If you're looking for a change of scenery—and you're dealing with debt (especially student loan debt that feels like it's just not going anywhere)—there may be a cost-saving solution you can try: move to a state with a lower cost of living and no income tax. At least, that's what Andrew Josuweit, CEO of Student Loan Hero did, and it helped him pay off his loans faster.
The numbers don't lie, either—according to Student Loan Hero, on average, living in a state with no income tax can save you $1,977 per year, and if you're paying off debt, any amount can help. That also doesn't take into consideration the money saved just from living somewhere with a lower cost of living (like moving from New York City to Austin, Texas, like Josuweit did).
We wanted to find out more about the process, so Josuweit told AT all about his decision to move, how he made it work, and ultimately, how he paid off his student loans (and how it felt when he was done!).
When you made the decision to move from NYC to Austin, was it solely to save money and pay off your debt or were there other factors involved?
When I decided to move to Austin, I was in a rough situation with my student loans and wanted to do whatever I could to pay them off faster. I understand many people can't just get up and move to another state. In my case, after living in New York for two years, I was just tired of the high cost of living and wanted a better work-life balance. I found about 10 cities that I was interested in moving to—Austin was the first place I visited, and I fell in love with quality of life, weather and food. They do make some amazing tacos and barbecue.
Did you put all of the money you saved towards your student loans?
The first thing I did [was build] up my emergency savings fund—first to $1,000 and then to three months of expenses. After that, I put everything toward my student loans. My favorite piece of advice for paying off debt is to treat all debt like your house is on fire—you need to focus on putting out the fire before anything else. For some people who have other types of loans with higher interest rates than their student loans, it might make sense to put the money towards those loans first, but for me it was all about my student loans. I did other things to save money too—I rode a bike instead of buying a car or using public transportation, I rented an affordable apartment instead of buying a house, and I refinanced my loans at a lower interest rate. Also, it wasn't just that I put the money I saved toward my student loans, it was about how I applied the money saved. By putting extra money toward the loans with the highest interest (the debt avalanche method), you save the most money in interest. Or you can put the money toward your smallest loans and get those paid off (the debt snowball method), which is really mentally motivating because it makes you feel like you've achieved something. I did a little of both which is called the snowflake method.
Why was it so important to you to pay off your loans faster?
For me, it was really a race to bringing my debt down to zero. In the beginning, I made a lot of mistakes with my student loans—I lost track of a couple of my loans, they went into default, and I went from $74,000 to $107,000 in student loan debt. When I saw how quickly things could spiral out of control, it really scared me. If my debt went even higher, I would have been hopeless. After that, paying down my loans as quickly as possible seemed like my only option.
How long did it take you to pay off your loans, and how did you feel when you made your final payment?
I graduated in 2009 and I made my final payment last fall, so about 7 years. After paying them off, I felt relieved and had a sense of calm. It was amazingly freeing to make that last payment. I could focus on saving money for retirement and a house. It felt like I could finally move on with my life.
How have the move and getting out of student loan debt affected your day to day life?
My day to day life is great and I'm proud that I was able to pay them off! When I had my student loans, I felt like I had a cloud over my head, and I wasn't able to live my life. Now I feel more comfortable with splurging on vacations and buying organic food. My quality of life has improved, and my overall stress has gone down. Now, I'm excited thinking about things like investing and saving up to buy a house.
What advice do you have for people looking to make a similar move?
Do your research—the financials have to make sense, and you have to think about your quality of life. This was really important for me. Also, I'm a big believer in trying new things—when you move to a new place, it gives you a chance to grow as an individual...I didn't love every place I lived in, but I always learned something. And if it doesn't work out, you can always move back.
A survey of student loan borrowers found that a third of them would move to either a state with no income tax or one with low income tax to save, and another 38 percent said they would use the money they saved on their taxes to pay off their loans. So, would you consider moving to save money?