How One Grad Student Paid Off $32,000 in Debt

US News

Ken Ilgunas graduated college with $32,000 in student loan debt and a Thoreau-inspired dream to live simply. He also wanted to go to graduate school, but couldn't afford it yet. Instead of taking on more debt or delaying grad school, Ilgunas, now 31 and living in Benedict, Nebraska, decided to live out of a van to keep his costs down while earning his degree. He ended up saving enough money to pay off all his debt, too, and writing a book, "Walden on Wheels," about his experience. U.S. News spoke with Ilgunas about how he cut his costs so drastically and freed himself from debt. His responses have been edited:

How did you manage to pay off all that debt without earning a large income?

I paid off $32,000 in two and a half years, and most of the time I was making less than $10 an hour. I even did a good bit of traveling in those years and had a lot of "gap time" between jobs, so conceivably I could have paid it off a lot quicker than I did.

[Read: The Secret to Living Well on $11,000 a Year .]

The trick was working at camp jobs. I got a job at a truck stop in Alaska that didn't pay much, but it did offer room and board, meaning I didn't have to pay for rent or food. Plus, I didn't need a car or phone. So I literally had no "life expenses," apart from a few used books. That first year in Alaska, I only made $18,000, but I was able to save about 95 percent of that, all of which went toward my debt. I think, for young people, the key is not to look at how big your salary is, but how big your saving potential is, because that's really the number that matters. In other words, if I'm making $40,000 a year in New York City, but paying $35,000 for living costs, my saving potential is pretty pathetic. But if I'm making $18,000 in Coldfoot, Alaska, and paying literally nothing for life expenses...you get the point.

I understand that not everyone wants to live in Alaska like I did. But there are always opportunities to cut back on expenses. Many of us don't need cars, and pretty much all of us could get by with cheaper phone plans, smaller apartments and a no-restaurant policy. The key to paying off your debt is very simple: Put yourself in a situation where you can save.

You write that you spent less than $5 a day on food -- what were your meals like?

Since my van experiment, I've become a bit of a health nut, and a lot of the stuff I ate back then was not perfect for a human's nutritional needs. But I got by OK. And rarely, if ever, did I go to bed hungry. In the morning, I'd usually cook oatmeal or have a bowl of cereal, which I mixed with water and powdered milk. For lunch, I'd usually have a banana and a peanut butter sandwich. For dinner, I'd have spaghetti stew (almost all my suppers were stews because I only had one pot), which is a combination of noodles, peanut butter and chopped vegetables. I did away with coffee, beer, dairy and meat for most of my time in grad school, and I was very healthy. If I'd had the money, I probably would have splurged on organic and local stuff, which I do whenever I can now.

[See: 10 Ways to Feel Better About Your Money .]

Did you put your earnings into a bank account to earn interest?

All my earnings went straight to my debt. You really can't earn interest on your savings unless you have a lot of money, which I never did. It made more sense to put it toward the debt, so that the interest on my loans wouldn't get out of hand. I was far from an expert on personal finance, but I knew and lived by this: The quicker you pay off your debt, the less you'll have to pay. Some people who take their time paying back their loans end up paying tens of thousands of dollars extra because of interest, which seems like such a crime to me. As for my savings, I never had any except for a few hundred bucks in the bank for emergencies. The second I got the check, it went toward the debt.

Do you have any tips for recent graduates?

If you really want to pay off your debt, you need to think about it in a new way. Don't think of your debt as if it's a monthly payment, like car insurance, that you're going to have to pay for the rest of your life. Think of it, rather, as a sworn enemy. Think of indebtedness as a life-and-death situation. Because if you take it lightly, your student debt will affect everything from starting a family, to what job you work at, to how much you can travel. It's the steel ball chained to so many young people's ankles. Don't put 8 percent of your income toward it. Do everything you can to pay 100 percent. Hate your debt. Obsess over it. Despise it. Anthropomorphize it. Murder it. Grand tasks require grand thinking. And a little bit of insanity.M

[Read: The Secret to Living Well on $20,000 a Year .]

What is your money and job situation now?

I have some healthy savings from my book advance for "Walden on Wheels." I still refuse to pay rent, so I find situations where I can barter labor for room and board. This allows me to work on writing projects. Sadly, the van died on a road trip through Iowa, but I now have a fuel-efficient Honda Civic. I'm currently working on a travel book called "Trespassing Across America," which should be out next summer.



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