Welcome to Debt Free Journey. This interview series has been developed in collaboration with my friend Steve Cummings from The Frugal Expat.
We are excited to bring you a series in which we explore real-life stories on people working towards or who have already become debt-free.
Interviews will be conducted on an ongoing basis, with new interviews being published bi-weekly on Wednesdays. You can find past and future interviews in the series Main Page.
As our first interview, we have no other than Steve himself. Steve, an American expat, lives in Taiwan, and in this interview, he will show us how he was able to pay off $25,000 student loan debt by following some basic financial principles and taking advantage of a lower cost of living area.
And without further ado, let’s get to the interview. Enjoy!
- Name: Steve Cummings
- Age: 34
- Gender: Male
- Location: Taipei, Taiwan
- Blog: thefrugalexpat.com
- Twitter: thefrugalexpat1
- Debt paid amount: $25,000
- Debt source: Student Loans
- Time to eliminate debt: 9 years
Tell us a little bit about yourself
Hi, my name is Steve. I grew up in Florida, and in the last 4 years, I have been living in Taipei, Taiwan with my wife Sarah. I write a personal finance blog called The Frugal Expat, where I talk about saving money, investing more, and trying to reach financial independence.
My career is a bit different than most. I have done a ton of things from running an outdoors camp in North Carolina as a Program Director to now Teaching English at school in Taiwan. At this time my income is at about $27,000 a year.
If people want to connect with you, where can they find you?
Introduce us to your debt. Where did it come from? How much was it? How old were you when you first acquired the debt?
Going to school out of state at a small liberal arts school brought on some good things, but also brought with it some student loans. I was in school in South Carolina so my education was paid for through scholarships, Federal Aid, and student loans. I acquired about $25,000 worth of student loan debt, which my father took some of that on as well. At age 18, I was getting some student loans. I walked away with about $25,000 in student loan debt.
In that period of paying off the debt, I decided to go back to school to become a nurse. At age 26, I was back in school, but this time I was a resident of the state of South Carolina and so I got in-state tuition. I walked away with another $2,500 in student loan debt.
Was the total debt always the same amount, or did it grow over time? What was the interest rate?
I would say the debt went down over the years, but I kept acquiring more and more debt. I bought a car because my other one was totaled in an accident, and the car dealership sold me things I just didn’t need. So there was extra debt added onto the student loans I had.
I was able to pay that one off pretty fast. The student loans all had different interest rates. There was the Discover loan that had a 4% interest rate. There were also the federal loans which two of which had around 6% interest rate, and two of them had an interest rate around 3%. One loan at the interest rate of 5.5%
The loan for nursing school had an interest rate around 2%, which was awesome, but still, I had so many different loans with different interest rates.
Honestly, I am not sure why there were so many different interest rates. The two high-interest rates loans had their rates drop in 2016 down to 4.5%.
Why did you choose to get into debt? Were you fully aware of everything you were getting yourself into?
Honestly, I didn’t really know I was choosing to get into debt. It was about getting a good education, and I used any money I had to get a good education. That is the hard part. Looking back at everything, I knew I could have gone to in-state schools for $3000-$5000 a semester plus have many other scholarships that could have paid for that education
Paying off the debt
Did you already eliminate the debt, or are you still working on it?
I knocked out all of my debt in November of 2018. My wife wanted me to be debt-free before we got married. Our wedding would be in February of 2019, and so I needed to knock out that debt sooner rather than later. It would be a good time to knock it out and start our life on the right foot.
If already eliminated, how long did it take you? Were you ahead of schedule set in the loan terms?
It took me about 9 years. I think I had about 3 years left to knock it out. My loans were deferred a couple of times due to being back in school.
If ahead of schedule, what made you want to eliminate it sooner?
Getting married. My wife and I wanted to start on the right foot in our marriage. We wanted to be debt-free together.
Did you have a strategy to pay off the debt? If so, what was it?
My strategy was the Debt Avalanche method. I would pay off the highest interest first, and work on knocking the rest off as the loans started to disappear. Now, If I had smaller loans and I would have a windfall, I would knock those out right away. It made it easier to consolidate with fewer loans to worry about.
There was hail damage done to my car, and the insurance company gave me about $4,000. At that point, I saved the money for a few months, and then knocked off one loan worth around $4,000.
In 2018, I sold my car for about $8,500. I was living in Taiwan at the time so I no longer needed it. With that money, I was able to knock off the rest of my loans.
Did you take on any side hustles, overtime, etc. to eliminate the debt sooner?
In 2016, I was working like 3-4 different side hustles. Each one was helping me to build an emergency fund, and help try to knock off these loans.
One big thing that really helped out was moving to a Low Cost of Living area. I moved to Taiwan, and I was then able to save a good $10,000 per year living frugally while still working. This really helped accelerate my debt payments.
What have your learned from all this?
I have learned a lot about debt management. One of the key things is to know why you are getting into debt, what is the reason, and how to get out of it. When I was 18, I had no idea I was getting into massive student loan debt. It was not really apparent to me until I graduated and knew I would have to start paying it down.
I also learned how to pay it off faster. The goal should be to knock it off as soon as you can. Debt can be a crippling thing and really stall out your financial success. You need to make goals and create a strategy to help get rid of them.
Knowing what you know now, would you have done anything differently?
I would have done so many things differently. First of all, I would have made it my goal to knock it off as soon as I could. Secondly, I would have lived more frugally and pushed any money towards that debt. Lastly, I would avoid getting into that type of debt again.
Was the debt worth it? Did you get a return on your investment (ROI)?
For the most part, the first student loans were worth it. My nursing school was not so much since I never finished. The car loan was something I figured I would not do again as well. So many things to consider.
The student loans I got from my first University really were worth it. I walked away more educated and with a degree, which I need to teach in Taiwan. It helped me to establish great connections, friendships and opened me up to being a better person. I could have done all of this at an instate school as well. That is a hard question to answer.
What would you say to someone struggling to pay the same debt as you?
I would tell them to weigh their options. If you have a choice over different schools that offer similar educations look at the one that can be done cheaper or offers more financial incentives. I feel if I had gone to an instate university my education would have been close to free.
Are you still paying any other debts, or did paying this one off made you become debt-free?
I am debt free for over 2 years. It is a great feeling.
What are your plans for the money that was going towards the debt all this time?
All of that money is going towards investments. My wife and I have been investing the surplus of our money in order to hit financial freedom.
Where do you go from here? What are your personal and financial plans for the future?
My future is to try to grow my net worth little by little. I do not have a home so I am growing mostly a liquid net worth of investments in index funds. It is great for mobility. I am not tied to any place because of debt.
Any final words?
One thing is that we need to learn to make goals. Debt is something that happens to a lot of us. When you get in that type of situation you need to make a goal to get out. Then you can strategize and have a plan. We cannot just go and wait for it to disappear. There needs to be an effort to track spending and create other avenues of income to help knock out your debt.
This article originally appeared on The Financial Alien and has been republished with permission.
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Cristian Ferrier is the founder and author of Financial Alien, a site that promotes financial literacy in people. He is a husband, father, and IT professional. A 34-year old immigrant who went from having $80k in student loan debt, to building a Net Worth of $600k+ in less than 5 years, and is now on the path to retire at the age of 39. Learn more about him on his About Me page. He loves learning, talking, and teaching about personal finance, and wants to inspire others to create their own path and follow their dreams. Contact him on his Contact Me page.