Americans are currently carrying $1.5 trillion worth of student loan debt. That number reflects a monumental financial burden and a serious emotional one too. Many people find themselves battling poor sleep and anxiety while feeling trapped by their debt. Fortunately, some people have conquered their debt, offering hope for the rest of us.
Today, Andy chats with Okeoma Moronu, a corporate finance attorney who also is the host of The Happy Lawyer Project and the author of the new book series called Money Monsters. She and her husband were once buried under a massive mountain of student loan, and they’ve successfully found their way out.
We’ll explore how they accumulated their debt, strategies they used to combat debt, and advice she has for other families carrying debt. Here’s her story of how her family paid off over $300,000 in student loans.
Accumulating Massive Student Debt
Like many people, Okeoma believed that education is a good investment. As a result, she found herself ignoring the money lessons she already knew in favor of signing on the dotted line for loans to go to law school. Specifically, she took out $210,000 in loans.
As the first person in her family to get an advanced degree, she felt that she didn’t have anyone to give her real guidance. Unless you count the school personnel who encouraged her to take the maximum amount of money she could get each year.
Armed with little more than this questionable advice, she started her journey through law school. Because she was in college during the recession, that also meant that her loans had 8 and 9% interest rates associated with them.
In addition to her loans, her husband also ended up taking out student loans of his own, bringing their combined debt to around $300,000.
Okeoma says life with debt was crippling and understandably so. That number is staggering. It is also important to note that prior to graduate school, neither of them had debt. They managed credit cards responsibly, paying them off each month. They didn’t have car loans, either.
Because she didn’t have debt previously, she didn’t realize the enormous stress and pressure she would feel. Though she felt student loans were presented to her as a solution for alleviating financial stress, Okeoma says she actually just deferred her stress with the loans.
Tackling the emotional and psychological side of debt is challenging. The fact that she lived in New York City, one of the highest cost of living areas in the country, didn’t help matters. On one hand, she knew that a HCOL area would net her a higher salary. But as a New Yorker, she had to pay hefty state and local taxes on top of her federal taxes. As a young lawyer, she says she didn’t realize at first what a difference there would be in terms of what she earned and what she actually took home.
An Unexpected Tipping Point
For Okeoma, the tipping point to pay down her debt came when someone else looked at her numbers. Specifically, she connected with an accountant after she and her husband ended up with a particularly complex tax situation due to traveling and working overseas. At one point, her accountant asked her to report the interest on her loan and mistook the number Okeoma shared for the amount of total debt–not just interest–she paid.
The interest on Okeoma’s loans dropped the jaw of a financial professional who looks at student loan interest as part of their profession. At that moment, Okeoma says she knew she had to get aggressive with her repayments. If she was paying more than $30,000 in interest in a single year, she knew it was time to do something about it.
What Methods She Used to Pay Down Debt
Okeoma and her husband had to sit down together before they could get to work. Together, they combed through their finances, calculating the actual cost of living in New York. Then, they determined how much extra money they could direct to student loans each month.
But Okeoma knew the real problem wasn’t just the loan amount; it was also the interest on the loans. That led her to consider refinancing. Initially, she refinanced from 8.75% to 6%. Then, as her debt-to-income ratio improved, she refinanced again. Ultimately, she was able to refinance her interest rate below 3%.
Lowering her interest rate really started to move the needle on the debt. Then, Okeoma and her husband made another decision. They moved from New York City to Dallas. It wasn’t an easy decision to uproot their lives, but ultimately, they knew the move aligned with their ultimate goals.
Okeoma and her husband prioritized their goals as financial freedom, travel, and family. Knowing that, they used those goals to determine how to allocate regular income to their debt and other savings goals. It also helped them know where to direct windfalls, such as tax refunds and bonuses.
When they originally started mapping out their debt freedom journey, they created a five-year timetable. However, they bought real estate and had two kids. As their family expanded, they adjusted their timeline slightly. In 6.5 years, Okeoma and her husband crushed $300,000 of student loan debt.
How Life Has Changed Without Six Figures of Debt
Now that Okeoma and her family are enjoying freedom from debt, life has changed dramatically. Based on their initial calculations, they realized that without that debt, they could open up around $4,000 a month in cash flow. They committed to directing that cash flow toward two of their most important priorities–family and travel. That meant that they spent a year saving and deciding where they wanted to go.
At first, they weren’t sure where they wanted to raise their kids. But based on Okeoma’s childhood and a pivotal trip she and her family took to celebrate their debt freedom, they knew that they wanted to explore the possibility of living internationally.
Okeoma felt strongly that she wanted her kids to enjoy some of the experiences that she had growing up: traveling the world, attending an international school, and being exposed to different cultures.
Then, they took a trip to Bali to celebrate their debt freedom and her mother’s 60th birthday. Okeoma was able to treat her mom and her mom’s entire extended family to a birthday celebration dinner, and that is when Okeoma realized that this party was about teaching her kids what financial freedom can afford you as much as it was about thanking her parents for their sacrifices.
After considering Nicaragua and Southeast Asia, Okeoma and her husband still weren’t sure where to relocate. To celebrate New Year’s, they vacationed to Costa Rica. There, they fell in love with the country and bought a house a few months later.
By August of last year, Okeoma was able to start a sabbatical. While on her sabbatical, she happened across an opportunity to join a company that does more humanitarian work. Now, she realizes that the financial freedom she and her husband achieved is going to allow her to stay in Costa Rica and support a cause she believes in.
Lessons Learned for The Whole Family
Throughout the process, Okeoma and her husband kept their kids involved in their plans and their decisions. They understood that their whole family was going to face big life changes and have to make sacrifices. So they made it a point to ask their kids for input and to help them understand the reasoning behind their decisions.
In one instance, their kids asked why Santa Claus brought them different presents than other kids. Okeoma and her husband explained that Santa understands that families all value different things. Their family was living lean, not just in terms of finances but also in terms of possessions to make the international move smoother.
There’s no doubt that Okeoma and her husband are going to continue teaching their kids important financial lessons. Okeoma isn’t stopping with her kids, either. In fact, she’s working on a Money Monsters book series.
The first Money Monsters book touches on how money circulates through banks (with a “monster” ATM, of course!). Later books in the series will have the protagonist Kai exploring the idea of smart borrowing and entrepreneurship. Each book is designed to spark conversations, so families can talk about money together. Kai and his family explore finances using apps and other fintech because Okeoma also made it a point to make sure that the books reflect modern-day money.
Practical Advice for Others Who Want to Eliminate Large Debts
Okeoma and her husband’s story is unique. Everyone’s financial journey is. But that doesn’t mean that there aren’t important lessons to be learned. In fact, her story is full of practical advice for anyone who wants to eliminate large amounts of debt.
One of the first things Okeoma suggests is to look at refinancing, especially as your debt-to-income ratio improves. While there isn’t usually a fee associated with refinancing student loans, it will impact your credit score. Still, she says that’s a relatively small price to pay.
In addition to refinancing, make it a point to track spending. See how much it actually costs to live and then allocate additional money toward your student loans. If it’s hard to get in the habit of paying yourself first, automate your savings.
You can also take a page from Okeoma and her husband by scheduling money meetings as a couple. Okeoma and her husband plan quarterly retreats that allow them to get away and have conversations about their goals and values. Having a clear goal to work toward makes the journey much easier.
Take it from Okeoma. If you set a clear goal and commit to taking the first step, you’ll move that mountain of debt faster than you think.
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