In addition to owning a home in my twenties, one of my financial priorities is to pay back student loans. For the past three years, I’ve been slowly chipping away at my student loans and I’ve reduced it by more than half. I can proudly say that I will make my last payment in 2016. So how am I managing to do this all so quickly, almost six years ahead of schedule?
My Student Loan Story
In college, I was fortunate enough to have scholarships that covered some of my tuition, but despite the financial aid, I accumulated $20,000 in student loan debt. However, things started to get out of hand in graduate school when I borrowed over $45,000.
Although I am grateful for my education (Master’s in Health Care Administration), I am ready to live debt free and start investing in my future, not my past. In less than four years of repayment (as of November 2015), I am down to $34,000 and I can’t wait to move on with my life and earn financial independence.
Update November 2016: I paid off the rest of my student loan balance in November!
How to Pay Back Student Loans Faster
There is no rush to move out.
My accelerated payment plan would not have been possible if I did not take advantage of living at home with my parents. Instead of paying rent, I used the extra funds to pay back student loans.
I understand that this option is not for everyone, but if it is possible, I strongly urge you to take advantage of it. Living at home with my mom was one of the best decisions I’ve ever made.
Update November 2017: I moved out in November and bought my first home!
By keeping my living expenses low, I could afford to make more than the minimum payment which directly reduced the principal.
Throw money at your student loans.
This is my favorite tip because it’s one of the most effective ways to pay off student loans faster, a lot faster.
This means that you have to pay more, way more than the minimum requirement.
Right now I’m paying 123% more than my required payment, but to do this, I’ve made a lot of sacrifices. I quit going to the movies, drinking Starbucks and nail salon visits.
Here are the six major sacrifices I made to pay off my student loan debt.
I’ll have plenty of time to live a glamorous lifestyle once I’m debt free.
Use your bonus or tax refund.
Use your bonus, tax refund or any (cash) gifts you receive throughout the year to make a large lump sum extra payment. This is a great way to make a significant dent in your student loan balance and speed up the repayment process by months or even years.
Hack the interest system.
Some student loan providers offer 0.25% interest reduction if you sign-up for auto pay. But just because you signed up for auto pay doesn’t mean that you have to actually use it.
Use auto pay to take advantage of the discounted daily interest rate.
Don’t forget to disable it a few days before the automated withdrawal and reactivate it once enough days have passed.
Get the “free” discount every month!
Be consistent with your payments.
Send payments to your student loan lender every time you get paid. If you get paid bi-weekly, make payments every two weeks. If you get paid weekly, make payments every week. Do not make only one payment a month!
Seriously, paying off your student loans requires consistency. Pay the same amount every pay period.
Frequent payments will dramatically cut your accrued interest.
Make repayment a priority.
Paying off your student loans early is all about your attitude and mindset. Make repayment a financial priority and create a monthly budget including the most that you can possibly afford.
Think out of sight, out of mind. You’ll learn to live without the extra funds.
Also consulting professionals for debt management advice can also be a good idea.
Your student loan repayment journey depends on your personal financial situation. Although the one size fit all approach may not work when creating your repayment plan, I’m confident that you can use these tips to pay back student loan debt sooner.
As you create a strategy, consider how far you are willing to go and how fast you want to pay off your debt.
I cannot stress enough that paying off student loans starts and ends with you.