Are student loans holding up your travel plans?
This is a summary of how I paid mine off in just a couple months.
Over the last 6 months I’ve had the experience of a lifetime traveling extensively in Europe and venturing into Africa, a trip that was almost impossible because I had $30,000 in undergrad student loan debt.
From my new office in Naxos, Greece (below), I’d like to share quickly how I paid off those pesky loans and how it helped cut my costs enough for me to travel the world.
Like many twenty-somethings I was struggling to find a better way to get rid of my student debt, free up the little bit of savings I had, and travel the world.
As many of you know, traveling on minimal income is hard enough and making payments on $30,000 of student debt makes it even harder.
Adding $350/month (my monthly student loan payment) to my travel budget would make a HUGE difference in not only my sanity while traveling, but also in the experiences I could afford. I racked my brain for a while and being decent with numbers (I studied math and economics in undergrad) I tried to scheme up several ridiculous ways to get out of my debt as soon as possible.
I’ll spare you the crazy attempts and share what ended up eventually working.
I worked in real estate while I was in college for a bit of spending money and luckily that’s where I found my student debt solution. Although a real estate background helped me to come up with the strategy I used, now that I’ve done that work, you don’t have to know a thing about real estate or student debt – just follow my outline.
I’ll give you the basics below and you can also download the e-book “Hacking Student Debt: How to Save 20%+” right from Amazon for the complete set of tools I used to tackle my debt.
Yes, that is a rather obvious plug and yes, it costs $2.99, but I saved $6,000 in the matter of about 10 weeks and I sincerely believe it can help you to do the same.
How it Works
Like a lot of people attending college, parents or relatives ultimately end up “co-signing” the loan – all that means is that if you fail to pay it off, the “co-signor” will have to pay it for you.
And like most other college students with debt, chances are that your parents own their home.
If your parents own their own home there is some financial magic you have access to:
The interest rate you are paying on your student loans is probably close to 7%-8%, while the rate your parents are paying the loan on their house is probably closer to 5% or 6%. Current mortgage rates today are anywhere from 3.8% to 4.14% (as of April 18th, 2014).
Now if you could pay back $30K of student debt at 4% instead of 7% over 10yrs you would save roughly $10K!
So here’s exactly what I’m suggesting you do:
– Ask your parents to “re-finance” their house (which lowers their overall interest payment anyway,) and use part of the proceeds to wipe out all, or part, of your student loans.
– Then pay your parents back at a lower rate, but obviously for the full amount of your loans. This should drop your monthly payment and total payoff amount by close to 20% (probably more).
In my case, I made an agreement with my parents to make monthly payments to them that included a small extra fee every month, that way they were actually making a bit of money off of the process instead of the bank (how could they say no to that?!)
Another huge bonus is that now not only has your student loan that both you AND your parents were responsible for been paid in full, but it has been paid off early, which will help both your credit scores.
This may not work if
A) your parents don’t own a house
B) your parents don’t trust you or
C) you’re unable to make the monthly payments to your parents
But it should work in most cases and can save you A TON of money!
Think of it this way:
It makes much more sense for you and your parents to pay off a loan amount of $30K at 4% interest instead of at 7%, and since your parents co-signed your loans for college and are ultimately on-the-hook for them anyway, they might as well agree.
If you don’t follow this plan, you’re basically paying the government or Chase Bank an extra $10K for nothing.
I learned a few other neat tricks along the way, and they are all in the e-book “Hacking Student Debt: How to Save 20%+” but I’m hoping many of you can just take the idea above and run with it.
Good luck and happy travels!
P.S. If you’re interested in chatting over a Skype consultation about how to make this method work for you, feel free to shoot me an email: steve@thestudentdebtsolution.
