From Student Loans to Millennial Homeowner: How I Overcame My Debt To Buy Property
Written by
Laura Bogart
Edited by
Levi Leidy
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Taking on student loans can feel like forfeiting large swathes of your financial future. With factors like accrued interest coming into play, combined with overall increases in the cost of living, certain milestones — like homeownership — seem like they could just slip out of your fingers forever.
Though you may feel like you’re trapped between honoring your debt while renting for the rest of your life, you can still make your dream of homeownership a reality with some planning, savvy, and a little bit of help.
GOBankingRates talked with two millennials, Jessica and Caryn, who were able to pay back their student loans and take keys in hand to open the door of their futures as homeowners.
Careful Budgeting Is Essential
As a first-generation college graduate, Jessica was very aware that she’d need to prioritize paying back her student loans once she had her diploma.
To make her payments while still keeping ahead on her other bills — and, crucially, protecting her credit score — she enrolled in an income-based repayment plan. As her income increased over time, she chose to pay the full monthly amount, even if it meant forgoing certain pleasures and luxuries.
When Jessica was searching for a new car, she ultimately chose a more affordable option with “no bells and whistles.” She also became “a coupon and clearance queen” to help her save more and keep up with her student loan payments.
After she paid off her loans, she set her eyes on homeownership, finding that renting became too expensive for a property she would never own.
Maneuvering Through Hardships
When Caryn was early in her career, she had to take forbearances on her student loans to pay for medications and bills on behalf of her mother, who was ill with cancer. During that time, interest continued to accrue — and Caryn would ultimately go on to pay a total of $108,000 against an original loan of $42,000.
As her balance ballooned, Caryn took on longer payment terms to afford her monthly payments — and at an 8% interest rate. She would make monthly payments between 2000-2018, barring the times she had to go into forbearance. While she worked for a nonprofit, she was unfortunately unable to receive public service forgiveness.
Ultimately, Caryn was able to pay off the last $48,000 of her student loan debt through an inheritance left by her grandmother. That money also helped her with a down payment on a new home.
“Homeownership is one of the only ways average people are able to amass assets and have a positive balance sheet,” she said. “I was also tired of paying D.C. rents and having nothing to show for it.”
Moving Forward With a New Financial Future
After paying off their student loans, both Jessica and Caryn applied their new-found savings to other aspects of their lives, including their homes.
Caryn said that once her monthly student loan payment was gone, she could accelerate her retirement contributions and general savings. However, if she hadn’t been able to use some of her inheritance to help buy her home, she would have used one of the homebuyer programs in Washington, DC that provides assistance with down payments and other forms of forgiveness if you’ve lived in your home for a set period of time.
Jessica said that the thrifty habits she adopted to pay off her loan have continued to serve her well, and she also takes on occasional freelance work outside of her full-time job to put more into her savings.
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