Dave K. (not his real name), a 31-year-old former engineer, doesn’t have a home address or phone number. He doesn’t even have an email address, let alone a computer with internet access. When asked how to contact him, he answers, “Call my cousin, and she’ll tell you when I plan to be in town next.”
Becoming a Nomad
Dave didn’t grow up as a nomad. Nor did he dream that one day he’d be living out of his parents’ beat-up Chrysler. But he loved the outdoors as a child — which ultimately inspired him to pursue a career as an environmental engineer.
“I didn’t think being an adult came with being stuck with student loans,” he explains. “I went to community college to save a buck, and constantly applied for scholarships. Still [I] ended up with $20,000 in student loans. It kind of spiraled from there when I lost my job in the recession.” Two years after graduating, Dave found himself in over $30,000 worth of student loan debt that he could not pay.
Out of desperation, he sold his car, moved home to Denver, and worked temp jobs.
While he was able to pay his parents rent and help with utility and food costs, his debt went untouched, and debt collectors started calling.
- Apply for income-driven repayment plans such as PAYE, REPAYE, or IBR. All three plans limit the minimum payment to about 10 percent of your income. This way borrowers who are underemployed or have simply fallen on harder times can still make their monthly payments and avoid harming their credit score. (Note, these plans are limited to federal loans. Read our complete guide to federal student loan repayment here.)
- Temporarily suspend student loan payments through loan deferment or forbearance. Again, federal loans are generally more forgiving toward putting a temporary pause on payments, but it’s still a worthwhile consideration to reach out to your private lender.
If you earn below 150 percent of the poverty guideline for your state, receive welfare, or are serving in the Peace Corps, you may be able to avoid paying accrued interest on specific types of deferred subsidized federal loans. Forbearance always requires that interest accrues on your debt, but you can choose to pay just the interest as it does or let it be added to your principal. In the latter case, you will end up paying more over your loan’s lifetime than otherwise.
After saving a few thousand dollars, Dave bought his parents’ old van and took to the road. A friend with a ranch in Idaho offered him $400 a week, plus room and board if he worked the busy season doing odd jobs around the land. He negotiated the offer up to $600 by offering to stay in his car and pay for his own food.
Using a Nomadic Lifestyle to Annihilate Debt
“I didn’t spend a dime of the money,” Dave says. “I put everything toward paying my student loan debt back home. I think I splurged on pita chips once, but I was too guilty to eat them. Same with going out to eat. I’d make an excuse why I couldn’t go to the bar on the weekends. I haven’t bought a new shirt or a pair of shoes in five years.”
In exchange for living so minimally, Dave came up with a simple budgeting system that worked for him. “I’d get paid in cash, so I’d go to Walmart every Friday night and send cashier’s checks to my mom so she could pay $400 toward the loans, $15 toward car insurance, and $50 went to paying down my past credit card debt. And then I’d use the rest for essentials like gas and food for the week. If there was any left over, I kept it in a safe hidden in the van.”
Dave gave up a lot: the comfort of a traditional home, the companionship of his friends and family, and many of the modern conveniences digital devices offer. In return, he is putting his journey to pay off student loan debt on turbo-speed. But this decision isn’t for everyone.
“It’s the lifestyle choice he embraced to pay off his debt. That isn’t something that everyone is able to do, or wants to do,” says Robert Farrington, founder of The College Investor. Dave’s choices just aren’t realistic for many. For those with external obligations such as an existing mortgage, children, or other factors that simply make them unwilling to sacrifice their current lifestyle to become a nomad, there are less radical options available.
“I’m a huge believer in creating a plan and sticking to the plan for your student loans, whatever that plan is. For some, that could be budgeting, others it could be choosing employment that qualifies for Public Service Loan Forgiveness, and for [Dave, it’s] choosing a lifestyle job that allows him to generate a lot of excess income he can put toward his debt,” adds Farrington.
When the System Pays Off
Dave paid off $1,000 of his credit card bills and $5,000 of his student loan debt in 10 weeks of ranch work.
While he intended to return to Denver and apply for more jobs, Dave realized that living the nomadic life would both help him make huge bill payments and give him the life he really wanted.
“I spent my whole life thinking I was supposed to graduate high school, get into college, find a job, have kids, retire, and die,” he muses.
“[But] after the first few weeks out in my van, it sounded so stupid to have to live like that… So I didn’t go back.”
Dave’s family friend recommended him to another farmer in California, then a construction foreman in Texas. Each paid him under the table and agreed to let him live on their land, in lieu of providing board, for more cash. No matter the job, Dave found a way to get to a bank or a credit union to send the cash for his bills to his mother, and later to his cousin.
“When I was out working, I didn’t get the bills, so I didn’t really think of them,” he recalls. “That was the best part. So it was just a habit I developed: get a new job, think about how much I needed to survive bare-bones, and then give the rest to the bank. I guess it worked because by my third year out on the road, I paid off my credit card bill and my student loans.”
“Credit cards typically carry higher interest rates than other types of debt, such as student loans,” Benjamin Dobler, Financial Coach at Stewardship Financial Counsel, adds. “It can save you thousands in interest to pay down your credit cards first. In general, paying down debt with higher interest rates first means you'll pay the least interest in total over time. Paying down high interest debt is like playing a game of financial whack-a-mole — if you don't get it under control, fast, it only gets worse,”
Taking Lessons Into Adulthood
Dave continued to live on a budget of bare minimums while saving the rest of the cash in his hidden safe. On the ranch, he was making the right move to prioritize paying off high interest debt rather than investing in lower returns.
“If you’re facing down high interest debt, trying to grow your savings can be a risky and losing battle. Any time the interest rate on your debt is higher than what you’d earn on your savings, you should consider focusing on paying down debt now, and saving or investing later,” says Dobler.
Dave estimates that he now has between $30,000 and $45,000 stashed between his van and at various bank accounts around the country. Debt-free and equipped with a sizable hoard of liquid savings, he may be missing out on simple ways to invest his money.
Employed student loan holders should see if their employer offers matching contributions to saving accounts such as a Health Savings Account or a 401(k). For example, if you save 6 percent of your pre-tax annual income into a 401(k) and your employer matches 50 percent, you are essentially earning free money for the future.
The Bottom Line
Dave believes his time as a real nomad is nearing its end. At time of writing, he planned on on heading back to Denver to start over again. This time, he’s doing it — as he calls it — “the right way.”
He’ll go without the debt to hold him down, but with a backup plan for emergencies and a million unforgettable experiences to guide him on the road ahead.
Additional reporting by Alice Yeung.