When it comes to repaying student loan debt, have you ever thought about selling bugs online?
That’s what finally helped Jeff Neal, 33, repay the $25,000 in debt he owed for his English Literature degree from Temple University. While Neal loved the literature program, he struggled to find a well-paying job that would allow him to repay his student debt quickly after graduation. For the first eight years after he graduated, he made just the minimum payments on his loans and even had to file for forbearance a few times.
Fast-forward to the moment Neal learned about crickets while trying to find a side hustle that would help him pay off his debt. While researching potential business ideas, he discovered a burgeoning market of pet owners looking to buy crickets online and decided to start a side business selling the protein-packed delicacies via the web at The Critter Depot.
“Having an English degree doesn't land you a six-figure job right out of college, which made it challenging to pay off debt and save,” he said. “Which is why I had to pursue side hustles. Luckily, I like my side hustles, and I like selling crickets.”
Here is what he learned from his experience.
Don’t Give Up on Your Dream to Buy a Home
One thing Neal wanted desperately after he graduated was to buy a home, but his student loans interfered with his dream. Not only did they keep him from saving enough for a down payment, but the high monthly payments made it harder for him to qualify for a mortgage because his debt-to-income ratio was too high. He could qualify for a loan, but not enough to buy the house he wanted.
While he still had student loans to pay on top of his mortgage, by cutting expenses and consolidating his loans he was able to move into his dream place and start building equity.
Focus on Making More Money
While many financial gurus tell Neal and other millennials like him to focus on living frugally to repay their student debt, Neal saw a flaw in this logic.
“You can only take frugal living so far,” Neal said. “It just got to a point where I needed to make more money. So, I turned to side hustling. I knew a little about search engine optimization and discovered that crickets were an excellent product to sell online. There was a lot of interest, but little competition.”
Soon, his plans to sell bugs online started to take shape.
“I started putting together a business plan on a napkin, and started letting reptile forums know about my crickets,” he remarked. “Then, the orders started coming in.”
Stay on Top of Your Payments
Neal stressed the importance of making your monthly payments on time for your long-term credit health since any late or missed payments will hurt your credit score.
“Keep making your payments,” he said. “If needed, file for forbearance. If your credit history gets crushed, you'll have a harder time applying for a mortgage. If I had any dings or late payments reported on my credit history, I never would have been able to get a mortgage.”
If you do decide to apply for deferment or forbearance, know what you’re getting into. Neal didn’t realize that when his loans were in forbearance he was still being charged interest. When he was able to start repaying his loans again, he was shocked to find he owed much more than before because the balance had grown.
Being Frugal Still Helps
While living frugally isn’t a silver bullet when it comes to repaying your debt, it does help. Neal reduced his costs by cutting back as much as he could.
“I ate peanut butter and jelly sandwiches, lived with my parents for a little bit, and drove an old Ford Explorer that my parents lent me,” said Neal.
Being too frugal can also backfire by discouraging you. As you cut back, make sure to find a balance between being rigid with your spending and allowing yourself small splurges.
Maintain Your Perspective
Paying off your student loans is important, but it’s just one part of your financial life. While repaying his debt, Neal tried to stay focused on buying a home, saving for his retirement, and increasing his income—all things that would benefit him long-term.
In fact, his next financial goal is to retire before he’s 50, something he was focusing on even before his student debt was completely paid off.
“This will be hard, but not impossible,” he said. “I think the first step in gaining this massive milestone will be to pay off the house, which I think is possible If I continue to invest time and finances into the crickets website.”
While paying back your student loans might seem difficult, it's great training for accomplishing other financial goals. And who knows—if you start a successful side business as Neal did in order to repay your debt, you might be able to retire earlier than you expected as well.