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Lessons learned from a millennial who paid off $120,000 of student debt in 26 months
How this first-generation Mexican American college grad paid off her loans in just over two years.
CommonBond is no longer offering new refinanced student loans but check out Select's Best Student Loan Refinance companies for other great ways to save.
In an effort to help younger generations learn how to be debt-free and combat money taboo among the Latinx community, Sofia Bastida, a 24-year-old first-generation Mexican American, created @savingwithsofie. Through this platform, she shares her experience paying off $120,000 in student loans within the span of 26 months on an income below six figures.
Like many college students, Bastida wasn't aware of many of the basics of finance until she got into student loan debt and felt obligated to pay it off on her own. Without a college fund, Bastida took out federal student loans to attend Drexel University and a Parent PLUS loan to cover the large remaining balance of tuition, which ultimately became a big bulk of her debt load. Unaware of the impact that interest rates have on loans, it wasn't until her first payment was due that she realized how much her debt had increased in comparison to what she had initially taken out.
What started off as a Parent PLUS loan of $75,000 increased to about $90,000 — just while Bastida was in school.
Through her own research, Bastida learned about refinancing as a method to lower the interest rate of her Parent PLUS Loan. She also realized that paying off her loan as quickly as possible was the best way to go about paying less overall, rather than delaying the process, which allows for more interest to accrue. This became her motivation to develop a system to act fast.
The experience itself has taught her how to manage her expenses, and she's now motivated to help future generations of college students take control of their debt. Here are a few lessons she learned along the way.
Research and plan out your expenses
Refinancing student loans doesn't always make sense, but it did for Bastida. She was able to lower her interest rate from 7.8% to 4.98% with a private lender and therefore save thousands of dollars in interest.
Each month, Bastida made at least two loan payments immediately after she received each paycheck. "That way I wouldn't be tempted to spend the money on something I didn't need," she says.
Prior to refinancing, Bastida saved money in a savings account throughout her years in college and though she gave herself permission to tap into this pot of money while paying off her debt, she made sure to keep three months' worth savings in the account.
With a plan (and a healthy dose of urgency) to motivate her, Bastida went about getting her monthly expenses together. She paid less than $1,000 in rent living in Philadephia while sharing an apartment with her roommates. Then, when she landed a job as an early talent recruiter with TD Bank in New York, she managed to keep her rent cost the same by continuing to have roommates.
As for the other expenses, Bastida is a bargain shopper. She worked to keep her fixed expenses low by finding deals on clothes and goods and searching weekly ads. She walks and takes the subway whenever possible to avoid ride-sharing costs and meal preps instead of spending money for lunch. For her social life, Bastida opts for free outdoor meet-ups with friends, making sure they are on board with helping her stick to a budget.
- Best overall: SoFi
- Best for having a co-signer: CommonBond
- Best for fair credit score: Earnest
- Best for parent loan refinancing: Education Loan Finance
- Best for medical school loan refinancing: Laurel Road
Take accountability of yourself and your debt
Bastida knew she wanted to attend a private university out of state for her own independence. Although unaware of how much the debt would build up throughout the years, she understood it was a challenge she had to face.
"While it's very overwhelming having such a high debt amount, I learned that I am the one who chose to take out those loans and therefore, I must take accountability for those choices I made when I was younger," Bastida says.
Develop a support system
But accountability doesn't mean doing it all alone. Debt can take a major toll on your mental health, and it's important to reach out and find support. Some 73% of Americans recently ranked their finances as the number-one cause of stress in their lives. For Bastida, one of the most important aspects of paying off her debt was being her own cheerleader and having her mother and close friends encouraging her throughout the process.
"Being in debt did take a toll on me when I first graduated from college. I felt stuck and hated hearing negative things from people. I quickly learned that tackling six-figures wasn't going to happen overnight and it sure wasn't going to be easy if I kept allowing myself to hear the negative things others would say."
Don't stop there
Bastida found that there's more to learning about finances than what's taught to you in school and that there are plenty of others who are sharing their knowledge in the space. As ambassador for Snowball Wealth, a platform designed to help those with student debt develop a system to pay off their loans based on their financial background, she continues to share her journey with others.
Just recently, Bastida landed a new job as associate campus recruiter for Black Rock. She wrote on her Instagram account that this came as a result of sharing her successes on LinkedIn — she also managed to negotiate a 30% increase to her base salary. Her goal continues to be teaching others about finances and how they can develop generational wealth.
"Now that I'm done with the loans, I'm keeping my strategy the same in terms of me living below my means and essentially just investing the rest, because I do hope to reach F.I.R.E," she said. "I don't know if I want to retire early because I do enjoy what I do, but I think building wealth is what I like, especially because in my family that doesn't exist."