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“Student debt wasn’t as big a barrier as we thought”
May 10, 2018
When you have student loan debt, buying a home can feel like a distant fantasy. It certainly did for Ed and Lyndsay.
When we talked with Ed about it three years ago, he was resigned to putting off homeownership for a looong time. Between the cost of rent and sending $900 a month “straight out the door” for his $80,000 in student loans, there was just no way. And Lyndsay’s student loan debt? Take Ed’s and double it. (At least they have two master’s degrees to show for it!)
Yet despite all that debt (let’s call it an investment), the couple now owns a charming Craftsman-style bungalow in an appealing suburb of Boston. Their student debt didn’t magically disappear. “It’s like a member of the family,” says Ed. “It’s always there.”
So what changed? Ed, 33, and Lyndsay, 31, shared their story with us via Zoom, from the couch in their living room. Read on for the details about their house, their debt, and … the ring. But the “what we did” summary is this:
- They started working as a team.
- They came to terms with the student loan debt. Ed even switched to an income-based repayment plan.
- They steered clear of all other debt.
- They stayed focused on saving a big down payment. (Props to Lyndsay’s role model, her thrifty grandma.)
- They made a plan and stuck to it.
“I didn’t really want to touch all this financial stuff with a 10-foot pole because it is so confusing, complicated, and overwhelming,” says Lyndsay. “But we approached it in chunks and started to dig in and really understand where our money was going, what our options were, and what we actually felt comfortable with.”
The bungalow: “It reminds people of a beach cottage”
Framework (FW): So, tell us about buying your house.
Ed: Over the course of a year or so, we were looking around trying to find the right neighborhood for us. We zeroed in on Norwood. It has a good commute for both of us, in our price range, nice homes. It was the second home we put an offer in on.
Lyndsay: We took the Framework course as we went along. We reviewed each module as we were about to do that step in the process. For me that was really helpful, because we were biting it off in smaller chunks. It was just-in-time learning, as opposed to go take a crash course on how to buy a home and then go out and do it and hope that you got it all the first time around.
FW: What do you love about your house?
Lyndsay: A lot of it is the character. It has built-in china cabinets, a plate rail in the dining room, some of the original mosaic light fixtures in the main hall. We’ve got French doors, original hardwood floors, a three-season porch that lets in a lot of natural light, a pantry. In the backyard we’ve got a little deck and a magnolia tree.
FW: That sounds wonderful.
Lyndsay: Yeah, people have told us it reminds them of a beach cottage, and I kind of like that vibe.
FW: Did you have to compromise on anything?
Ed: I guess I would prefer something a little more spacious, but [at 1,300 square feet] it’s not bad as far as that goes.
Lyndsay: My big thing was the number of bathrooms. I wanted at least one and a half. We got one, but we think there’s room for expanding on that. We also ended up with oil heat instead of gas, and Ed really likes to cook, so that was kind of a downer.
“Two of us working together”
FW: So, Ed, when we talked to you before, you thought that at this point in time you wouldn’t have even started saving for a down payment. Yet here you are as homeowners. How did it happen so much faster than you expected?
Ed: Well, Lyndsay and I got married, and it’s a lot easier to do it with two people than one. Lyndsay had some savings, and with the two of us working together, it was easier to get to where we needed to be.
FW: You two were already living together back then, but you didn’t know you were going to get married yet?
Ed: Well, I mean, I think we had a sense that things were moving that direction, but we weren’t engaged at that point.
Lyndsay: You proposed in December of 2014. Maybe once you realized I could help you buy a house faster.
Ed: Maybe it was taking me so long to say it because I was saving for a ring.
[Laughter all around]
Lyndsay: I had been very fortunate to live with my grandmother for about five years before Ed and I moved in together, as she was kind of aging out of being able to live independently. I also learned from her ethic, being a product of the Depression era, to be very thrifty. Assoon as we got married, we opened a joint money market account that had a high-interest yield. We transferred all our savings into that account for the down payment. We were using Mint to help with budgeting, setting a goal and constantly transferring any leftover money at the end of the month to our money market account, so it was kind of off limits.
Ed: We did a full 20 percent down payment. I mean, we probably could have gotten a mortgage with 3 percent down and bought earlier, but the 20 percent helped us increase the budget on the total cost of the home while at the same time keeping the monthly payment pretty reasonable.
FW: Fantastic. And no PMI! [private mortgage insurance]
Ed: Exactly, yeah.
Student debt: “It’s like a member of the family”
FW: Okay, let’s talk about the student loan debt.
Ed: It’s like a member of the family. It’s always there.
FW: Oh God!
[We’re all laughing again.]
Lyndsay: Once we started looking at the details and getting into our finances, we realized that it wasn’t going to be as big a barrier as we thought. We were fortunate not to have any credit card debt, auto loan debt, or medical debt. It was strictly student loan debt. Which was substantial.
Ed: Substantial, but it pays off more than putting a TV on the credit card or something like that.
Lyndsay: My car has been more troublesome as it’s gotten older. We decided that if my car were to die before we bought the house, we were just going to live as a one-car family, and I was going to have to learn how to drive stick.
FW: Smart. A lot of people are getting in deep on their cars.
Lyndsay: We definitely benefitted from getting informed and not being so scared about the student loan debt. You only talked to Ed before, but I would have said probably the same things around “It’s going to be 10 years before I can buy a house,” and “Oh my gosh, how will I ever get out from under this mountain of debt?”
FW: Yeah, Ed, you were so pessimistic about buying a house back then, even though you were in a strong relationship.
Ed: I was really focused on making that maximum monthly payment on my student loans to knock them out as quickly as possible. While I still had that as a priority, it was really hard to see how I could increase savings. But I moved to income-based repayment. It’s a smaller payment, so that helped me save more money each month. I had kind of resisted it for a long time, because you end up paying more interest over the life of the loan, and it pushes out the length of time that you’re paying. But priorities change, you know?
“All it really took was adjusting my thinking”
FW: It sounds like what shifted the homebuying outlook even more than getting married was that you adjusted your attitude around the student loan debt. Were you so depressed about it that you couldn’t really see around it?
Ed: Yeah, I think that’s true. All it really took was adjusting my thinking about it and coming to the conclusion that carrying the debt for a little while longer than I planned is maybe not the end of the world.
FW: There’s always the option of making extra payments.
Ed: That is something I am planning to do, for sure. Now that we’re not looking to save at such an aggressive rate, there is a little bit more money in the monthly budget that’s freed up that could be applied to paying down the loan.
Lyndsay: I have been doing that, actually. I mean, I just rounded up my monthly payments. Around $50 more a month. I wouldn’t have necessarily qualified for a significantly lower monthly payment.
FW: Ed, was it pretty easy to change your repayment plan?
Ed: You can just do it all online, actually. There is some paperwork you need to submit just to verify your income. I forget what it was, like last year’s tax return or something like that. But overall, it’s a pretty simple process.
“You have to have a bit of a plan”
FW: You guys didn’t have wait to buy a house for as long as you thought you would, but still, it took several years. Is there anything you can say about that experience of delayed gratification and, I don’t know, dealing with it or keeping the faith?
Ed: I guess it’s just part of being an adult, you know?Things don’t always come that quickly, and to make the right decisions and get to where you want to go you have to have a bit of a plan. Even if it takes a little while, you have to stick to that.
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