Student loan debt in the US is currently measured in the trillions of dollars. That’s a lot of people who owe a lot of money.
While there are lots of repayment programs and forgiveness programs being offered, they mostly rely on you waiting a LONG time, and paying a lot more money than you would if you just dug in and paid off the full balance. Of course everyone has to make their own financial decisions, but here’s what I did to pay off my 30-year student loan 22 years early.
Crunch the numbers. It’s hard to get serious about any kind of debt if you don’t know exactly how much you owe and how much you’re paying in interest. As soon as I figured out that my student loans were going to cost me $27,000 in interest what I had to do became clear. In this case, ignorance is not bliss. Know your debt.
Make your debt public enemy #1. Be 100% focused on paying down your debt. This decision to make paying off your loans your top priority is what will set you up for success. If you’re still feeling like, “it might be nice to have no student loans” then it’s going to be hard to make the commitment and sacrifice required. I gave up a lot in order to pay down my debt, but it was worth it because my financial future was more of a priority than vacations, a new purse, or anything else.
Pay more than the minimum. As in as much as you possibly can. While paying the minimum will eventually pay off your loan, you’ll end up paying a lot more in interest. My $45k loan balance would have cost me ~$73,000 if I’d just paid the minimum! By paying it off early I saved my family over $18,000!
Set up automatic payments. It’s too easy to “forget” to pay a bill when you’d rather buy a new outfit or iPhone. Either through your bank or your loan provider, set up payments to be deducted automatically so that you can’t forget or skip a payment. I actually set up my payments to be taken out weekly. It allowed the deductions to be smaller instead of a large monthly payout, which was just easier on my psyche.
Keep your eyes on the prize. Before I started focusing on paying off my loans I never checked my account statement. Once I made the decision to make my debt public enemy #1 I began checking it religiously. Not only was it awesome to see my balance drop, but I could see the amount that was going toward interest drop, too. That was the motivation I needed to keep going.
Draw from your savings. If you have enough money in your emergency savings account, consider withdrawing money from your savings to pay down your student loans. Chances are you’re making less in interest on your money in savings than you pay in interest on your loans.
The day I said goodbye to my student loans was one of the best days of my life. The financial strain it put on my family and the mental strain it put on me, mostly guilt, was like an anchor around my neck.
Now we’ve set our sights on other goals. We put more into retirement, we’re able to do some upgrades around our house, and we’re rebuilding our savings to provide us a full 12-month savings cushion.
What could you do if you didn’t have loans to pay?