The idea of paying off massive debt can seem impossible, which is why many people just ride it out. But when you decide to make it a priority, you may find that you can turn things around a lot quicker than you thought — and save yourself a whole lot of money in the long run.
Whether it’s student loans, credit cards or some other big debt, making the decision to pay it off can be the hardest part of the process. And when you can’t seem to find the motivation to make it happen, learning how someone else did it can be the perfect inspiration.
Meet Blake Hillstead. He graduated dental school with a whopping $380,000 of student loan debt, but with some planning and hard work, he managed to get it paid off in just 21 months!
How he paid off $380K in less than two years
It’s probably no surprise that Hillstead says he was completely overwhelmed and stressed out when he realized the total amount of debt he owed after graduation, which Hillstead noted in a story for Student Loan Hero. And like many people, he was facing this huge debt, along with interest, while also trying to support a family and raise young children.
Hillstead says he and wife went back forth many times about how they should approach the debt — ride it out with minimum payments so they could upgrade their current spending habits and lifestyle, or, pay it off as quickly as possible to relieve the burden.
Hillstead says in order to save themselves a lot of stress and money over time, they decided to pay off the loans as quickly as they could.
Step 1: Refinance
For a while, Hillstead said he couldn’t even bear to look at his loan balances, since his Stafford loans were set at an interest rate 6.8% and his Grad PLUS loans at 7.9%.
When he finally added up all the numbers, Hillstead’s loans were costing him $26,000 a year in interest alone! So the first step in his payoff plan was pretty clear: refinance those loans to save on interest.
Here’s how he did it:
- First, he refinanced $55,000 in loans down from a 6.8% interest rate to a new 7-year term with a variable rate. ‘While I thought that choosing a variable rate loan might be risky, I figured the economy was still going to be slow for awhile, so I took the risk,’ Hillstead wrote.
- Next, he took out a home equity line on his house. ‘This was a little gutsy—and in retrospect probably a little too aggressive,’ he wrote. ‘But I was able to completely get rid of my 7.9% APR loans and change them to a 3.75% fixed rate! The fixed rate was nice here since it balanced out some of the risk of my student loan portfolio.’
- He then refinanced the remaining loans through a private student loan lender, which reduced the interest to a 2.74% variable rate.
Hillstead says this allowed him to reduce the annual interest he was paying by about 70%, which meant he could put more money toward the principal, allowing him to pay off the debt much quicker.
Read more: 6 ways to eliminate your student loan debt
Step 2: Earn more money
After the refinance process, Hillstead knew he needed to make more money to get the debt paid off quicker — especially since it involved variable interest rates.
He bought and ran his own orthodontic practice, and then also began working as an associate at other offices as a way to increase his income. He says he worked long hours and even worked on weekends.
Step 3: Reduce expenses
Hillstead says he and wife also reduced their expenses and didn’t make any big purchases during the payoff period. They kept their old cars, reduced their spending and didn’t do anything ‘extravagant.’ His family moved out of their ‘starter home,’ rented it out to tenants and moved into an inexpensive rental house.
Hillstead says it was a sacrifice, but as he continued to make progress and actually make a dent in the overall debt, it just gave him even more motivation to keep going. And after just 21 months, he was able to pay off the loans in full.
How you can do it, too!
Regardless of how much debt you have, getting it paid off is the only way you will ever reach financial freedom — and it all starts with the decision to make it a priority!
While Hillstead’s strategies may not work for you, there are some key lessons that anyone with debt can take away from his story — with the two biggest being the power of refinance options and how increasing your income can be a huge factor in speeding up your payoff timeline.
If you have student loans and don’t qualify for any of the debt forgiveness programs, there are tons of options available now for you to refinance your loans to a lower interest rate, which can save you big bucks over time. Here are some refinance options to consider.
If you’re facing big credit card debt, consider balance-transfer offers that will reduce the interest. Here’s more on how it works.
Finding ways to increase your monthly income can also be a key part of the debt payoff process. If you can’t take on a part-time job on top of your full-time work, look into opportunities that allow you to use your skills to make extra money online. There are also tons of side jobs out there that can help you boost your income on your own schedule.
Here are some more resources to help you get started: