This is part one of my How To Pay Off Student Loans Fast series. See part two here.
Student loans…UGH. These were the bane of my existence for 7 years.
I graduated in 2007 from a private Christian university with 36k in student loan debt. Considering it was a private school, I didn’t even end up too badly compared to many others. I believe my alma mater cost about 20k a year when I started as a freshman, and by my senior year, it was around 30k (these numbers are off the top of my head, so I could be wrong). I just checked online, and as of now in 2019, it costs $49,000 per year. Crazy!
Anyway, I just paid minimum payments for several years, and even eventually took out some more loans for grad school (thankfully we didn’t spend all of that loan money before we started our gazelle intense debt-free journey and could pay some of it back). But eventually we decided enough was enough and we didn’t want to live this way. We knew we made decent money on paper, but with all of the payments, we had it sure didn’t feel like it.
The Student Loan Crisis
According to the US Department of Education, there are 1.598 trillion dollars in student loan debt in America. That number is mind-blowing. It is spread across 43 million total borrowers, and over 2.8 million people owe over 100k in student loans.
That is depressing.
However, the stats for the average person aren’t quite so terrible. The average debt per person is about 33k and the average monthly payment is $398.
Yes, that is a lot of money. Yes, it can really weigh someone down. However, so many people take out a car loan for 33k and don’t even think twice, yet go on about how fair it is that they have student loans.
I don’t like the cost of college, either, but the first step to getting this burden off of your shoulders is being willing to give it all you have to get it gone ASAP. No more “woe is me, I’ll never get ahead” thoughts and rants. It’s time to attack this!
How To Pay Off Student Loans Fast
Paying student loans off doesn’t have to take you forever. You don’t have to be a slave to them. It’s not going to be really easy, though. If it was easy to pay off student loans, everyone would do it and no one would be complaining.
You can wait to see if someone gets elected that promises to ease this burden for you, but honestly, do you really trust Congress to get something like student loan forgiveness passed? I’m no political or economic expert, but honestly, I feel I can confidently say that the odds of free and clear loan forgiveness is very, very low. And if it does happen, it’s not going to be all that soon. You can’t put your life on hold just because maybe someday quite possibly perchance someone may erase that debt for you.
And if that does happen and you “miss out”…the financial returns you get simply from learning how to manage your money wisely and freeing up the money from monthly payments earlier will pay you back 10x…heck, maybe even 100x what everyone else received through loan forgiveness. The best way to get ahead and build wealth is to learn how to utilize your income to meet your goals. Loan forgiveness isn’t going to solve the average person’s financial issues like we think it will.
That’s why we need to be willing to sacrifice to change our financial situation. That means you need to make a plan that will work for the here and now.
Create A Budget
Creating a budget is the most important thing you can do for you and your family’s financial health. You need to control your money, not let it control you. You should be aware of where every dollar is being spent, and if you feel like you don’t have very much money, you need to know exactly what is to blame for that. Without a budget, you have very little information about your spending habits.
Some of you may not like the word “budget”, but if you do it correctly, it should feel like you got a raise. You will be able to see what you really bring in for income, how much you really spend, and what exactly you’re spending it on. Read here for more information on budgeting.
Your budget will be your NUMBER ONE TOOL for slaying your student loan debt as fast as possible. Vow to yourself that any money outside of your bills and essentials will be budgeting toward paying off your student loans.
List Out Your Student Loans (and other debts)
Look into exactly what your debt is. List it out. I liked to list them out smallest to largest, but maybe you prefer to list it by category, interest rate…it doesn’t matter. Just get it all listed out in front of you. Face your debt head-on. Knowledge is power–no more burying our heads in the sand about all of this.
Many people’s student loans are actually a bunch of smaller loans managed by one servicer that you may just have to pay one payment towards, and the servicer divides the payment as needed. If you concentrate on paying extra on your loans, try to focus on one individual loan at a time. When that individual loan is paid off, it brings your minimum monthly payment number down with it. It’s cool to watch and track!
If you have debts other than student loans, list those out, too. Ask yourself the following questions about your debts:
- What type of debts are they? Credit cards, cars, boats/other vehicles, personal loans, etc.
- What are they on? IE, what did you buy with all of that credit?
- Do you *need* these items?
- If yes, do you need that exact one, or is there a cheaper option you could get by with?
- If no, can you sell these items?
- Are you WILLING to sell these items?
Selling things is a sacrifice. But you’re not selling things and resolving that you’ll never be able to have them. You’re selling them because you have a bigger, life-changing goal in front of you that is more important right now. Once you get your debt behind you, you can save up to repurchase these items.
One of the biggest lessons of this journey is patience. We need to learn that we can’t have it all, especially not all at once. Things take time. We can’t expect to graduate and maintain the lifestyle our parents gave us that they took a decade or more to work towards.
Almost all of our debt we used to have was in car loans and student loans. We could have sold the cars, but we decided to keep them and got them paid off in just over a year. We kept them because our cars were already used, older vehicles, and we were underwater in the loans. What we would be able to buy instead, plus factoring in the cash we would have to come up with to sell…it wasn’t saving us that much money in the end.
I will be honest, I was kind of jealous of people who had debt on things they could sell. If only my debt was a motorcycle, boat, or camper…I could just sell that and be done with it! But that was not our story.
Anyway, if you can sell anything you have debt on and get rid of that payment, that will free up more money you can throw at your student loans. You can save up and buy whatever it is you want once you’re debt-free.
Focus on getting a handle on these areas. When you are ready, check out How To Pay Off Student Loans- Part Two.
How are you doing sticking to your monthly budget? Share your tips in the comments!