier to handle since they were now capped at a percentage of my income.

2. I Focused On Increasing My Income

This step may sound obvious, but some extreme budgeters focus so much on cutting costs that the benefit of increasing income doesn’t always get the attention it deserves.

As the founder of a start-up, I wasn’t able to go to my boss and ask for a raise. After all, I was my own boss. And I had to make choices that were good for the company, such as taking lower pay so I could put more of the company’s revenue towards growth.

But when we did finally increase company revenue and I was able to increase my income, I allocated most of my pay increase to my student loans. I didn’t get a nicer apartment or upgrade my lifestyle in any way. Instead, I used the opportunity to aggressively pay off my debt.

If you’re able to ask for a raise or increase your income through side gigs, it might be tempting to upgrade your lifestyle. But just imagine how much better your lifestyle will be when you don’t have student loan payments anymore. That’ll be like getting another pay raise.

3. I Worked On Rebuilding My Credit

Once my student loans were rehabilitated, it was time to work on rebuilding my credit.

Since I couldn’t qualify for a traditional credit card, I signed up for a CapitalOne secured credit card. Secured cards are a bit easier to qualify for when your credit score is on the low end. Rather than borrowing against a revolving line of credit, you “secure” your credit limit up front with a deposit. Then, you borrow against your deposit and pay the balance each month like you would with a regular credit card.

I was able to put down a $2,300 deposit for my secured card, which instantly increased my total available credit. Plus, by making all my payments on time, I built up a positive credit history.

Finally, I worked with a reputable credit repair company to have negative entries removed from my credit report. Admittedly, this was an expensive move. But it was also effective and helped increase my credit further.

4. I Refinanced To A Lower Interest Rate

Eventually, I was able to increase my credit score enough to qualify for student loan refinancing. My credit score still wasn’t perfect, but I was approved to refinance $33,000 of my student loans with Earnest. I also reduced my interest rate from 6.8% to 5.9%, which resulted in lower monthly payments and interest savings.

Lowering my interest rate wasn’t the only benefit of refinancing my student loans. It also enabled me to choose a new loan servicer – and to find one that had a great customer experience.

Some might worry that refinancing student loans might hurt their credit score, but this wasn’t the case for me. In fact, refinancing my loans freed up extra cash to help me pay off my debt faster, which increased my credit score.

One thing to be wary of is that refinancing federal student loans means giving up access to income-driven repayment plans and federal deferment or forbearance. If your employment situation is unpredictable or unstable, you might want to skip refinancing until you can more safely expect your income to either increase or at least remain consistent.

5. I Moved Across The Country

This step might be drastic for some, but my final step toward student loan freedom was moving across the country in 2015. This enabled me to save around $9,000 on income taxes, decrease my cost of living by roughly 18 percent, and pay off my student loans one year ahead of my goal.

I understand not many people can just get up and move to another state. I was simply tired of paying the high cost of living in New York and wanted a more relaxed pace of life. My move to Austin, TX benefited me both financially and personally.

But if you love where you live or simply can’t move, examine other changes you could make to your cost of living. Maybe you could take on a roommate, downgrade your apartment, or even change neighborhoods.

Take Your Future Into Your Own Hands

With some frugal living and pigheaded discipline, I finally paid off my student loans in August, 2016, nearly 7 years since I graduated from college.

I know it’s not easy dealing with student loan default or ridiculous monthly payments, but a few small actions can truly make a big difference.

Refinancing your student loans at a lower interest rate, focusing on increasing your income, and looking for ways to decrease your living costs can be the perfect combination to help you build momentum and pay off your debt. Hopefully you can learn from my story, and leverage some of the strategies that helped me get to the finish line.

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