One Harvard student made an “emotional decision” to eliminate his student loan debt no matter what he had to forfeit.
If there was a sport called Extreme Loan Repayment, Harvard student Joe Mihalic would have its gold medal. In the past year, the guy managed to pay down $90,000 in student debt saving himself about $40,000 in interest. And many of Mihalic’s frugal savings habits, which have drawn him thousands of emails thanking him for the inspiration, are worth underscoring to your members.
Set Clear Goals
Mihalic, driven by a personal goal he set last August to pay off the debt within a year, cut every spending corner he could. His blog — nomoreharvarddebt.com — includes graphs that showed his progress. He set a target end date of August 2012 for the full $90,000, a clear goal that kept him focused.
Mihalic aligned the graphs so that he created smaller monthly goals, ensuring he was on track for the larger mission. His loan payoff plan was very similar to a strong savings plan.
Cut Even Small Spending
In the seven months, Michalic didn’t buy one article of clothing, gadget, or gizmo. He used duct tape to fix his car and never went on a dinner date. He passed on weddings and traveling for Christmas. He even took a flask to bars so he wouldn’t have to buy drinks. He admitted he did feel in a funk sometimes with the downgraded lifestyle, but the benefits of eschewing materialism helped him find “that life can still be beautiful without spending a lot of money.”
Although he did earn a healthy salary, the guy made even more money by selling his bike and car and renting out rooms in his house. He tried pedi-cabbing and took on landscaping gigs for even more cash.
Engage Others In Your Mission
It was only after his mission was accomplished that his blog drew national media attention, but Mihalic spent the entire time blogging to anyone who would listen and said the blog itself was effective in helping him achieve his goal. His site drew an average 300 hits a day before the media spotlight pushed it to about 10,000 hits per day.
MIhalic said he started the blog to his friends and family, who happened to be the exact people who could encourage him to continue with the effort. You can advise your members to be open about their efforts to save or pare down a loan, so that the people in their lives can help them along.
Pay Attention To Interest
It wasn’t until about two years of trying to pay down his $101,000 original student loan that he realized the true cost of interest. He’d been making monthly $1,057 payments and expected to see a loan of about $80,000. It was actually closer to $90,000. “I failed to take interest into account,” he says.
Ensure your members know how interest will add up over time. Offer calculators on your website that help them tally up interest on repaying a loan over various time periods. Ensure they understand the full repayment amounts before you grant them a loan and help them realize how paying off a credit card at the minimum amount can cost them. Because financially healthy members are valuable members.