If you had told Guenevere Garrido, 32, of Los Angeles, CA, just a few years ago that she would find herself in New York City, popping champagne in celebration of being 100-percent debt free, she would have surely thought she was dreaming.
But last month, this was real life. After making her final payment towards her student loans in July of 2016, Garrido treated herself to a massage — and then entered a competition (which she won) for a trip to New York courtesy of SoFi, the company that also made it possible for her to refinance, and ultimately pay off, her debt.
But the journey to living her best life debt-free was anything but easy.
“When I was applying to schools, I was conscious of how expensive it was. I considered starting in community college, but a lot of people said to me, ‘You got into UCLA! Not a lot of people can say that, so just do what you have to do.’” So she accepted the offer of admission, and the hefty price tag that came with it. “I wasn’t taught anything about money,” she says. “I wasn’t taught how loans work; so I was in that mode where my parents want me to go to college, anything that they offered me when I applied for the FAFSA, I took. I just thought, whatever it takes to go to UCLA.”
Garrido, who initially took out approximately $40,000 in student loans and signed up for a work study program to pay for college, is far from alone. Roughly 70 percent of grads leave college with student debt, and over 44 million Americans hold a total of $1.4 trillion in student loan debt. According to data from the Federal Reserve’s 2016 Survey of Consumer Finances, people under the age of 35 with student debt owe an average of $32,900. And while the standard payment plan for federal student loans puts borrowers on a 10-year track to pay off their loans, research has shown that the average bachelor's degree holder takes 21 years to pay them off.
Research shows that the average bachelor's degree holder takes 21 years to pay off loans.
“Everyone said, ‘Don’t worry, you’re going to get a good job and be able to pay them off really fast. Well that wasn’t the case,” says Garrido. “I [majored] in child development so I became a pre-school teacher right after I graduated; I was only making, at most, $13 an hour.” That’s when Garrido, who also enjoyed working with computers and was good with numbers, decided to make a career change. “I applied for a corporate job and started working for quality assurance and got a raise; totally different from a teacher, but that was the way I knew to make more money.”
But making more money wasn’t the only issue — her mindset was much to blame for her mounting debt.
“I thought, I’m never going to pay these off, because that’s the norm. Everybody has student loans, so I didn’t think it was an urgency,” says Garrido. “I was finding any way to minimize the amount I needed to pay for them. I heard about loan forgiveness, so I applied for the income-based payment plan and thought after a certain amount of years they would just be forgiven.”
With interest, that $40k slowly grew. Add in credit card debt and personal loans on top of that and Garrido quickly found herself in a $68,000 hole.
But with interest, that $40k slowly crept upwards. Add credit card debt and personal loans on top of that and Garrido quickly found herself in a $68,000 hole. “That’s when then I started realizing the weight of it: 20 years is a long time, and I’d end up paying a lot more in interest.”
The Turning Point
Garrido knew she needed to get a hold of her finances, but it took an ‘ah-ha’ moment to really convince her to make paying off her debt a priority.
“2013 was a really, really, bad year for me. I got out of a relationship of five years; we were financially co-dependent on each other and I had to figure out how to be on my own financially and emotionally. On top of that, my dad was diagnosed with cancer. He was the main breadwinner of the family; we love our dad and we were also scared for the whole family, too. Thankfully he got better, but it made me think, what if in the future something were to happen again to my family and I don’t have an emergency fund? I can’t even help my dad financially right now because I’m still in this deep hole of debt. I knew I needed to get rid of the debt so that I could have savings to take care of my family.”
That’s when Garrido finally took a long hard look at her finances and began researching her options.
“I thought, why didn’t I research this before? They always say the teacher finally appears when you’re ready,” she says. “I started picking peoples brains; I found SoFi in March of 2015 because one of my student loans was at 10.5% interest rate. I wasn’t paying attention to that, but that was eating up most of my minimum payment. No wonder I wasn’t making any progress! So I refinanced and I got myself down to 6%."
Driving an UBER: A lesson in money management
Now that her loans were at a more manageable rate, Garrido decided that she needed another source of income to make a significant impact on her debt, and she signed on to be a ride-share driver with Side Car and UBER.
Working a side hustle, on top of her full-time job, wasn’t easy. “I would work from 8 a.m. to 4:30 p.m., alternate between taking a nap and going to the gym for 30 minutes, then get in my car and work until midnight. I set a stop time of midnight for my own sanity and safety and because I wanted to get enough sleep. I would occasionally work past midnight if I didn’t meet my goal for the night. I would do one or two more rides, because after midnight is when surge pricing happens and I would get more money.”
Her goal for each weeknight was $50, and on the weekends at least $100; on busy nights, she would come home with a couple hundred extra dollars in her pocket.
I knew if something big was to happen, I was finally preparing for it versus just waiting and reacting.
"Once I got momentum I started really budgeting my money," says Garrido. "I knew if something big was to happen, I was finally preparing for it versus just waiting and reacting.”
At first, Garrido was embarrassed of having to pick up a side hustle to pay her bills, but one particular set of passengers changed her mindset. “I was in a shady area and I was a little nervous who I was going to pick up and it turned out they were college kids from UCLA. The next thing you know we’re cheering and doing our school chant in the car. They asked me if this was what I did for a living. I told them I just do it on the side to pay off my student loans and they all agreed they were going to have to have a side job too, they totally got why I was doing it,” she recalls. “That made me feel better. These kids understood what I was going through. You have shame going through something like this, you don’t want to tell anybody you have to take on a side job. But you have to humble yourself and know that you’re doing what you have to do.”
Managing the second income — and handling it responsibly — was a huge learning opportunity. “I worked for almost a year. I was preparing for taxes, so I put 25 percent away. Thankfully my corporate job was taking a lot of taxes out so by tax time I was able to take that couple thousand dollars I’d saved on the side and put it towards my student loans,” she says. “There were times when I made a payment of $3000 at once. It was always about preparation. It definitely gave me the discipline and the focus and the hustle to do it, because I was more focused on my money and making that extra income. It made me more conscious. That first year gave me the muscle to really be disciplined to pay off the rest of my loans.”
Using the mental shift to make a lifestyle change
After a year, Garrido stopped driving and applied her newfound discipline to meticulously budgeting.
“It was total focus and sacrifice. I knew I didn’t have that extra side hustle so I was looking at other little things: surveys, looking for discounts and promo codes when shopping, all the little things that can add up. I also got a raise at work, which bumped up my income,” she says. “People need to remember that as you get new jobs or yearly increases, if you’re in a rut like I was, you shouldn’t be using that to up your lifestyle, you should put the extra towards your debt.”
Her other sacrifices? She stopped taking major vacations — opting for affordable trips like hiking. (“My goal was to never have my vacations follow me,” she says.) At one point, Garrido had four roommates to keep rent on her San Diego apartment low. She stopped shopping, and instead borrowed clothes from friends for big events, and took a hard look at her lifestyle: “I gave up my Disneyland pass, stopped eating out all the time like I used to do, stuff that was normal to my friends and I because it was our lifestyle. It was about being conscious of: If I don’t go out tonight, I can do a little bit more later.”
With $68,000 I could have had a down payment on a house, but at the same time, if I hadn’t done this I wouldn’t have the consciousness to know that I could do it.
All of the sacrifices allowed her to dump any extra money into her loan payments. “I was doing an average of $1200 a month, my minimum was about $500, so I was doubling it. I think the most I ever put in was $3500 in a month. Sometimes I’m still mind blown: I put that much money into my loans?! But I was budgeting per paycheck and after all of my expenses, I put it all towards the loans. It added up. Once you pay a little bit, the interest goes down, so it was really encouraging to see the bigger amount start going towards the loan itself. There were times I thought, ‘Dang! With $68,000 I could have had a down payment on a house,' but at the same time, if I hadn’t done this I wouldn’t have the consciousness to know that I could do it. Before, I would’ve thought $68,000? I can never pay that off. But now I’m like ‘I just paid off $68,000! I can definitely save up that much. I have a lot more hopes and dreams knowing that I have that power.”
Now that Garrido has dug herself out from under debt, she has some new financial goals in place. On the top of the list is building up that emergency fund. She also plans to have a debt-free wedding and travel before having kids. Finally, she plans to start saving for children now. “We want to afford our future children and the opportunities thy want and I don’t want them to have student loans,” says Garrido. “We’re going to start saving for the kids now, so that by the time they’re 18 they will have some funds to go to school. I learned my lesson, and I don’t want my kids to go through the same thing.”
Her advice to others? “There is a way; you just have to pay attention. Be conscious of your money and what you’re spending. People will say, ‘Oh, it’s only a Starbucks coffee.’ But every day you’re buying that coffee and that adds up. Prepare, be conscious of what’s coming up and plan accordingly and everything will fall into place.”
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