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[Podcast Ep. 19] How Melanie Lockert Paid Off $81k In Student Loan Debt

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Who is Melanie Lockert?

Melanie Lockert is the personality behind the award-winning blog, Dear Debt, where she chronicled her journey out of $81,000 in student loan debt. Through her blog, she inspires readers to break up with debt by writing their very own breakup letter to debt.

In 2015, Melanie (and her journey out of debt) was named one of the top five most inspiring personal finance stories of the year by Yahoo! Finance. She currently works as a freelance writer and event planner. Melanie and her work have appeared in Business Insider, The Huffington Post, Yahoo! Finance, INC, and more.

What is your debt story?

At the age of 17, Melanie was given two options. Take out student loans or don’t go to college. Since she never considered not going to college, she took out the loans and graduated with an initial amount of $23,000 of student loan debt.

She didn’t think about it too much at first and paid the minimum each month. A few years later she went back to school and attended NYU for grad school. She ended up taking out another $58,000 for a total of $81,000 in student loan debt.

By the time she May 2011, she was still stuck with a bill of $68,000 in student loan debt. Now, 2011 was not a good time to try and find a job and that’s exactly what Melanie experienced. She would sometimes get as far as the second or third interview and then be told they’d gone with something else.

Ultimately, she realized she couldn’t continue living in New York so she moved to Portland, Oregon with her partner and started over.

What is the connection between debt and mental health?

In her book, Melanie likens paying off debt to the five stages of grief.

In her case, shortly after graduating NYU she knew she needed to get her finances in order. She got herself a free Mint.com account, saw how much she owed and deleted the account within a few minutes because she couldn’t deal with it at that time.

She also experienced a lot of anger, depression, and denial for a long time. She did go to counseling to work through some of the emotions that were being brought on by her student loan debt. The good news is she started her blog to help her climb out of it and educate people on the connection between emotions and debt.

What are some resources for people struggling with money related mental health issues?

People who are struggling with mental health issues as they pertain to money can get affordable counseling from a variety of places including community centers, graduate schools, and religious organizations.

If you happen to be in a lot of credit card debt, consider speaking with a legitimate non-profit credit counseling agency. They can help you face the numbers and come up with a plan. One such organization is Clearpoint Credit Counseling.

What were the strategies you used to get out of $80k of student loans?

Step one is to face your debt. You need to get clear on what you owe and what the interest rates are. In Melanie’s case, she realized that because of interest, her grad school student loan debt was costing her $11 a day.

It’s especially important to look at the interest rates because it will help you see whether or not you need to increase your monthly payments.

From there, Melanie cut her expenses drastically. She scaled down as much as she could and cut her budget down to the bone.

Since Melanie was a low-income earner, she realized her next step was to earn more money. She took on any side gig she could do that was legal. She also turned her blog into a freelance writing side hustle and double her income.

Did you try anything that didn’t work?

Melanie notes how she was sometimes too strict with her budget and then it would backfire. For example, she would avoid spending money on going out, realize there was no food in her apartment and then end up spending $30 on a meal anyway.

She also points out how she was working herself too hard which caused her to make mistakes and spend money on conveniences.

However, Melanie notes that the biggest mistake she made was only paying the minimum on her student loan debt.

How can people stay motivated when paying off a large amount of debt?

When Melanie experienced debt fatigue, she realized she needed to set up a reward system to keep her motivated. For example, if she paid off $5,000 she would take herself out to a nice dinner.

She also recommends finding ways to do some of your favorite things on the cheap. Do you like happy hours? Buy yourself a bottle of wine from Trader Joe’s and invite friends over.

Journaling is also a great way to get your emotions out of your head. Additionally, Melanie created a secret Pinterest board where she pinned images of what her life would look like after she paid off debt. In other words, she had her eye on the prize.

On a day to day basis when she had to deal with money, she taped her student loan amounts on the back of her debit card so she wouldn’t overspend.

What is one tip that people can use to improve their finances right now?

Sign up for automatic payments. Some student loan services will cut you a deal on your interest rate if you sign up for auto pay.

If you’re having trouble paying your student loan debt, Melanie suggests speaking with the student loan provider. The last thing you want to do is go into default or get your wages garnished.

How do you make money your honey?

Melanie puts in the work! Specifically, she automates her finances as much as possible and mindfully makes her money work for her. Most of all, she’s finally putting money toward her future instead of her past.

Where to Find Melaniedear-debt-large-cover

Melanie’s Blog

Dear Debt – The book.

Twitter

Resources Mentioned Or That Add Value to This Episode

Income Driven Repayment Plan for Federal Student Loans

5 Options for Paying Back Federal Student Loans

SoFi Review: Refinance Your Student Loans With Low Interest Rates

Clearpoint Credit Counseling – For anyone who is struggling with paying their credit card debt.

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[MMYH Episode 15] 5 Options for Paying Back Federal Student Loans with Ryan Lane

federal student loans

This week we’ve got another Make Money Your Honey podcast episode! I’m interviewing one of my long time editors, Ryan Lane of the SALT community.

SALT is a free online community that offers personal finance education for undergraduate students and college grads. I’ve been writing for them as one of their career experts since 2012!

This week he’s helping the Make Money Your Honey community know what their options are as they pertain to federal student loans. We’ve covered private student loans in the past and many of you have requested that I cover this topic and I figured I’d bring in one of the experts.

While SALT focuses on several personal finance topics, one of the areas where they definitely excel in the personal finance education department is with federal student loans.

In this episode, Ryan will explain five different options for paying back federal student loans. or those of you who are condering going back to school, he will also be covering what you should look for when deciding to take out federal student loans.

What is the difference between federal student loans and private loans?

There are some big differences between the two. The first difference is the lender who is providing the loan. If you get a federal loan, it’s going to be from the federal government.

Private loans come from private lenders, which could be a bank, an online lender, a private company, etc.

The main way you can tell is how they have you apply. For any type of federal aid, you’ll need to fill out the FAFSA, which will let you know how much you qualify for in loans. A private lender has their own process.

You can also look up your federal student loans in the National Student Loan Data System (NSLDS) at nslds.ed.gov. If you have a federal student loan, it will be listed there. If you have a private loan, your best bet is to look for it on your credit report.

What are some things people need to look at before signing on the dotted line and taking out a student loan?

You want to pay attention to the interest rate. One of the benefits of federal student loans is that they have fixed interest rates. These change every year on July 1, but you’re locked into your rate. The current rate for undergrad Stafford loans is 3.76%. For grad school, you’re looking at a 5.31% rate for an unsubsidized Stafford loan, and for a Grad PLUS loan, you’re looking at a 6.31% interest rate.

With a private loan, the interest rates can change based on a variety of factors, including your credit score, credit history, etc. You could also have a fixed interest rate or a variable interest rate.

What is the difference between a fixed interest rate and a variable one?

A fixed rate stays the same for the life of the loan. A variable rate can change throughout the course of the loan based on a variety of factors, which will be laid out on the promissory note (i.e., your loan’s contract).

Where can people find more information when trying to decide between loans?

There are lots of resources online, including the free SALT website and community, as well as your school’s financial aid office.

If you’re going to a private lender, make sure to ask questions. And know that you do not need to take the loan if you feel uncomfortable. You can also go to the Consumer Financial Protection Bureau for resources to help you.

Now let’s get to paying back federal student loans…

What options are available for individuals who have federal loans and are having a hard time paying them back?

There are lots of options available out there for repaying federal student loans.

Here are some of the most common options:

 

  • Income-driven repayment plans: There are many different types of income-driven repayment options. Fortunately, they have one application and you can pick among the ones you qualify for or simply opt into the lowest payment. The nice part about these is they also have a built-in forgiveness option after 20 or 25 years of eligible payments.

 

  • Public Service Loan Forgiveness Program: Not a payment repayment plan, per se, but rather a benefit that can go hand-in-hand with other repayment plans. If you work for a qualifying public service organization, you may be eligible for student loan forgiveness after 10 years and 120 eligible payments. The CFPB estimates that a quarter of borrowers could actually be eligible for this program. The important thing to remember is that it’s not about the job you have; it’s based on the organization you work for.
  • Deferment: This temporarily pauses repayment of your loans. This is preferable to use before forbearance because the government may pay the interest that accrues during your deferment on some of your loans.
  • Forbearance: Another way to pause repayment. In forbearance, you will always be responsible for paying the interest that accrues.

(Note: If you are considering deferment or forbearance, look into an income-driven repayment plan first. These could reduce your payments to as little as $0.)

If you decide you may be better off refinancing with a private company or maybe you just don’t qualify for the federal programs, what do those with federal student loans need to consider?

When you refinance or consolidate a loan, your old loans go away – and so do the benefits that were tied with them. Consider whether or not you will need those protections in the future. Will you never be eligible for loan forgiveness? Are you fairly confident that you won’t need to use anything like forbearance or deferment? If you’re getting a better rate with a private lender, figure out if it’s worth the risk of losing those options.

Resources That Are Mentioned Or Add Value to This Episode:

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[MMYH Episode 11] What I Wish I Knew About Money When I Graduated From College

WHAT I WISH I KNEW ABOUT MONEY

It’s been six years since I graduated from college into a shit show of an economy. Time flies!

For those of you who don’t really know me or my story, I graduated from college in 2010 and went six months without a job. It was also a time when people were blaming millennials and calling them lazy and entitled for moving back home with mom and dad. I was one of those millennials and was like, “Uh, no dude. The economy is crap. That’s not me being entitled.”

It propelled me to look for additional sources of income and that’s when I started freelance writing and blogging about money. It was really all in an effort to learn about personal finance because Lord knows school didn’t teach me shit.

When I did find jobs I was pretty much underemployed. While I’m grateful for what those jobs taught me, I saw the opportunity to make more money as a freelance writer, blogger and coach – so I quit my job in 2013.

Fast forward a few years and I’m making more money than ever. I also actually know a thing or two about what to do with that money. In that time, I’ve realized that there are several things I wish someone would have told me about money when I graduated college.

Negotiate everything.

I was so happy to find any job back then that I didn’t even bother to negotiate my salary. I was terrified of asking for more money because I literally thought there was no money.

I know realize that this sets you up for failure in the long term. I’d probably have more money to my name if I’d started asking for more from the beginning.

Running a business isn’t about having a great new idea.

We’re told that successful businesses are successful because they came up with some great new idea. I’ve since come to learn that this may be a conspiracy theory to keep people working in corporate. When I graduated from college, I didn’t even realize running a business was an option for me because I thought I needed to study it.

Guess what – two hundred years ago everyone ran a business. If you had a skill – like welding – you learned how to sell it. That’s all business is.

Some nasty people will try to screw you over with your money.

There are, unfortunately, people out there in all industries who will try to screw you over to make money for themselves. In finance, for example, you have people trying to sell you on some hot stock or the next great business investment.

It’s all bullshit.

That’s one of the reasons I’ve become so passionate about learning what to do with my money, because if you don’t know how it works, you might get played. Education can go a really long way in making sure you have sound finances, so do your due diligence. Read books, follow blogs and ask for help.

Finance isn’t that complicated.

I used to think that finances were so complicated. I’ve since come to realize that this is because some people in the industry make it seem complicated on purpose in an effort to get your money.

Don’t fall for this common money myth. If this totally right-brained girl whose hated math since the third grade can learn to love and understand finance, then you can too.

No one is going to fix things for you.

When I worked in recruiting I interviewed a lot of people who wished someone – the government, politicians, corporations, whoever – would just fix the economy. Or they wished they could win the lottery.

No one is going to fix anything for you. If you’re waiting for the government to fix a mess you’re going to be waiting a long time. And even if you win the lottery, if you don’t know what to do with the money it won’t fix anything either.

That’s why it’s important to realize that you’re the only one with any real power when it comes to your money.

You can make money as a creative.

I primarily identify as a creative. I was the kind who went to art camp, took theater classes and wrote for the school newspaper. I’d also been told my entire life by this society that creative pursuits don’t make money.

Well, they’re wrong. I create for a living and last month I brought in almost five times was I was making at my last job. I do wish I would have realized that creatives can make money sooner. I feel like I would have quit my job sooner and I’d be further along, however I do realize how fortunate I am to have figured this out in my twenties.

Bottom Line

I hope you found these lessons helpful – whether you just graduated from college this year or have been out for a decade. We always need a little boost in the money mindset department and I hope this episode serves as a reminder of the power you have.

Resources That Are Helpful Or Add Value to This Episode

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[MMYH Episode 8] New Study Released: Student Loan Debt By State

student loan debt

Disclaimer: This post was made in collaboration with MoneySavingPro.com. Opinions are my own.

MoneySavingPro.com recently released a study that details the differences in student loan debt among states in the U.S. The study is so detailed and so in-depth that I knew I had to share it with my audience, of which many readers are dealing with student loans every day.

In this episode I discuss some of the findings, why student loan debt is a major problem and what people who carry student loans can do about it.

Key Findings:

  • Student loan debt is at an all-time high. A recent news report I saw noted how college tuition is double of that of our parents’ generation. MoneySavingPro.com notes how between 2004 and 2014 student loan debt increased at double the rate of inflation.
  • There are major differences in student loan debt depending on region and state. There are many factors that contribute to this including, the amount of debt students are carrying, tuition costs, the percentage of students carrying debt in each state and the rate at which student loan debt is increasing.
  • Delaware’s student loan debt increased by almost 130 percent in the time period mentioned above.
  • States with the highest student loan debt tend to be located in the Northeast and Midwest.
  • New Hampshire had the highest percentage of student loan debt with 76 percent of students carrying debt.
  • Utah had the lowest student loan debt with an average of $18,921. New Mexico, Nevada, California and Arizona followed with average student loan debt of $20,418.

Why Is This a Problem:

  • It’s no surprise that student loan debt has become a major policy issue. I’m looking at you Democrats.
  • People are starting to question whether or not an education is worth it. While evidence suggests that those with bachelor’s degrees make more money than those with just a high school diploma, skyrocketing tuition costs and stagnant wages are causing a big problem for graduates.

What I Think:

I’m Team Go to College. If you think you’re making crap money with a Bachelor’s degree try not having a bachelor’s degree.

I’m also on Team Don’t Be Stupid With Your Money. Read the terms on loans, go to affordable schools and get a marketable degree. If you don’t get a marketable degree (I get it. This creative wasn’t meant to be a doctor either.) then get ready to create your own career like I have. The only way for me to make good money as an English major was to start my own business.

Now, despite all the variables that go into student loan debt, some of which are in control of the borrower, I still think we have a problem. Costs are rising way too fast for a degree that everyone now has. Additionally, wages aren’t keeping up. It’s definitely an issue that needs to be addressed and fixed.

Options for Paying Down Student Loan Debt:

  • Consolidate. If you’ve got multiple loans and trying to keep up is driving you insane then consolidating may be a good option for you.
  • Refinance. Refinancing is an option for those of you with high-interest rates and high monthly payments. Refinancing will bring down the amount you pay each month and possibly bring down your interest rate as well. Just note that it could extend the time of your loan.
  • Note that for both options mentioned above you need to shop around. Private and federal loans are not created equal and there are several factors to take into consideration depending on the kind of student loan debt you are carrying.
  • Find ways to make extra money. Believe it or not, sometimes the easiest solution is to make more money. Ask for that raise. Find a new job. Get a part-time gig. Start a side business. Raise your rates.
  • Find support. There are plenty of bloggers and communities available that support student loan borrowers with their debt repayments.

Helpful links and resources:

 

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