9 Things You Should be Doing NOW if You Have Student Loan Debt…But Want To Buy a House.

This is another one of those posts that comes 1/2 from the Realtor side of me and 1/2 from my own experience. As a Realtor, I’m frequently reviewing data for house buying trends, and overwhelmingly this year (and years previously), there has been one startling fact that emerged:

People have so much student loan debt that they can’t buy a house.

That sucks. What that means for them in reality is that they’re paying rent for MORE than they would pay for a mortgage. It’s a vicious cycle designed to hurt future home buyers, and it’s discouraging if you are one of those people.

But let me remind you, I was also one of those people. I purchased Flip 1 in 2011 with an original student loan principal of near $70,000…in the middle of a recession.

In my years since as I flip homes and work with home buyers, I’ve gathered a list of mistakes we’re all making that is preventing us from using real estate to help pay off student loans like me. Let me blunt and upfront, most of my “solutions” aren’t ideal, they’re out of people’s comfort zones, they’re inconvenient, they’re not popular, and they can suck while you’re doing it. But you will live…I have lived to tell about it!


I’ve discussed before how I do what I do (and why), but I didn’t really discuss what to do if you can’t do what I do yet. So this isn’t really a rehash of a previous post, instead, it’s my suggestions of things that I did before I pulled the trigger on Flip 1. Student loans or not, home buying requires some prep work, and if you have student loan debt, it may require a lot more prep work.

According to the National Association of Realtors latest report, first time home buyer sales could increase 4% (appox 150,000 more sales) if student loan debt wasn’t a factor, and 31% of current homeowners report that student loan debt is delaying an upgrade. So if this is you, you aren’t alone.


Don’t consider this a comprehensive list or even an absolute list. This is what worked for me. It’s how I bought a house with massive student loan debt and used real estate to pay off that debt.


  1. Ditch that car payment. 9% of people in their early twenties have car debt. By their late 20s, that jumps to 38% with auto loans. Add on student loan debt, and people in their twenties are drowning in debt. And it doesn’t just magically disappear in your thirties.

So what does that look like if you’re trying to save up for a house? The car you’re driving and paying $400 (or more) a month? Sell it. Buy- with cash– an older car. It might have 100,000 miles. It might not have leather seats. It might not have a warranty. But it’s paid for. I drove a 10+ year PAID FOR Honda before I bought a house. That freed up money to pay on my student loans and (most importantly!), it helps to free up your debt-to-income ratio (one of the biggest deciding factors in mortgage approval). Another benefit? Your monthly auto insurance payment goes down!

That’s just #1. I told you, it’s not convenient. You don’t want to do it. But I assure you, you don’t want to live a life of debt. You do want to own a house.

2. Get a 2nd job. Work 40 hours a week AND get a part time job on the weekends? Or at nights? Yeah, it’s not ideal. I told you. But that 2nd income will generate more cash to pay extra on your student loans. Before, and after, I bought Flip 1, I worked part time at Gap on nights and weekends. I didn’t want to do it, but I did it because I was sick of drowning in debt.

So what do you do with that extra money? You don’t go shopping, that’s for dang sure. That money can serve two purposes. 1. Save up for a down payment OR 2. Pay on the principal of your loan. My suggestion- pay on the principal of your loan. The reason? The magic goal you’re attempting to reach- free up your debt-to-income ratio.

We’re at #2. And, I know, they aren’t getting anymore desirable.

3. DON’T stop using credit cards. BUT there’s a little caveat to that. You absolutely, under all conditions, no matter what, with no exceptions…you pay off that credit card every single month.

College freshmen have an average of $940 in credit card debt. College seniors graduate with $4,100 in credit card debt. Tack on car debt and student loan debt. They are DROWNING in debt. If that’s you, then your 2nd job, you use it to pay off your credit card debt because, hopefully, your student loan has a lower interest rate than your credit card.

But if you’re lucky enough to not have credit card debt, use your credit card and PAY IT OFF every month. You’re building your credit reputation of responsible debt and payoff. If you pay it off each month, it can help you.

4. DON’T close your credit cards. You know, most people think that if they’ve paid off their credit card, they should close it out to help them. They’re wrong. You can help yourself if you will leave the credit card open and not use it. (I know, that seems to contradict #3. Hang on.) Before I bought a house, I had credit cards. I paid them off but kept them open and never used them. Why? It shows your available credit (another factor in mortgage approval) without a dent/hit on your debt-to-income ratio. Translation- there is debt you COULD have but you’re responsible enough to NOT have debt.

But doesn’t it contradict #3? If you have a credit card that you use for #3, use it and pay it off at the end of every month. What I’m talking about in #4 is all the other credit cards. Your department store cards. Maybe other Visas or Mastercards….whatever…leave those other ones open but DO NOT USE.

5.Pay extra towards the principal on your student loans. Your student loan payment each month- $200, $400, or more-doesn’t all go to principal. It goes to principal and interest. My current payment on my student loans (luckily, not $70,000 total anymore), 50% of my monthly payment goes to interest. Only 50% goes to principal. If you don’t know the havoc that interest can cause you, you need to. The interest on your student loan will ravage you financially if you don’t attack the principal amount.

How do you do that? #2. Whatever your second job, dedicate that money to paying down your principal- unless you have credit card debt. Without paying extra towards your principal, you will pay thousands of dollars more in interest. THOUSANDS OF DOLLARS. That’s not a scare tactic. That’s math. When you are paying extra on your payment, make sure you are designating it as a principal only extra payment.

I used this tactic- not in extreme fashion- but maybe $100 extra one month or a few hundred extra dollars from a yard sale one summer–paid towards my $70,000 balance. Now, at the time, it seems so overwhelming that what good can $300 do? It eats your principal.

6. Drastically rein in your spending. And before you do that, track your spending. With something as simple as Excel, you can track where your dollars are going each month. One thing I can assure you, you don’t realize how much you’re throwing down the drain each month. Tracking your spending will enlighten you and give you specific areas to target on reining in your spending.

$4 latte every morning? = Over $1,000/year. That’s a big chunk to pay down your student loan principal!

$100 cable bill?= $1,200/year. If you want free cable, do what I did.

Take out/Eating Out Regularly?= On average, people spend $2,746 eating out for LUNCH. Lunch, people.

Gym Memberships: Around $600/year. While I was buying Flip 1, I began training for my first 5K. I spent $0 on gym memberships. I used community parks and my own home to train.

Take out your daily latte, your cable, your lunch takeout, and your gym memberships: You could save, on average, $5,546. That’s a HUGE chunk on your student loan principal!

7. Use your tax refund wisely. If you get a tax refund, it’s not a windfall. Don’t treat it as such.

Regardless of the amount, a few hundred or thousands, utilize that money to help you get one step closer to home ownership. As I’ve discussed at length already, utilizing that money to pay down the principal on your student loan (or your outstanding credit card balances) will have the most dramatic effect.

Another option you could do, as I did, is to utilize your tax refund for a down payment for a home. It’s important to know, you don’t have to have all of your student loans paid off to purchase a home. So, having money for a down payment is necessary, and if you’re saving to pay down principal, you might not have the resources for a down payment.

8. Purchase a fixer upper. When you and your loan officer get to the point where your debt-to-income ratio is at a point of loan approval, understand that you don’t have to have a brand new home. You don’t have to have a large mansion. When you buy a turn key house, you are paying for someone else’s effort. Buying a foreclosure or fixer upper, you can build equity like I have. That equity will be your best friend in paying off large chunks on the principal of your student loan.

For example, on Flip 1, I purchased it at $51/sq ft. It was a fixer upper. I’ve talked about how I did it, but I sold that same house (2 years later) for $74.50/sq ft in the middle of a recession. I utilized those profits as a down payment for Flip 2 & paid a chunk on my student loans. For Flip 2, I purchased it at $57/sq ft. It was another fixer upper. Two years later, I sold it for $68/sq ft. From Flip 2 alone, I wrote a $15,000 check to pay off one entire loan and a massive chunk on the principal of another student loan.

But let me be honest, this journey has included living in a house for a year without any furniture except for a bed. No cable. No Internet. Living in a house for over a year without any floor covering- only dusty subflooring. Living in a house with 1 working toilet. Living in a house with saw horses, paint buckets, scrap wood, and tools scattered everywhere. It meant dodging tools and spending weekends peeling wallpaper, laying floors, painting walls, or installing countertops. It wasn’t fun..but it paid off, literally.

9. Negotiate closing costs. If you’re finally getting to the point where you can purchase a fixer upper and you’re utilizing your tax refund for the down payment, you are still expected to pay closing costs.

But here’s what you need to know- you can…and SHOULD…negotiate your closing costs. In whatever offer you submit, ask the seller to pay your closing costs. At certain price points–certainly fixer uppers– it’s not abnormal to ask for closing costs. The seller can choose to pay your closing costs, counter with paying partial closing costs, or choose not to pay any. Whatever isn’t covered by the seller, you, as the buyer, are expected to pay those closings costs–adding to the amount for the down payment.


I told you, none of those are ideal. It’s hard work. It’s not fun work. But escaping the wave of student loan debt should be a high priority. I keep telling people, I’ve found no other outlet that gives me such large returns and enables such significant principal payments for student loans, so I’ll stick with real estate!


3 thoughts on “9 Things You Should be Doing NOW if You Have Student Loan Debt…But Want To Buy a House.

  1. All very good strategies. Keeping track of every penny for awhile in a journal kept in the car is valuable, too. Those little trips into the convenience store or the fast food drive through are very revealing. I also paid toward our debt before anything. Any raises or extra money went there first. That helped me years ago with credit cards we used during some tough times.

    We got out of debt by paying off the highest interest card, then putting that monthly payment to the next card in addition to its monthly payment. It was a very good feeling to finally be free of that burden, and then we had extra money to pay cash usually for our wants and put extra towards the mortgage.

  2. Funny, same thing is happening here too. Student loans are hindering people from buying houses. It’s a hard reality… I remember being in college and so nonchalant about the debt I was incurring. Now working in real estate, people are having a harder and harder time qualifying due to those student loans.

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