Months using ReadyForZero: 19
Accounts paid off: 1 of 6
“I think it’s such a cool mission. I think it’s such a cool thing because it’s such a dark cloud for so many people. And you guys have set up such a great platform for people to really have control. You’re giving the control back to the people. It doesn’t have to feel like you against corporate America. It’s you and ReadyForZero – and you can do it.”
We’re always excited to feature real stories about real people who are making their journey to get out of debt. Today we’re profiling Michael, a ReadyForZero user who is currently tackling $100,000 of student loan debt.
Michael’s story is one of the most impressive we’ve seen yet. All across the country, young college graduates are facing the reality of five-figure (or even six-figure) student loan balances. At a time when unemployment and underemployment remain big problems for young people, Michael’s story can give us hope that it is possible to bounce back from severe financial challenges and defeat our debt.
The Leap Into Debt
It all started innocently enough. Michael was in his senior year of high school and looking at different colleges. His parents, like many other parents, wanted him to stay close to home. “I was really urged to go local – to stay by the family,” he told us. As an added incentive, his parents offered to pay a portion of his tuition at any local college or university. That sounded fine to him, especially since there was a nearby school he had already been accepted to and very much wanted to attend. Without any second-guessing, he signed the paperwork and was officially a college student.
For awhile, everything was going as planned.
As often happens, however, the well-intentioned plans were soon overcome by the weight of unexpected events. The family’s finances, which had been going along nicely, were suddenly less stable, due to some emergencies that came up. Before he knew it, Michael was getting ready to start his next semester of college and realized the tuition had not been paid. “I went to my parents,” he said, “and asked them ‘What can we do about this balance? I can’t register for classes.’” His parents said they’d help him call financial aid to get assistance with the tuition for that semester.
After a brief meeting with the financial aid officers, Michael agreed to take on student loans to make up the difference in his tuition that was owed. He said, “We went in there and told them [the situation], and very conveniently I got some loans – private loans.” With the immediate financial problem taken care of, Michael went ahead and continued with school, focusing on his studies and trying to get the most out of his college experience.
When he looks back on it, he says it’s surprising how fast the whole process of signing up for student loans felt. He said, “Now, in retrospect, that was a very abrupt decision. It should have been a little more well thought out. But I was 18 years old and I wanted to keep going to that school. I didn’t even really explore other options.”
The compelling thing about this part of Michael’s story is not that it is so uncommon, but in fact the opposite. This same experience happened to millions of people in the last 10 to 20 years, and in each case the person looked back later in wonder at how quickly they had agreed to go into thousands of dollars of debt.
Coming to Grips with the Problem
Upon graduating from college, Michael had $100,000 in student loan debt. And he felt the same sinking feeling that all of the above-mentioned individuals also felt. There was the regret. There was the frustration. And there was the questioning – of himself and others: Why had he agreed to this? Why didn’t the experts and adults warn him about what it really meant to graduate from college with $100,000 of debt? And more importantly, how was he ever going to pay this off?
At first, Michael’s response consisted of valiant attempts to start paying off the loans combined with some good old fashioned denial. “I deferred a couple of them at first, and picked away at some of them,” he said. While he made payments on the bills that arrived at his house, he also didn’t take any initiative to find out what was wrong when some of the bills stopped arriving (he later found out they had been sent to the wrong address). Whether consciously or subconsciously, he said, “I ignored some of the debt.”
It wasn’t until 2010 that the severity of his problem smacked him right in the face. He said, “At about the end of 2010 I did a credit report and I realized that I was probably 30 days away from just completely defaulting on two loans.” It was a painful moment, sitting there, knowing that not only had he dropped the ball but that he would have to work doubly hard now to get out from under this crippling debt.
He immediately decided to do the right thing. He said, “I made a phone call to Great Lakes Bank and I said ‘I realize that I’ve neglected these loans. It’s a terrible situation. I want to make this right.’ And I just came to terms with all my debt.”
In a Hollywood movie, this would be the turning point. And in a big way, it was. He describes it as “sort of like an AA-type moment, where you just acknowledge that you’re sort of weak and powerless. I acknowledged that I had a lot of debt and I just had to work on it.” Unlike in a Hollywood movie, however, he knew that the hard work that lay ahead of him could not be glossed over with a catchy tune and a photo montage. No, quite the opposite – it was likely to be painful and anything but quick.
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Climbing Out of the Hole
After some phone calls to his lender, he found out that they offered a rehabilitation program that would allow him to avoid default – if, and only if, he met certain requirements. “I had to make about $360 payments for nine months in a row, and then it would be rehabilitated… And you couldn’t be late on one payment, you had to make them all on time, in full, no questions asked. So it was pretty stringent.”
Michael worked diligently to make those payments and he ensured that every month the payments were getting where they needed to go – on the correct day, with the correct amount. He made it to the end of the ninth month, and all his loans were successfully rehabilitated. Then he started looking around to figure out how he could keep up his progress for not just nine months but for the next nine years – give or take a few!
In particular, he knew that he’d have to be organized and that he would need to stay motivated, so he wanted to find tools that would help him stay true to both of those goals in the long run. Not long after that, he found ReadyForZero, which he began using to track his progress and to calculate changes to his repayment plan when his finances changed.
Michael’s debt repayment graph in ReadyForZero
After rehabilitating his loans, his determination was steady. He was committed to paying off that debt. “I started getting really serious about paying off my loans,” he said.
He also began to see the negative effect that interest on his loans was having. “I saw how each payment was partly interest, and you could save $20 in interest by paying more of the principal. I just thought, ‘That’s my money, so I can either sacrifice it now or pay it later.’ And I just started paying.”
To speed up his debt progress, Michael also realized he wanted to increase his income. After looking at his debt situation, he said, “I just thought ‘You know what, I don’t have a debt problem. If I made more money, this wouldn’t really be a debt problem. I feel like I have an income problem.’ So I sort of made this shift in terms of how I thought about everything.”
Michael’s student loan progress bars in ReadyForZero
This new focus on increasing his income led him to look for new job opportunities. “I’m a personal trainer by trade,” he said, “but I picked up two other jobs. I started bartending right away, and then I also got hooked up with a company that sold roofs. So I was working three jobs, nonstop.” Even when his personal training business slowed down, he said, “I got more aggressive in seeking out clients and everything [else] I did.”
As he brought in more and more income, he also got fanatical about automating his finances so that he could rest easy knowing he would never miss a payment or forget about an account.
Debt Freedom on the Horizon
Over time, Michael got better and better at his day job – personal training. The extra effort he was putting in (to get new clients and improve his business) has paid off and he is now able to earn his desired income with personal training alone. He said, “Thank God, I’m very busy and very in demand right now. So I actually don’t have to work all those jobs. I still work 12 hours a day, Monday through Friday. And then I work on Saturdays and Sundays three or four hours a day, just to get some clients in. But I do work seven days a week. I work extremely hard because I don’t want to be in debt.”
So far, Michael has paid off more than $20,000 and has about $75,000 left to go. It’s still a big number, but the important thing is that now he feels like he’s in control. He’s not worried anymore. The feeling of being in control has completely changed how he approaches his finances. “It’s a very freeing feeling,” he said.
He’s seen his credit score go from around 600 to high 700’s. And that in itself has been a tremendous reward.
Now, with all his accounts and payments automated, he’s putting money into a savings account every month and preparing for the day when he’ll have plenty of money to manage. He said, “I’m glad because one day I hope to have a lot of money to manage. And I think I’ll do it responsibly.”
With the determination that he’s shown so far, who could doubt him?