Debt has a way of turning your finances upside down. If you don’t quickly get a handle on it, you could end up in a financial mess that takes years to untangle. However, some wrestle with their debt demons and emerge much stronger, with sharpened financial skills and newfound confidence.
One debt that is putting a strain on many borrowers is educational loans. With total outstanding student loan debt in the United States reaching roughly $1.6 trillion, many borrowers are struggling to keep their heads above water. One person who wrestled with student loan debt and won is entrepreneur Andrew Josuweit, founder and CEO of Student Loan Hero. Josuweit spoke with The Cheat Sheet about how he dug his way out of debt and turned a bad situation into a business opportunity.
The Cheat Sheet: How much student loan debt did you have?
Andrew Josuweit: I graduated with $104,000 in student debt, consisting of 16 different loans from four servicers. I currently have about $80,000 left and my goal is to pay it off by the end of this year.
CS: When did you realize you were in trouble?
AJ: Like many college graduates, I wasn’t fully prepared for the reality of having to make student loan payments. After I graduated, I took a job at a non-profit and later started my own business, neither of which enabled me to make the payments. Eventually, my parents let me know that my loans had gone into default. Because they were cosigners, running away from my debt affected not only my financial future, but theirs as well.
CS: What steps did you take to pay the debt down?
AJ: I completed the Department of Education’s student loan rehabilitation program, which returned my defaulted student loans to in-repayment status and didn’t show up on my credit report. I cut unnecessary expenses — including cable, a car, and a gym membership — and eventually moved from New York City to Texas, which has a lower cost of living. The most important thing I did was focus on increasing my income over this time period by working more hours, freelancing, and even listing my apartment on Airbnb.
CS: What would you say to students who are contemplating taking out loans for school?
AJ: I would advise students to analyze the ROI of the school you want to attend, the major, and the degree type (master’s, bachelor’s, associate’s, etc.), and weigh that against the cost of the school. Keep in mind that no one is guaranteed a high-paying job when they get out of college, which I learned the hard way. If you do decide to take out loans, keep in mind that you don’t have to take the first loan you’re offered. You can shop around for a good rate — especially if you’re receiving an advanced degree. Lastly … there are programs in place for students who are unable to pay their federal loans. You just have to be strategic about repaying your loans and realistic about your job prospects post-graduation.
CS: What advice do you have for graduates who are trying to dig their way out of student loan debt?
AJ: Delinquency occurs just one day after missing a payment … If you’re unable to make your full student loan payment, don’t delay — contact your loan servicer right away and look into deferment or forbearance to put a pause on your payments. There are a number of income-based repayment programs out there that provide relief to borrowers, but the application process can take several months. Going into deferment in the meantime will minimize the consequences of missing a payment.