Let me offer some encouragement if you’re feeling like paying off your student loans is a distant dream or even an impossible task. I want to assure you that it can be done.
Before we get started, let’s be realistic. I don’t have a secret formula or a quick fix that will make all your student loan debt disappear in just 30 days. Just as I didn’t grow overnight, getting out of debt will take time and effort.
However, if you follow these 10 steps, you can accelerate the process and finally rid yourself of your student loans for good. I won’t sugarcoat it: paying off your student loans requires patience, hard work, and a lot of sacrifice. But it’s absolutely achievable! Years ago, I used these same steps to pay off my own $36,000 in student loan debt in just 18 months.
The sooner you take action and start chipping away at your loans, the sooner you can regain control of your life. So let’s make it happen!
- Create a budget.
Implementing a budget can significantly impact your financial situation. If you haven’t started budgeting yet, now is the perfect time to create a zero-based monthly budget. This type of budget will help you identify where your money is going and where you can cut back. For instance, those late-night dollar menu purchases can add up both calorically and financially, so you might want to reconsider.
By adhering to a budget, you might discover some extra cash that you weren’t aware of before. This is much more effective than hoping to stumble upon a few bucks in an old jacket pocket. If you allocate this extra money towards your student loans every month, you will make progress sooner than you think!
EveryDollar is a free budgeting app that can simplify the budgeting process. You can even assign a separate line item for each student loan that you’re paying off. This way, you can track your progress and feel encouraged as you crush your student loan debt.
- Find out your payoff date.
Discover when you will fully repay your student loans by using our student loan payoff calculator. Simply input your monthly payment, loan balance, and interest rate for each individual loan you possess. The calculator will display the expected payoff date for each loan based on your current minimum payment plan. While the initial results may be disheartening, don’t fret. Proceed to step 3 to explore the benefits of making payments greater than the minimum amount. - Make a payment greater than the minimum amount required.
Consider paying more than the minimum payment each month, as it can help you make progress in paying off your debts faster. By only paying the minimum amount, you may not even be covering the interest that accumulates, let alone the principal amount. To make a significant dent in what you owe, aim to make larger payments. You can use a student loan payoff calculator to experiment with how much extra you can afford to pay and how it can impact the time it takes to pay off your loans.
Like this, for example:
Suppose you have the typical amount of student loan debt that the average student graduates with, which is $38,792.1 (this may consist of multiple loans, but for this example, let’s assume it’s all one loan).
Assuming an interest rate of 5.8% (which is the industry average) and a loan term of 10 years (which is very common), your minimum monthly payment would be $426.782.
Due to interest, the total amount you would repay is $51,489, which is $12,697 more than your original loan. That’s quite a lot!
However, let’s say you decide to pay 20% more than your minimum payment each month (that’s $85.36). This would increase your monthly payment to $512.14, allowing you to pay off your entire loan in about eight years and save $2,794.04 in interest (as well as more than two years of your life)! This is much better!
If you paid more than 20% more than your minimum payment each month, you could pay off your loan even faster (which I think is an even better plan). I hope this example helps you understand the importance of paying more than the minimum amount due.
It’s important to be savvy when it comes to paying off student loans. If you pay more than the minimum monthly amount, your loan servicer might apply the extra funds to the following month’s payment, which delays the due date but doesn’t speed up the loan repayment process. To make sure you’re making progress, ask your loan servicer to keep the due date unchanged and to allocate the extra funds to your current loan balance instead.
You might have heard of biweekly payments, where you make two payments per month. This strategy can be effective if you have only one loan to pay off, and it motivates you to work harder to eliminate the debt. However, if you have multiple loans, it’s better to focus on paying them off one at a time, starting with the smallest balance first. This is called the debt snowball method, and I’ll discuss it further in point 5.
Of course, if you’re struggling to make the minimum payment every month, the idea of paying more might seem like a distant dream. If that’s the case, there are other options to explore.
- Consider making some financial cutbacks.
Remember when we talked about sacrificing earlier? This is where it comes into play.
Take a look at your current lifestyle. What luxuries can you live without? Cancel that expensive cable package and those fancy subscription boxes. Consider finding a roommate to split your housing costs or renting out that spare guest room for some extra income. By reducing your housing expenses, you can pay off your loans much quicker.
Additionally, you can sell items you no longer need on platforms like eBay, Facebook Marketplace, or Craigslist. Calculate how much you spend on dining out every week and make adjustments. Instead of buying expensive coffee, brew your own at home. Eat your leftovers or meal prep for the week to save money on lunch. Be smart at the grocery store and find ways to cut costs. Remember, making temporary sacrifices can lead to long-term gains.
- Pay off student loans with the debt snowball.
The strategy of using the debt snowball can be applied to paying off student loans as well. Begin by compiling a list of all your loan debts, including private loans, secured loans, and unsecured loans, in order from smallest balance to largest. Focus on paying off the smallest student loan balance first and allocate any extra funds towards this debt while still making minimum payments on all other debts.
After the smallest debt is paid off, move on to the next smallest balance. Take the amount that was previously being paid towards the first debt and add it to the minimum payment for the second balance. Repeat this process for each subsequent debt until all debts are paid off. This method has proven effective for many individuals seeking to eliminate their debts.
You may think that paying off your debt using the debt snowball method will take forever, but that’s not true. Most people who commit to this plan pay off their debt within 18 to 24 months. The best part is that you’ll feel the progress as each loan gets paid off. By starting with the smaller loans first, you’ll get some quick wins and stay motivated to tackle the bigger loans.
Make sure you don’t spend the extra payment money once you pay off a loan. Instead, use it to pay off the next loan and keep the momentum going.
Here’s a pro tip: Don’t try to do this on your own. Take Financial Peace University (FPU) to learn how to work the plan that has helped nearly 10 million people. This course will show you how to get rid of your student loans (and other debt) as quickly as possible!
- Apply every raise and tax refund toward paying off your student loans.
When you receive a raise or tax refund, consider putting it towards paying off your student loans instead of splurging on luxuries. Many people spend their raises without thought and then wonder why they don’t feel any richer. However, if you want to make progress in your fight against student loan debt, it’s crucial to use your extra income wisely.
As you progress in your career and earn more money, resist the urge to upgrade your lifestyle. Don’t buy a bigger house, a new car, or designer clothes. You managed to live without that extra money before, and you can continue to do so for a little longer. By putting your extra income towards paying off your student loans, you’ll make significant progress towards being debt-free.
Similarly, when you receive a tax refund, don’t waste it on frivolous purchases. Remember that the money you receive is just the government giving back what you overpaid in taxes. Instead of splurging, consider putting the refund directly towards paying off a significant portion of your student loans. By doing so, you’ll be one step closer to financial freedom.
- Increase your income with a side hustle.
One way to increase your income and tackle student loan debt is by starting a side hustle. You can pick up a part-time job on nights or weekends to earn some extra cash quickly. There are numerous options for side hustles, such as driving for Uber or delivering food, walking dogs, house sitting, or doing freelance work. For instance, the person who wrote this advice drove for Lyft and Uber and did freelance marketing work to pay off their student loans faster.
Don’t make excuses about not having enough time for a side hustle. If you have time to hang out with friends, scroll social media, or watch Netflix, you can spare a few hours for a side gig to earn additional money.
Remember that a side hustle won’t be a permanent solution. It’s a way to intensify your efforts and eliminate student loan debt so that you can move forward with your life.
- Don’t bank on student loan forgiveness.
Don’t rely on the possibility of having your student loans forgiven. Some people may have told you that taking out student loans is no big deal because you can have them forgiven later. However, student loan forgiveness is not as easy as it seems. Currently, there are numerous requirements that you have to meet to be eligible for forgiveness, such as working in a public service job for 10 years, and even then, forgiveness is not guaranteed.
Although there has been recent talk about the government erasing all student loan debts, it’s not something you should rely on. While President Biden talked about student loan forgiveness, he has only canceled nearly $3 billion of current student loans, which sounds like a lot, but the current federal student loan debt is actually $1.57 trillion as of summer 2021. So, after all that talk, only 0.19% of the debt was forgiven. Politicians often make empty promises, and it’s important to take care of your own financial responsibilities.
It’s better to have a well-paying job that you enjoy so you can pay off your student loans as soon as possible. This way, you won’t spend years waiting for your loans to be forgiven, which may never happen.
By the way, if you’re interested in documentaries, you should watch “Borrowed Future.” It’s about the student loan debt crisis in America, but be warned, it might make you angry.
- Refinance student loans if it makes sense.
Consider refinancing your student loans only if it makes sense for your financial situation. Don’t rush into refinancing without weighing the pros and cons.
Refinancing may be a good option if:
- There are no fees associated with refinancing.
- You can secure a lower interest rate.
- You can choose a fixed rate or switch from a variable rate to a fixed rate.
- You don’t have to extend your repayment period.
- You don’t need a co-signer.
- You haven’t recently filed for bankruptcy.
- It will help you pay off your student loans faster.
- When you refinance, all your loans, including federal and private loans, are consolidated and paid off by a new lender. You’ll then owe the new lender the amount of money they paid off on your behalf.
When you refinance, your objective is to obtain a more favorable interest rate and payment conditions. This means that you will be paying less each month to a single lender for a shorter period of time, rather than paying more to one or more lenders over an extended period.
Ideally, if you can continue making the same monthly payments after refinancing, you will be able to pay off the principal faster and save on interest. Additionally, once you have paid off your refinanced student loan, you can accelerate your debt snowball if you have other outstanding debts. (Refer to Section #5 for a quick tutorial on the debt snowball method!)
However, it is important to remember that the purpose of refinancing is to secure a better rate and payment terms. If the terms being offered to you are not advantageous, it is not advisable to refinance. Do your due diligence and carefully read the terms and conditions to avoid getting into a worse financial situation than before.
- Remain motivated, and you will eliminate your student loan debt as soon as possible!
To quickly pay off your student loan debt, it’s essential to stay motivated. I’m not here to criticize you for taking out loans, but I want you to experience the freedom of living without debt. Don’t drag out your payments for years when you could be using that money for other things. Imagine all the beefy Frito burritos you could buy!
If you’re ready to get rid of your student loan debt for good, check out The Ultimate Guide to Getting Rid of Student Loan Debt. This video course will guide you through a proven plan to pay off your loans faster than any lender’s payment plan. Say goodbye to student loan debt!
Remember that the key to success is your own hard work and determination. It may not be easy, but it’s definitely worth it. Keep fighting the good fight and eliminate that debt!