Erica spread out the acceptance letters of all 6 universities in front of her. Her mom peered over her shoulder, proud of the daughter that had worked hard to make these opportunities for herself.
“Just pick the place where you feel like you will be most successful,” Erica’s mother advised. “We can figure out the finances.” Like most parents, she wanted her child to focus only on success. As the mom, she would figure out how to help make that success happen.
So Erica enrolled in a private university in New York City. Tucked away from the bustle of the metropolis, Erica enjoyed 4 years on a tranquil, green campus. But as graduation neared, the financial implications of her education dawned on her. She hadn’t qualified for any federal student loans so she had applied for private loans on her own.
“I graduated with $210,000 in student debt. When I first joined the workforce, my net worth was negative. To the world, I had negative value.”
Erica started her career as a commodities analyst at a firm in New York City. ⅓ of her first year’s salary went to paying off her student loans. Originally, her parents had planned to help, but the costs of college for her two younger siblings were just as high, and her siblings ended up struggling more in the professional world than Erica did. Eventually, it fell on Erica to take on the entire student debt burden.
She focused on working hard, and enjoying life when she could. Within a few years, Erica was bringing in new business for her firm, based on the strength of her reputation and quality of her research. She decided to treat herself to a $4,000 vacation to Norway, Cyprus, and France. She was living paycheck to paycheck at the time with no savings, though she wasn’t necessarily struggling to make ends meet. She just didn’t believe that savings were an efficient use of her money. She spent exactly what she earned each month, and made payments towards her student loans. She’d have to put the vacation on her credit cards, but she could afford to do so. She would just pay it back in a few months.
“I got back from Europe and, in a few months, the company’s financial situation changed radically. Instead of laying off a bunch of people, it decided to cut everyone’s salaries by 10%.”
Erica’s life didn’t have room for a 10% cut. She started financing more of her life through her credit cards, eventually ending up with $7,000 in debt.
Erica made some life changes quickly: she moved out of the Upper East Side down to Brooklyn, and started biking to work.
“The biking was just fun, to be honest. That was more for me.”
But other changes came more slowly.
“Every month, I would look at my budget and think, ‘I’m cool, I can pay these cards off this month.’ But each month, I would be left with $0 to put towards my credit card debt.”
A year passed, during which she got a new job in Chicago and negotiated with the firm to cover her relocation costs. Every month for 12 months, Erica went through the ritual of checking her budget and convincing herself that she would pay those cards off. But the interest kept accruing.
“Finally, I had had enough. It was probably some burst of anxiety that I had about it that finally made me do something. The interest rates on my card were really high, maybe 27%. I started to research online about what to do with my debt. There were stories of people who had gone to extreme measures – selling all of their things and their car, living out of RVs… Eventually I learned about personal loans, and then I learned that they were available online. I used to think you had to walk into a bank branch to get one of those.”
Erica spent hours browsing different loan aggregator sites, submitting information about her income and requested loan amount, waiting for all of the loan offers. But the offers returned were discouraging. None of the offers she found were any better than those of her credit cards.
“It just wasn’t worth it. I don’t know if it’s because I didn’t have much of a credit history… It was pretty upsetting. I knew I was a good borrower but all of these other lenders only looked at credit score, which didn’t show the full picture.”
Eventually, Erica found Upstart.
“I loved that they looked at my grades and things beyond my credit profile. Finally, my education was worth something.”
Her APR with Upstart was 1/3 that of her credit cards. If she took the Upstart loan to pay off her credit cards, and then focused on paying back the Upstart loan, she would pay less in interest overall and the debt would be completely gone in 3 years.
She did one better. Erica paid her loan off early, in just 18 months.
“The process was very easy and all the customer representatives were nice. I’ve told my other friends with credit card debt to apply as well. Upstart trusted me and believed that I could manage money responsibly. The whole experience was empowering.”
Today, Erica reflects on her financial mistakes with the confidence of someone who has both struggled through regrets, but eventually understood that her identity stretches beyond them.
“I acknowledge that I’ve made mistakes in my financial decisions. I spent $4,000 on a vacation with money I didn’t have, gambling that I’d pay it back later. I picked an expensive school in New York City when I could have gone to a school somewhere else – anywhere else really – that would have been cheaper.”
Erica still has $80,000 left in other student debt. But paying off her Upstart loan early was a crucial part of changing her relationship with debt.
“My debt used to be this prison that I was trapped in. I never knew, still don’t know, if I work because I actually enjoy it or because I have to pay off my debt. But recently, I realized that I could make smart decisions within my debt. I can refinance, I can adjust my monthly payments.”
Erica is on track to have her debt under control by age 37. Her financial goals now are to pay off her student debt and have a few years to live for herself.
“I want to see how I will live without my debt.”
Erica’s journey to be free from her debt is not over yet. But joining her story in the middle allows us to see how one’s relationship with debt can change over time. Even if our debt feels like a prison now, it doesn’t have to be that way forever. There are concrete things we can do to make progress towards the larger goal. The people who get out of debt are not superhuman. They commit over a long period of time, making progress day by day, going through ups and downs.