Student debt — and how to pay it off
Like the majority of American students, Brooks-Long had to borrow money to pay for her degree, which she acquired from Baylor University, a private school.
But with no access to federal student loans due to a family issue around a contested inheritance, Brooks-Long had to turn to private funding from Sallie Mae.
She took out three student loans worth about $176,000, but her debt swelled to nearly $250,000 with interest and fees.
At the time she spoke with Hammer, her bill between May and April of 2022 was $1,945 — more than two-thirds of her income of $2,816, which she was bringing in working four jobs.
“It's going to be a million dollars before she knows it,” Hammer told Insider of Brooks-Long’s terrifying tale of student debt.
Brooks-Long is not alone in struggling with student debt. Today, Americans owe a combined $1.7 trillion for their education.
There are a few things you can do to reduce your student debt or pay it off faster. If you have private loans, like Brooks-Long, you can attempt to refinance them to try and secure lower interest rates. Remember that it’s worth shopping around and comparing quotes from multiple lenders before selecting the option that best fits your needs.
If you have a federal loan, you won’t be able to refinance, but you could switch over to an income-driven repayment plan, which would allow you to make more affordable payments based on what you earn.
Discover how a simple decision today could lead to an extra $1.3 million in retirement
Learn how you can set yourself up for a more prosperous future by exploring why so many people who work with financial advisors retire with more wealth.
Discover the full story and see how you could be on the path to an extra $1.3 million in retirement.
Read MoreAvoid mistakes that will ruin your credit score
When Brooks-Long sought Hammer’s advice, the interest rate on her three private student loans was 11.75% on the two larger ones and 9.875% on the smaller one of $37,000.
In comparison, the interest rate for all new federal direct undergraduate student loans for the 2023-24 school year is 5.50%.
Brooks-Long didn’t share how her student loans are structured, but Hammer told Insider he hoped she didn’t have a variable interest rate on her loans because the amount she owed would have increased due to repeated rate hikes.
In addition to her student loan struggles, Brooks-Long — who is trying to make it as an actress in San Antonio — shared with Hammer how she fell into credit card and car loan debt.
A year before meeting Hammer, she took out a $13,500 auto loan, which costs her $300 a month, and by the time she spoke with the YouTuber she’d paid multiple late fees already.
When asked about her credit score, she found it had taken a big hit — from 720 to 549 — since acquiring the auto loan.
Hammer recommended she sell her car: “You literally cannot afford this car,” he told her. “You cannot sell your credit card and pay it off. You cannot sell your student loans and pay it off. You can sell your car.” But she insisted it wasn’t as big a problem as her student debt.
Brooks-Long also carried a balance on her credit card and admitted to overdrafting on her checking account multiple times a month.
“That is just dire,” Hammer told Insider. “That's where it gets to the point where it feels like it's impossible to get out of.”
All of these common financial mistakes can damage your credit score and leave you in poor standing if you need to borrow more money. Not only that, they can limit your options to getting out of debt — keep in mind that whether you qualify for refinancing will depend a great deal on your credit score.
Boost your income
Brooks-Long took on multiple jobs to pay off her debts, including working as a virtual assistant for a realtor, an enrollment advisor for an online university, at an ad agency and modeling and acting gigs.
But ultimately, she was spending almost double what she was bringing in. Hammer said she needed to earn double or even triple her income in order to pay off her “ballooning” debts.
“If you don't, you're not going to be able to do anything for the rest of your life,” he told her.
There are multiple ways you can supplement your income. For example, you could look for a new job that offers a higher salary.
If you want to boost your income without switching jobs, or you're able to work beyond the average 40-hour week, consider taking on multiple gigs like Brooks-Long.
You could also earn some extra cash by selling items online, renting out some space (a room or even a parking spot) or getting a housemate who can split some of your housing costs.
Brooks-Long actually did this — splitting her bills with her roommate, who is also her cousin — but this backfired as she often ended up paying more than her fair share because her cousin was unemployed.
Hammer went on to advise Brooks-Long stick with a strict budget, which included no more eating out even if she needed to travel for work.
“Pack a sandwich,” he said.
This 2 minute move could knock $500/year off your car insurance in 2024
OfficialCarInsurance.com lets you compare quotes from trusted brands, such as Progressive, Allstate and GEICO to make sure you're getting the best deal.
You can switch to a more affordable auto insurance option in 2 minutes by providing some information about yourself and your vehicle and choosing from their tailor-made results. Find offers as low as $29 a month.
