5 Smart Tips on How to Pay Off Student Loan Debt Fast
I paid off all of my student loan debt in exactly 2 years. Yes, all $30,000 of it.
I didn’t have a fancy job and I didn’t make a lot of money but by the age of 23 I was completely debt-free.
Now, to understand my journey, it’s important that I start from the beginning.
The idea of student loan debt was always in the back of my mind the entire 4 years I was in college. I knew that when I graduated the celebration would be short-lived due to the amount of debt I was racking up.
The only problem was that I didn’t have a repayment plan. I tried talking to a few financial counselors, but I didn’t like what they were telling me. They kept trying to convince me to take the entire 10 years to pay my debt off and not to worry about the interest I’d be accumulating.
I wasn’t pleased.
I wanted a plan to pay off my student loan debt fast. I hated the idea that I owed someone money, even if that someone was the government.
Since I wasn’t getting the help I needed from the professionals, I decided to piece together my own repayment plan. As soon as I graduated, I gathered all the information I needed to create my plan. This information included: total number of loans, total costs per loan, interest per loan, monthly payment amount, etc.
I then calculated how much money I would make at my new desk job and came up with my two-year plan. I couldn’t pay off my debt before the two years, and to be honest, I wasn’t entirely sure I could pay it off at the two-year mark. But three years felt too long and one year was too short, so I settled on two years.
Once I got a solid plan into place I set out on my journey and within two years I succeeded.
It wasn’t easy but it was completely worth it. The good news is you can pay off your debt fast, too!
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Here are my top 5 tips on how to pay off student loan debt past
1. Don’t Consolidate Debt
The only reason I was able to pay off my debt was because I paid off a single loan at a time.
Many financial advisors and school counselors will urge you to consolidate your loans. You’ll see lots of advertisements for companies that specialize in loan consolidation. Here’s my personal opinion on consolidation.
Don’t. Do. It.
The only reason I was able to pay off my debt in two-years was because I focused on paying off my individual loans. I started with the loans that had the highest interest rate and finished with loans that had the lowest.
By consolidating loan debt, your interest becomes one. That means your monthly payments go to your interest first and if there is money left over, then it goes to the principal. This is why it takes people 10 years to pay off loans.
By leaving loans as individuals, like I did for my 7 loans, I was able to pay down one loan at a time while still making my monthly minimum payment.
2. Value Every Dollar You Make
A penny saved is a penny earned, especially when paying down debt. Maybe a dollar, or ten, or twenty dollars doesn’t seem like much, but in the long run that money adds up.
One of the key factors for how to pay off student loan debt fast is to save as much as you can. If you do my method of not consolidating your loans, then you can pay off individual loans at a time.
That means you will have a save a large chunk of money before you can knock out an entire loan. For example, one of my loans was for $2,000. That meant I needed to save up 2k + the gained interest in order to pay off that loan in full.
This is where the chump change added up and helped me reach my goal sooner.
Valuing your money also means deciding on which purchases are necessary and which ones aren’t. If you are trying to pay off your student loan debt fast, are you valuing your money by going out every weekend or shopping all the time? Unfortunately, the answer is no.
To really value your money for the purpose of paying off debt means that your debt comes first and everything else comes second.
Recommended: Top 5 Tips to Save Money in Your 20s
3. Embrace Being “Uptight”
Yes, I was called uptight along with a slew of other names: cheap, penny pincher, no fun, boring, and so much more.
Did it bother me? Nope! Why not? Because the very people who called me names still have debt and I don’t. While I didn’t like being called names it didn’t deter me from my goal.
I knew I wanted to live a life of financial freedom and the only way to get there was to sacrifice a few years of spending. Throughout this time I learned that it’s okay to be uptight and work towards a better future.
I don’t feel like I missed out on anything by being uptight. I didn’t lose any friends, I didn’t miss out on not having the newest technology, and I wasn’t outcasted for not wearing the newest clothes.
Everything worked out just fine in the end and the people who called me uptight ended up asking my advice on how they can get out of debt sooner.
4. Don’t Let the Principal Distract You
This concept kind of goes back to not consolidating your loans.
With your student loan debt, there is this big picture idea of the principal. The principal is the total amount of money that you borrow. In my case that amount was $28,000. The added interest fees is what brought my overall balance to around $30,000.
When you make a payment on your loan, the money doesn’t go to your principal first. The money first goes to your interest and then what is left over goes to the principal. Because of this system, it makes it seem like the principal hardly budges or it even raises. This is why it takes people 10+ years to pay off student loan debt.
The way I beat this system was by doing the following:
In total, I had 7 loans all at different amounts and interest rates. Instead of trying to pay off all $30,000, I chose to pay off individual loans in full.
I chose to pay off my individual loans for many reasons:
- When an entire loan has been paid in full, the monthly minimum lowers.
- Paying off a loan in full saves you money. Basically, if you aren’t being charged the interest of a loan, you’re saving money.
- Saving for an individual loan is way more bearable of a goal than saving up for the entire student loan bill.
Once I figured this out, I knew I could pay off my student loan debt fast!
I was able to start saving for the loans with the highest interest rates and knocking them out every few months. By the time I had one more loan to save for, my monthly payment was down to less than $50 and I had literally saved thousands of dollars in interest fees.
I was only able to do this because I didn’t consolidate my loans and I focused on paying off my individual loans.
5. Set a Goal and Stick to It
When I told people I was going to pay off my debt in two years no one thought I could do it. Everyone tried to convince me to take my time because student loan debt is “good debt”.
Set a clear goal for yourself and stick to it.
For me, that goal was two years. Maybe you want to take three years or five years. It doesn’t matter, just as long as you stick to your goal.
However, I understand that this is easier said than done. Just because you make up your mind to stick to a goal doesn’t mean it will automatically be easy. Quite the opposite actually.
Life still happens. There will still be emergency expenses. You will still need to purchase birthday gifts, Christmas gifts, and other miscellaneous gifts. You still have to pay all your bills and help take care of your family. Basically, life still goes on regardless of your goals.
Don’t let that discourage you. Instead, use this knowledge to prepare yourself for when life gets a little expensive. The moment you extend your goal is the moment you tell yourself that it can’t be done.
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But it CAN be done and you CAN do it. I absolutely believe in you.