Millennials are a forward-thinking, innovative generation, but they’re not without their strife. One major issue facing most millennials today is debt. Nearly 80% of young adult households have some form of debt. Whether that debt is due to student loans, credit cards, or something else, paying down debt at any age is the easiest way to move forward with future financial goals. Debt — and mainly student loan debt — is one of the main reasons millennials are holding back on homeownership. One study from the Urban Institute found that if a person’s education debt went from $50,000 to $100,000, their chance of homeownership declined by 15 percentage points.
Despite the headlines, the news isn’t all dire for millennials. Just as there are stories of financial hardship, there are also stories of resiliency and persistence in the face of paying down debt. Below are three of them. Perhaps the stories of these millennials taking charge of their financial future can help inspire others to, as well.
Patrick Smith
The facts: Smith is a 33-year-old graduate from Pennsylvania State University at University Park. After graduating, Smith was left with approximately $60,000 in private student loan debt. He currently works as a Destination Sales Executive with Marriott International and lives in Norfolk, MA, a suburb of Boston. Here’s how Smith put together a plan to pay off his loans in 10.5 years.
Q: When did you realize your debt had gotten out of hand, and that it might help to put together a plan to pay it off?
Smith: I realized very quickly after graduation that I had a very long road ahead of myself with regards to paying off my loans. I had no idea how quickly the interest would add up in the total loan payment. This was especially evident as I was living in Boston where rent, expenses, groceries, restaurants, etc., were very high in comparison to other areas of the country.
Q: What was your strategy for paying off your debt, and how did you come up with it?
Smith: At first I just kept plugging away making monthly payments, hoping that I would one day actually pay the loans off. You hear so often people that take 15 to 20 years to pay off their loans and some much longer than that, so I just assumed that maybe I would end up in that bucket. However, after getting married and starting my adult life, I quickly realized that in order for me to be financially independent, I would need to come up with a true action plan to get these paid off. My wife also had loans of her own that were much less than mine, so we focused on getting hers paid off first and then moved to mine by shifting those monthly funds to double up on my loans. Roughly three years before I paid off my loans I did refinance. This really helped to consolidate the loans and helped focus my efforts. I work in sales and made a commitment to use some of my bonus money to pay off these loans as well. By the time we were expecting our second child we had a real deadline to pay these loans off, as we needed this monthly income to pay for daycare for our second child.
Q: How did you stay on track with your repayment goals? Were there ever times you felt inundated?
Smith: I absolutely felt overwhelmed and in some cases felt that I was standing in quicksand. It was a very long, slow process, but I never missed a payment and never deferred the loans. I would call my lender often and ask about the amortization calculator [which is used to estimate monthly loan repayments based on principal and interest] and updated pay off date. This was really the a-ha moment that helped a 20-something realize how quickly interest can take over.
Q: What would you say were some of the biggest obstacles to sticking with your repayment strategy?
Smith: Saving for a wedding, credit cards, buying a car, vacations, buying a home, having a child, having a second child … life! It is extremely difficult for an 18-year-old to realize the true impact of loans. However, if you’re focused and come up with a plan, then anyone can do it.
Q: What were some of the most helpful resources in coming up with your debt repayment plan? Did you ever consult a financial planner?
Smith: Understanding the amortization calculator. I read a lot from financial planners, and tried to talk to as many people that worked in the financial world.
Q: What would be your biggest piece of advice for people going through something similar?
Smith: I would definitely suggest making sure that before you take out any loans you’re 100 percent sure that it is what you want to do. I would talk to a financial planner at the onset to ensure you’re taking the right loan and getting the very best interest rate. I would also say that if there is any way to pay off the interest while in college or a portion of it while in college, to do so. It will only help you in the long run. If asked if I would go to college again – of course. Besides the fun, it was an investment in my future and I would not be where I am today without it.
Vanessa Gordon
The facts: Gordon is a 31-year-old graduate from New York University at Manhattanville College. When Gordon finished with graduate school, she was approximately $110,000 in debt from graduate school loans and $3,000 in credit card debt. She currently works as a publisher and lives in Sag Harbor, NY. Here’s how Gordon put together a plan to pay off her loans in seven years.
Q: When did you realize your debt had gotten out of hand, and that it might help to put together a plan to pay it off?
Gordon: When it came time to begin paying off the student loans for college and graduate school in October of 2012, the reality fell on me. I was looking at just over $110,000 in student loans and $3,000 of credit card debt. Though the credit card debt was not nearly as much as the student loans, the reality of the value of money was at center stage. I was just hired as a full-time teacher and tutor at my local school district. At the time I was making less than $55,000 a year between teaching and tutoring. My husband was in his residency program at the time. My husband and I sat down and we told ourselves that we would do anything in our power to get rid of this debt as fast as possible. I was very determined.
Q: What was your strategy for paying off your debt, and how did you come up with it?
Gordon: We immediately calculated the amount of money we could afford to live on, which was at about $3,500 a month. That allowed me to put all of my income towards my student loans. I set up a direct debit with both student loan accounts to debit 70 percent of my income towards my student loans once a month. The rest of the money I would put as a lump sum towards the particular loan with the highest interest rate. I would take care of paying those loans separately. Any time we ever received extra income such as bonuses, Christmas money, you name it, it was put towards the loans. We successfully paid off $35,000 in the first year alone. This was not easy in any respect. We rarely went out to eat, we never bought each other gifts, I sold a lot of old clothes, handbags, and miscellaneous items on eBay and held off on buying a laptop until the loans were even more under control.
I soon took on a third job as a fitness instructor at two local gyms, and then at a third gym a few years later. With one gym, I had 50 percent of my income deposited into a retirement fund, and the remaining 50 percent went to my student loans. I received a great amount of joy seeing the amount slowly but surely decrease. It motivated me even more. This motivation particularly helped because my main financial goal was getting rid of this debt.
Q: How did you stay on track with your repayment goals? Were there ever times you felt inundated?
Gordon: Direct debit was the main way we stayed on track. We also started ‘rewarding’ ourselves after a year. We realized that being too strict could become overwhelming over a long period of time — we had to enjoy ourselves in some way. My husband and I put aside a few hundred dollars every month until we had enough to take a four-night cruise in the Caribbean to escape for a little while. That break helped us refresh and recuperate.
Then, happily, I became pregnant with our first child, our daughter who is now six years old. We had to start saving money for her. Thankfully, my parents had saved much of my furniture, toys, baby items, and clothes. Can you believe it?) And, it was all in like-new condition! This on top of the generosity of my grandparents and in-laws, we were able to be financially comfortable with our new baby and stay on track with loan payments.
When my daughter was born, I left my tutoring and teaching job and never went back. By that time my husband was out of residency and was pulling in a six-figure income, which allowed us to still stay on track and increase the payments to over $2,500 a month for student loans. I then began freelance writing for three different publications, where once again that income was put towards my loans.
Q: What would you say were some of the biggest obstacles to sticking with your repayment strategy?
Gordon: Overall, it was the frustration that piqued at times of us not being able to do things that we wanted to do such as traveling, shopping, and saving to buy a home for the future.
Q: What were some of the most helpful resources in coming up with your debt repayment plan? Did you ever consult a financial planner?
Gordon: Creating an organized savings plan certainly helped. With direct debit, we knew that those payments were coming up no matter what.
Q: What would be your biggest piece of advice for people going through something similar?
Gordon: Instead of focusing on the notion that there is no way you would be able to tackle this, think instead: What can I do to fix this? For example, choose three to five things that are considered luxuries and eliminate them for three months to start.
Vonecia Carswell
The facts: Carswell is a 29-year-old graduate from the University of Florida & Relay Graduate School of Education. Carswell is a teacher in Brooklyn, NY, who got her $11,600 in credit card debt down to $5,000 in two years.
Q: When did you realize your debt had gotten out of hand, and that it might help to put together a plan to pay it off?
Carswell: When it became hard for me to get approved for housing.
Q: What was your strategy for paying off your debt, and how did you come up with it?
Carswell: First I called the loaners and set up a forgiveness program, where I was given a lowered set minimum rate with no interest charges for a year to pay off my debt. Then, every time I got paid, I set aside at least enough to cover the minimum payment. I also set extra money aside using the Digit app, and every couple of months, I would transfer that money to pay an additional amount on my credit cards.
Q: How did you stay on track with your repayment goals? Were there ever times you felt inundated?
Carswell: Once I secured a stable job, I set automated payments and set aside a specific amount from my paycheck every month to contribute to the payments. I didn’t feel
inundated at all. Although anxious to get ahead, I was taking small steps and was just happy to be making positive steps toward getting back on the right track.
Q: What would you say were some of the biggest obstacles to sticking with your repayment strategy?
Carswell: Having to stick to a tighter budget was a little tough.
Q: What were some of the most helpful resources in coming up with your debt repayment plan? Did you ever consult a financial planner?
Carswell: The Budgetnista’s Get Richer Academy was an extremely beneficial resource in helping me come up with my repayment plan and a plan to elevate my credit score at the same time. Through it, I learned how to decide which debts to pay off first, and in which increments. I also learned about secured credit cards. In addition, I did my own research online to get ideas on strategies I could use to maximize my repayment plan. I did consider a financial planner, but I felt like I had it under control and was pleased with the efforts I was already able to achieve.
Q: What would be your biggest piece of advice for people going through something similar?
Carswell: Slow and steady wins the race. After a while, once I got into the habit of paying off and saving little by little, it became second nature, and I no longer viewed it as a burden. I was able to then gradually contribute more overtime to pay my debt off quicker.
While student loans can be intimidating, as the stories from above illustrate, getting a plan in place is the best way to tackle them head on. Using some of the tips that the graduates above used — like refinancing, using extra income to make larger payments and checking into any forgiveness programs you might be eligible for — can help you reach your goals more quickly. Remember to celebrate the small wins along the way, as well. Paying down your student loans may take a while, but every little bit you pay down can make a big difference in the long haul. If you need any help, contact your Santander representative for more information.
Santander Bank does not provide financial, tax or legal advice and the information contained in this article does not constitute tax, legal or financial advice. Santander Bank does not make any claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained in this article. Readers should consult their own attorneys, financial consultant or other tax advisors regarding any financial strategies mentioned in this article. These materials are for informational purposes only and do not necessarily reflect the views or endorsement of Santander Bank.
