As a high school student, I toured a lot of colleges- I’m talking somewhere around 13. I was very picky. Among my non-negotiables, were that I wanted a reputable business school, small class sizes, and a campus that felt like home. Ultimately, that’s what I got- a quaint, private business school tucked around 30 minutes outside of the city.
The funny thing looking back though is that price was never a deciding factor on that long laundry list- and not because I had some huge college fund or rich grandparents. Being that I didn’t have any older siblings to model after, I assume this was because all of the tuition and room and board fees looked outrageous so without knowing what I would be making post-college, the numbers didn’t mean much.
Fast forward to me at the end of my college career in exit counseling, for the first time really face-to-face with that looming student debt that we always joked about while in line for “free” t-shirts. It was in this moment when I saw my college debt in it’s totality for the first time that I learned that the standard repayment schedule is 10 years… 10 years?! By that time I would be 30 and, in that moment, I decided I would not still be paying on my student debt when I was 30 years old. That meant I needed a plan.
Given the title of this post, you can see that I accomplished my goal. For the most part, I waited out the 6-month grace period then got down to business. The end result is that I was student debt free by 22. So without further ado, I’m sharing the strategies that I used to aggressively pay down my loans, without living on Ramen, so that you can crush your debt too! It should be noted that these tips apply to all kinds of debt, not just student loan debt.
Let’s get started!
Really Understand Your Loans
Prepayment Penalties and Multiple Payments– As a finance graduate, I knew a few things about why it was important to pay off loans early and what I should look for when making payments above my normal monthly payment. Before I launched any sort of plan, I called my loan servicer to ask about anything I wasn’t clear on. Primarily, I wanted to know if there were pre-payment penalties, which are essentially fees charged for paying your loans off early, and if I could make multiple payments in a billing period.
The main goal of paying off your debt early is to reduce the interest you would normally pay over the life of the loan, so I certainly wasn’t interested in being charged any pesky fees. After knowing that I could pay ahead without being charged and could make as many payments as I wanted per month, I had a better idea of a plan of action.
Interest Rates– Another critical piece to understand is what your interest rates are. Back to basics here, if you have two loans that are $5,000 each, one with a 3% interest rate and one with a 5% interest rate, you will be paying more in interest on the one with the higher rate. This information helps you to make informed decisions on which loan to focus on paying off first. More on this later.
Subsidized vs. Unsubsidized– You know how you get that glorious six-month grace period after you graduate to get your life together and start making money before you have to start paying back your loans? A sneaky little tidbit that you should look into is whether your loans are subsidized or unsubsidized. This information should be easily accessible to you. Mine was located right beside the loan number and balance. Here is what you need to know:
- Subsidized loans= Interest is paid for you while you’re enrolled at least half time in college.
- Unsubsidized loans= Interest accrues as soon as the loan is disbursed, including while you’re in school!
What this means is that if you’re going to make any payments while in school or during that 6-month grace period, it would be wise to pay on your unsubsidized loans first. I mentioned earlier that I mostly waited until my 6-month grace period was over to begin repaying my loans. That’s because, during this time, I paid the interest on my unsubsidized loans through Sallie Mae.
Set It and Forget It
Set up your automatic payment (autopay) and forget about it. Don’t even factor that money into the money that you are bringing in. When I was paying off my student debt, I had a separate account that only paid my student loans and car payment. I didn’t authorize those payments myself each month or even see that money go out so I never gave myself the option to use it towards anything else. By doing this, you can sleep at night knowing that you will never miss a payment; thereby, avoiding late fees.
The way that autopay typically works is that it will apply a portion of your monthly payment towards each of your loans (assuming you have multiple due to multiple semesters). Many loan servicers offer a small interest rate reduction for setting up autopay, which will save you money in the long run!
Make a Plan To Overpay
Okay, so you already have autopay set up. That’s great; however, at this rate you will still be paying every cent of interest and will be making payments until that scary due date you were given during exit counseling, likely 10 years post graduation.
My primary Federal loans were all with one loan servicer and were broken down into seven smaller loans, each with a different interest rate. So how do you know which loan to pay off first (this is where we dive deeper into interest rates)?
One of the most common approaches is Dave Ramsey’s “debt snowball.” If you’ve ever heard of Dave Ramsey, you may be familiar with his famous “Baby Steps” that are comprised of seven steps to take to become debt free.
Right after you’ve completed the first baby step, which means you’ve saved $1,000 in an emergency savings fund, you’re supposed to tackle step two, which is using the “debt snowball” approach to pay off all of your debt except for your house. Essentially, what this means is that you pay off the debt with the smallest outstanding balance first regardless of the interest rate.
The thought process here is that if you are living paycheck to paycheck, paying off those mountainous debts are going to feel like the equivalent of climbing Mt. Everest without any water. Therefore, you start with the smallest balance so it feels some level of possible. Then, once you pay off that loan, you will have a sense of accomplishment and confidence that “I can do this,” which will propel and motivate you to tackle the next smallest debt until, before you know it, you are debt free.
While this concept is highly famous and wildly successful for many people, I actually focused on paying off the loan with the highest interest rate first. In some cases, this was one of the loans with the smaller dollar balances, and sometimes it wasn’t. While it was certainly uplifting to see whole loans paid off when the balances were smaller, it was equally as gratifying to see the amounts I considered huge dwindle lower and lower until they looked achievable. In reality, though, I stuck with this method because my goal centered around paying as little interest as possible and I felt a great deal of accomplishment in knowing I was lowering the amount of interest I would pay by tackling those with higher rates first.
The point here is that either method is perfectly fine and you are a winner just by making the effort to take charge of your debts.
Advancing Due Dates– As a recap of the section above, the only way to pay your loans off quicker is to overpay. Student loan servicers make their money by collecting interest on you so, for them, the longer it takes you to pay your loans the better (provided that you do, in fact, pay them). However, as a debtor, the benefit of paying off your loans in advance is that the smaller the balance the less interest that accrues and the shorter the duration in which interest can accrue.
One thing that you really need to pay attention to when making extra payments is the option to advance your due date. If you have already made your monthly payment, or have your payment set up for that month, you will be notified of such and then asked if you want to advance your due date. Advancing your due date does not help you in this situation!! Essentially what it means is that say you have made your January 1st payment and in January are making another payment that covers the monthly minimum.
Advancing it means that this payment would count as the February 1st payment and the next payment wouldn’t be due until March 1st. Sure, this is a great option if money is tight and you get an influx of money (say a stimulus check) that you want to use responsibly. However, for the purposes of wanting to make extra payments to reduce interest you need to make sure two things occur: 1. you do not advance the due date and 2. all of the extra payment goes towards principal, which will actually lower the loan balance and leave less for interest to be charged on. This brings me to my next point…
Be Obsessive
…and when I say obsessive, I mean be obsessive. If paying off debt isn’t truly your number one goal like it was mine, that’s totally fine. You can still implement these tips while going on trips or expanding your wardrobe, but for me, I wanted my loans gone more than almost anything, and I was determined. This meant every extra bit of money I had I would use to make a payment.
At the time, I was traveling a lot for work, so I would use all of my travel checks, tax returns, and any other larger sums of money that I had. However, on occasion, I would even make payments as low as $25 when I could find the extra cash because I figured, hey, every bit counts. And yes, this did mean swapping out expensive meals and going on shopping sprees for cheap grocery trips and seeking out free activities and events. However, it wasn’t all bad, built character, and in the end I can tell you that it was every bit worth it.
Track Any and All Progress
As another means of being obsessive, I would track all of the extra payments that I made on my loans to make sure they posted appropriately. Then, if anything looked off, I would call and talk to customer service. I made my spreadsheet in Google Sheets (Google’s version of Excel) and it looked a lot like the chart below, in case you want to make something similar. 🙂 I would highlight any payments that hadn’t posted yet and use the notes section to put what money I used or anything else of importance.
| Loan Number | Payment Amount | Payment Date | Loan Balance | Note |
| 1-02 | $500 | 3/14/2021 | $2,250 | Used bonus |
Celebrate Mini Accomplishments
When tackling a huge goal like this, it’s important to have big, medium, and small goals, make them fun, and adjust as necessary. For example:
- Big goal- Pay off all student loans in one year.
- Medium goal- Pay off loan 1-02 in 3 months by doing x, y, and z or using x, y, and z money.
- Small goal- Find/make $200 extra to pay on loan 1-02 this month or get the end of loan 1-02 to end in all zeros (ex. $3,456 to $3,000) by x date.
How do you eat an elephant? One bite at a time. Setting goals gives you something more achievable to work towards and can even turn things into a bit of a game to see what you can accomplish. But, in the pursuit of all of this hard work, it is important to recognize how far you’ve come and celebrate when you’ve accomplished a milestone, no matter how small.
Prioritize
Life is about learning what’s important to you and managing your scarce resources accordingly. As human beings, we are all limited to some extent by finite amounts of time and money. While the distribution of these resources among us varies, we all to a certain extent are limited by these factors. For the purposes of this post and paying off loans, the scarce resource we are focusing on is money.
As a recent college graduate and entry-level hire, I was limited to my starting salary. Sure, I have expensive taste and would love to be able to have everything I want, but in order to pay off my loans I needed to prioritize what was most important to me. This is where the “without living on ramen” part of the post comes into play.
While it was essential to me to build up my business wardrobe so I could work, eat, and enjoy life, I did it within reason and lived as minimalistically as I could during the time. Yes, I had a nice apartment, but it had limited furniture and I shared it with two roommates. Do I have any regrets? None at all because it set me up really well to tackle other big financial goals like buying a family home at 22 and getting married to my high school sweetheart at 23 without a wedding fund and without bringing that debt into our marriage.
The sooner your loans are paid off, the closer you are to financial freedom. Technically, you had to get loans to pay for the education that got you your first, full-time gig, so technically you don’t start profiting until those loans are gone. Plus, once they are that’s more money every month that you can put towards your other goals. If your salary isn’t enough, get a side hustle and dedicate the proceeds strictly to that goal.
Parting notes: I was fortunate to have had academic scholarships, free room and board my last two years for serving as a Community Advisor, and a full year of dual enrollment credit that allowed me to complete my degree in 3 years. If you are still in high school or college, I highlyyyy recommend any and all of these options to reduce your debt on the forefront.
I hope you enjoyed this post and it helped you understand your debt a little better, gave you tangible tips to get started, or motivated you to do more. Let me know what your takeaways are and if you’d like more content like this in the comments below!
