When Cherie and Brian Lowe of suburban Indianapolis threw a party last spring, 150 well-wishers came bearing casseroles.
This was no birthday or anniversary bash. Mr. Lowe, a lawyer, and Ms. Lowe, a stay-at-home mom, both 36 years old, were celebrating an accomplishment: paying off $127,482.30 in debt, mainly student loans.
Partygoers came from as far as 200 miles away. Some had never met the Lowes but followed their quest through a blog called Queen of Free. Guests won prizes such as personal-finance books, museum passes and homemade cleaning supplies. One friend sang "Sallie Mae Is Not My Lender" to the tune of Michael Jackson's "Billie Jean."
Americans are struggling with student loans like never before. Outstanding student-loan debt hit a record-high $956 billion in the third quarter, and 11% of student-loan balances were at least 90 days behind on payments, according to the Federal Reserve Bank of New York.
Some borrowers are fighting back, using a combination of extreme frugality and extra part-time jobs. And a few who win the battle by retiring their bills early are marking the triumph in style.
Ms. Lowe, through the blog she wrote during her family's four-year campaign to escape debt, repeatedly told family and friends: "When we're done, we're going to throw a party, and you're all invited," she recalls.
For some people, the anticipation of hosting a big bash is part of the motivation. Pinterest, a website that bills itself as an "online pin board," has a page of photos with decoration ideas for a student-loan payoff party being planned for March 2013. Another "pinner" posted a photo of what she calls the "perfect dessert for a 'Finally Paid off My Student Loans' party"—a watermelon fruit bowl carved as a shark, as in a loan shark.
Debates rage online over whether throwing such a party is celebrating or bragging. Some people who have sacrificed to wipe out their college loans worry that announcing their success could lead to requests for handouts.
In Manhattan, 31-year-old Sara Pereda is planning a party Jan. 25 to celebrate paying off about $37,000 in credit-card debt. She is still chipping away at $42,000 in student-loan debt but expects to pay that off within 18 months, she says.
Her party will be a charity fundraiser. She plans to buy drinks for friends at a bar for a few hours. In return, she is requesting $20 donations to YoungLives Harlem, a nonprofit group that works with teenage mothers.
She got the idea after realizing that the monthly amount she has been paying to shed her debt—roughly $2,200—would cover an open bar for about 70 people for at least a few hours.
Ms. Pereda says she got the student loans after moving back to her native Southern California to finish college, rather than staying at a Wisconsin school where she had a scholarship, so she could get work in the film industry. When she relocated to New York for a job with Miramax five years ago, she was making $45,000 a year, paying $1,300 a month in rent and about $330 a month for her student loans, on top of her credit-card payments.
In May 2009, Ms. Pereda quit using credit cards and started making payments of $700 a month after going through a "Good Cents" debt-reduction course offered by her church. The moment of truth was when she had to show all of her statements to the teachers, she says, and add up what she owed.
To make extra money, Ms. Pereda worked as a nanny on weekends for wealthy families in the Hamptons. She worked the front desk at her gym, which allowed her to ditch the $145-a-month fee. She hosted brunch at a restaurant, then worked as a cocktail server at a hotel lounge before learning how to tend bar. And she moved, slashing her rent by 60% to $490 a month.
Not everyone throws a bash to commemorate their freedom from student debt.
Joseph Mihalic, 29, paid off in just seven months about $90,000 in loans from attending Harvard Business School.
He attacked the debt by getting roommates to move in, selling a bicycle, motorcycle and second car, and starting a landscape business. He even cashed out his individual retirement account, paying a penalty to do so. He also sneaked a flask into bars rather than splurging on drinks, and took dates hiking rather than going out to eat.
A friend filmed him pushing a button on his computer to make the last loan payment. But there was no party. "I didn't have any money to throw one," Mr. Mihalic says.
The Lowes, the Indiana husband and wife, owed more than $80,000 combined on loans for law school for Mr. Lowe and undergraduate loans for both of them. When Mr. Lowe started applying for jobs, they were shocked to learn that starting pay at smaller firms "was less than what a teacher makes," she says. Still, they thought the more family-friendly working hours would be worth it.
Four years ago, they decided to tackle the debt head-on, she says. The student loans, which affected all of the family's other spending, were the toughest to shed.
Mr. Lowe took on two extra posts as an administrative law judge, working 12-hour days, often six days a week. They also scaled back their lifestyle dramatically. "The more success we got, the hungrier we got," Ms. Lowe says.
The Lowes quit giving each other gifts and limited their spending on their two daughters, who are 10 and 4, to three gifts apiece at Christmas: something to read, something to wear and one great toy. They went on no vacations, other than family visits and one trip to Disney World in Florida, a gift from Ms. Lowe's parents.
They quit eating at restaurants. There were no movies, and outings were limited to $10 and had to be budgeted. The daughters were limited to one extracurricular activity at a time.
In the past year, Ms. Lowe even started making her own laundry detergent. (The ingredients: one cup of Borax, one cup of washing soda and one cup of grated Ivory soap. Use one tablespoon per load.) She started to pull in a few hundred dollars from speaking engagements, and wrangled museum passes and other perks by blogging for the local convention bureau about things to do in Indianapolis.
The hardest parts of self-imposed frugality: not being able to donate to charity, give big gifts to her daughters' teachers or contribute as much to their church as they would have liked.
On March 28, they made the last student-loan payment. In May, they threw a party at their church. In lieu of gifts, they asked guests to clean out their change jars and donate their coins to Blood:Water Mission, a Nashville, Tenn., nonprofit group working to overcome the HIV/AIDS and water crises in Africa.
Rather than hiring a caterer, they made the party a "pitch-in," and everyone was asked to bring something sweet or salty to share. Ms. Lowe also scored $100 worth of fried chicken from a local cafeteria using credits from publicizing its deals on her blog.
With their debt gone, they now are turning to other goals: paying off their mortgage early, funding their kids' college without debt and saving for retirement.
Still, they can afford more ice cream and fresh herbs nowadays. "I've loosened up and gave us $25 extra a week in groceries," Ms. Lowe says. "We're living wild."