In 1996, Jeremy Jacobson graduated from the Milwaukee School of Engineering with a great education, a stellar job lined up… and $35,000 in student loans.
That total would be worth more than $50,000 today, and it put Jacobson in what he estimates to be the top 10% bracket for student loan debt at the time.
That’s one top 10 list you don’t want to make.
But Jacobson was able to pay his debt all the way down in just five years. What’s more, today he’s an early retiree who travels the world with his wife and son.
Want to know how he pulled off the transition from serious debt to seriously enviable? Read on.
An Education in Debt
Like so many of us, Jacobson says he didn’t have a firm grasp on the financial ramifications of choosing a college.
After all, most people make this decision when they’re just 18 years old.
Jacobson’s situation was worsened by the fact he was the first in his family to go to college.
“I had no idea what I was doing,” he explains.
So when a helpful and encouraging representative from the Milwaukee School of Engineering visited his high school, he naturally gravitated towards the institution — despite it being a small, private school with a high price tag.
Admittedly, the quality of Jacobson’s small-school education made the sky-high cost worthwhile in the long run.
“[Milwaukee had] small class sizes, which was great,” he says. He even felt he had a “leg up” on others in his industry coming out of different schools.
“Really, you learn a ton… but then you get stuck with the bill,” he says.
Prioritizing Student Loans
Although he didn’t know much about applying to schools, Jacobson had an advantage over a lot of us — myself included — who fall into a dangerous complacency with debt in our early 20s.
He knew he needed to prioritize debt, in part because of his studies.
“In a lot of ways, engineering is just math for people who like to build (stuff),” Jacobson says.
He took classes covering topics like loan and mortgage amortization, and his instructor harped on how paying the minimum requirement led to losing huge amounts of money to interest — sometimes double or triple the original debt.
Jacobson also had experience with poverty in his childhood, and had no desire to let debt return him to that lifestyle.
“Everyone I knew who had debt was in a world of hurt because of it,” Jacobson says. After watching his friends get kicked out of their apartments or have their cars repossessed, he knew he had to make repaying his student loans a priority.
“Debt was a terrible and a dangerous thing,” he explains. “I was like, OK, I have to get rid of this as fast as I can.”
Work, Work, Work, Work, Work
When Jacobson puts his mind to getting something done, he doesn’t mess around.
“I graduated on a Friday, moved myself over the weekend, and then started working on Monday,” he explains.
This was after a finals week so grueling he found himself falling asleep on his 3 a.m. drive home — the first time he’d slept in 72 hours.
He landed a job as an electrical engineer for Motorola, which had scoped him out after a successful senior design project: waterproof walkie-talkies for SCUBA divers.
His starting salary was $39,500 — nothing to sneeze at, especially in 1996.
But Jacobson didn’t spend his hard-earned income on celebratory champagne — or on much of anything other than his student loans.
“I started paying the loans off even before they were due,” Jacobson says, to take advantage of the set period of interest deferral students enjoy after graduating.
His spendthrift lifestyle was actually aided by the workplace itself. Jacobson and his colleagues were consistently working long hours enough that Motorola started to buy their meals.
Overtime itself kept his at-home costs down, too.
“We were there 7 a.m to 10 p.m. every day,” he explains. “When you’re doing that, you don’t really have any opportunity to spend money.”
And although he was salaried, Motorola implemented a kind of capped overtime pay, so he was making approximately 15% more than he’d expected.
Jacobson took advantage of the situation by putting every spare penny he made toward his debt, even cashing in his vacation hours — for five years.
Sounds rough, right?
Well, no one said paying off debt was easy. Luckily, Jacobson wasn’t as miserable as you might imagine.
“I thought this was the best deal in the world,” he says. “At the time, Motorola was the world leader in cell phones. …This is what I had gone to college for, was to work on this kind of stuff.”
He was passionate about his position and the work he was doing for the company, and his pricy education meant his salary kept climbing.
“Combine that with a 21-year-old body and caffeine….”
The Credit Hack that Helped Jacobson Get Ahead
But even with Jacobson’s insane work ethic (and apparent access to all the Red Bull), the high total coupled with over 7% interest rates meant student loans were a constant drain on his finances.
And hey, after years without one, even the most devoted employee could use a vacation.
That’s when he realized he’d had the key to a quicker repayment all along. In fact, he regularly threw it away with the rest of his junk mail.
Although Jacobson wasn’t a regular credit card user, his credit was good enough for him to receive offers for credit card cash advance checks with a 0% promotional interest rate. He’d already been regularly paying down his car lease.
By using the checks toward his student loans, Jacobson realized he’d effectively neutralize the interest on the portion he could safely pay off in time. He could take care of $10,000 of the debt this way, saving him more than $700 in interest.
He just had to ensure he’d paid off the balance by the time the promotional 0% interest rate was up. Otherwise, it would skyrocket even higher than the original 7% rate on his loan.
Because he was paying his student loan directly alongside the amount he’d put onto the credit advance, Jacobson was able to get out of student debt at an exponentially quicker rate.
Once he realized how valuable this tactic was, he used it for his car and mortgage payments, too.
“I just went through my loans in the order of the interest rate, and so the highest one first,” he explains. “I started paying that off, and then transferring it.”
After five years, Jacobson had paid off those student loans. Within a decade, he was 100% debt-free and financially independent — as was Winnie, the woman he married along the way.
But the family’s far from finished with the lucrative game Jacobson had discovered in hacking credit card offers to get ahead.
“We’re about to go to Europe for four months, and about $10,000 of that trip will just be free hotels and free flights from credit cards,” he says.
Ready to Become Debt-Free?
Prioritizing debt repayment and finding out-of-the-box ways to speed up the process is a huge part of how Jacobson was able to retire to travel the world with his wife and son.
They catalog their journeys — and their smart financial moves — on their blog, Go Curry Cracker.
And when I say smart, I’m not kidding. Here’s a post on how they’ll avoid ever paying taxes again.
Obviously, I asked him for his best financial advice for others looking to rid themselves of debt nd gain financial independence. His answer was way simpler than I expected.
“The main thing is just to make sure you don’t get sucked into lifestyle inflation,” he explains.
Don’t pay attention to the bloated lifestyles and spend, spend, spend advice of the people around you — they probably aren’t money experts, after all.
Figure out your own financial goals, and make a plan to achieve them.
“Just because you have more money than you had in college doesn’t mean you have to spend it all on stuff and experiences today,” Jacobson explains.
So it’s exactly what you expected: Buy less stuff.
And even though experiences last longer and are shown to make us happier than stuff, keep your budget in mind.
“It’s not just a choice between those two,” Jacobson says.
The third factor in the decision tree? Your freedom.
Jacobson recommends a lifestyle with “a little bit of stuff, a little bit of experience and a whole lot of freedom. Then you’ll have all the opportunities that money can provide later just by letting compound interest work for you rather than against you.”
Who knows? Follow his advice, and maybe you’ll be traveling the world with your family as a 30-something retiree.
Your Turn: Have you repaid your student loans? How did you do it?
Jamie Cattanach (@jamiecattanach) is a freelance writer whose work has been featured at Ms. Magazine, BUST, Roads & Kingdoms, The Write Life, Nashville Review, Word Riot and elsewhere. She lives in St. Augustine, Florida.