How to ditch your credit card debt and repay your student loan: get mad
- After his student loan company tripled his monthly payment, Steven Donovan’s life was turned upside down
- Then he got angry. Within five years he was debt free
After graduating from college, money coach Steven Donovan owed around US$98,000 in student loans and credit cards. He wasn’t focused on repaying the debt, and his credit-card balances slowly ticked up. A few years later, he financed a Mercedes-Benz, adding US$18,000 to his financial load.
On a whim, Donovan moved from Chicago to Miami and soon found himself with little income to cover his monthly repayments. It was a wake-up call.
“About a year into living there, I ended up getting a letter from my private student loan company,” he said. “Since finishing college I had gone into forbearance and paid the minimums … [but now] my payment was going to triple. It upended my budget and something had to change. I tucked my tail between my legs, moved back to Chicago to save and worked where I did when I was in college. It was a very humbling experience.”
When it comes to paying off debt, motivation is crucial
Donovan moved in with family and sold that Mercedes, shaving off a big chunk of his debt and saving an extra US$500 a month or so, he said. With a new job as an assistant bank manager and a side hustle selling clothing on eBay, he finally implemented a plan to pay off the remaining debt, which he estimates was between US$80,000 and US$90,000.
Enter: the debt tornado
Instead of using one of the two most popular debt pay-off strategies – the debt snowball, in which you pay off the smallest debts first, or the debt avalanche, in which you focus on the debt with the highest interest rates – Donovan decided to tackle the debt he “disliked the most.”
“I started with the debt snowball method but shortly into paying off debt I realised how much I disliked my private student loans and also the bank that tripled my monthly payment and focused on them,” he told said. “ I took all my anger and rage towards those loans and paid them off before the smaller student loan I had.”
And the strategy name? “Being from the Midwest, it just made sense to use a tornado.”
