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Many descriptions of crippling debt include regret, even shame, about the habits that caused the sum to accumulate. Even when college costs are a key factor, some debtors rue that they spent heavily on an education that didn’t deliver the expected returns once they hit the job market.
Not so Katrina McGhee. The life coach wound up $60,000 in debt after earning an MBA, and expresses no doubt that the investment was money well-spent.
Her strategy to pay down the debt included some familiar themes from other entries in this series: watching every dollar you spend, and then committing every dollar saved to reducing liabilities. But she was also able to take advantage of something that relatively few people with crippling student debt enjoy, namely equity in a home. She leveraged that asset to roll over a hefty chunk of her debt into a home equity line of credit, which cut the interest rate on the sum in half.
This interview has been edited for length and clarity.
What was your total debt, and how did you acquire it?
I left business school owing $60,000. I had a full-tuition fellowship, so this amount was just to cover cost of living expenses, travel, materials and other needs.
Was the debt worth acquiring?
Yes, absolutely. While I realized I didn’t love working in the corporate world, my MBA was still an invaluable experience. It opened me up to so many possibilities that never existed in my world before business school. I also met many interesting and inspiring classmates and traveled abroad for the first time.
My only regret is that I sometimes let the “keeping up with the Joneses” urge get to me – I spent money like someone making a great salary and not a student acquiring debt during business school.
What motivated you to pay it off?
Eventually, the debt started to feel like a burden. I still had $42,000 left to go and didn’t want to spend many more years limited to just those opportunities that allowed me to pay on my student loans. It had started to feel like money would always make my important decisions for me. I felt that paying off my loans as fast as I could would give me the freedom to choose my own path and follow my true passions.
What was your plan to reduce your debt?
Saving $40,000 in just 18 months helped me develop empowering money habits and showed me how to live a fulfilling life while saving a ton of money. I used those habits to pay off the last $42,000 in student loans by tracking every dollar I spent so I knew where my money was going and being thoughtful and intentional about the things I spent money on. One of my big wins was rolling $32,000 into my home equity line of credit (HELOC) for a much lower interest rate (3% vs. 6%). It also made my interest payments tax deductible. Lastly, I put each and every lump sum I received towards repaying my loans (job bonuses, tax refunds, etc.)
How did you stay on track?
I created a spreadsheet to capture all of my expenses and stay on track. As far as motivation, being clear about my goal helped me stay motivated.
How long did it take you to pay off the debt?
It took 7 years to pay off my $60,000 worth of debt from business school. This includes my 20-month career break when I put my loans into forbearance and made no payments. Once I came back to the workforce, I worked hard to pay off the last $42,000 in just 22 months.
What advice would you give to others struggling with debt?
Paying off your debt isn’t impossible, even though it often feels that way. What it requires is making that repayment your top priority, especially if you want to pay it down early. We often spend money on things we aren’t even aware of and wonder at the end of the day “where did it all go?”. If you feel that way and can’t answer that question, tracking what exactly you spend and where will help you be more thoughtful about your money and where it goes. And this will lead to you achieve big financial goals that previously felt impossible.
How do you remain debt-free today?
My financial habits have definitely changed for the better. I continue to track my spending and find I always feel empowered and in control when making big purchases. I can invest in myself and my side business as a life coach without much stress or struggle because I always know what I can truly afford.
This content originally appeared on ValuePenguin.