Ways To Pay Off Student Loans Quickly

Ways To Pay Off Student Loans Quickly – Today I have a great story about paying off Val Breit’s debt. She paid off $42,000 in student loans in 34 months while earning $36,000 a year. Below is her story. Nice!

For the first time, I chose my own student loan lender to help pay for my graduate school education.

Ways To Pay Off Student Loans Quickly

Ways To Pay Off Student Loans Quickly

After seeing the chart explaining that the $50,000 I was expected to borrow for college would actually cost me nearly $100,000 to pay back, I cried. Difficult.

How Long It Would Take To Pay Off Student Loans By Degree

I knew I wouldn’t make much as a school counselor, so I felt like it was a death sentence. I would pay off this student debt forever.

After this harsh reality slapped me in the face, I pulled myself together and decided to do everything I could to avoid paying that horrendous $100,000.

After 6.5 years, I graduated with a 4.0, a master’s degree in school counseling, and over $42,000 in debt. After consolidation, my loan manager put me on the standard 20-year repayment plan, but I knew I would never pay for my college education that long.

In fact, I paid back those student loans in full, plus the 6.8% interest, in just 34 months – less than 3 years from graduation day.

How I Paid Off My Student Loans In Just Years

I was offered a lot of financial aid and it was tempting to take whatever was offered to me. During graduate school, I was offered about $20,000 a year in financial aid, even though tuition was only about $8,500! I could have easily had $100,000 or so in student debt. Fortunately, I already had my “aha” moment (see the tearful story above) and knew how much that borrowed money would cost to pay back. So I figured out how much I needed just to cover tuition and turned down every extra dollar that was offered to me. This kept my total loan amount under $50,000.

Instead of looking at the short term and how I could get away with the lowest payment each month, I looked at the total amount I would pay back if I chose the standard, extended, or income-based repayment plans. I chose the standard installment plan because it saves you the most money in the end.

I also calculated and compared the total amount I would pay back (principal + interest) – and how much I could save – if I paid off my loans faster. I predicted that I would graduate with $50,000 in loans, and I realized I could save over $30,000 if I paid off my loans in 5 years instead of 20! For someone who would make only $36,000 a year, such savings were impossible to ignore. Check out the chart below to see for yourself.

Ways To Pay Off Student Loans Quickly

I looked at the amounts I owed to each lender and figured out what the interest rates meant. Most of my loans were direct unsubsidized loans with an interest rate of 6.8%, while a few had a much lower interest rate of 2%. Using a repayment calculator, I realized that I would save the most money by using the debt settlement method of tackling one loan at a time, starting with the loan with the highest interest rate first.

Tips On How To Pay Student Loans Fast (infographic)

You knew the b-word would come sooner or later. Yes, I created a detailed budget to tackle my debt. This was my plan for how I would spend my money each month. I compared my projected income to my monthly bills to see how much extra I could get. I studied every issue to find ways to save money. I continued to budget during the time I paid off my loans (and I still have a monthly budget to this day).

Before I made any debt payments, I saved $1,000 as a small emergency fund. It was a comfortable number for me as a safety net, and I was strict about only using it for real emergencies. This got me into the habit of saving, and I knew that once I had more than $1,000 in my bank account, I could continue to save and pay off my debt.

Using my budget and a down payment calculator, I set what I thought was an ambitious SMART goal: I wanted to pay off my largest loan, which was about $38,000 at 6.8% interest, in 8 years. My method was to set aside an extra $200 from my paycheck each month. When I first looked at my budget, it was the maximum I thought I could afford. And while 8 years seemed like a long time, it was much shorter than the 20-year installment plan I was on.

Most of my loans had a 6 or 9 month grace period before my first bill was due. But I started working full time as a school counselor making $36,000 a year right after graduation. Instead of using this money to buy clothes, furniture or a new car, I started paying off my student loans. Because no interest accrued during the grace period, all the money went directly to the principal. This is how I reduced the principal on my loans before interest rates started to rise.

Student Loan Repayment Plan

I consolidated all my direct loans at about 6.8% for an interest rate of 6.75%. I did not consolidate the 2% direct loans as this would have resulted in a higher interest rate. Since I only had my loans for a few years, it probably didn’t matter much. But it moved a bunch of smaller loans into one big chunk for me to handle. However, if you can get a lower interest rate by consolidating, it might be a smart money move for you too.

Once my payments were due, I set up automatic monthly payments so I would never miss a payment and received a small interest discount (0.25%). But instead of the minimum payment, I set up this automatic withdrawal to withdraw the extra $200 I needed to pay to reach my goal. This made my total monthly payment about $450. Rather than consider it an “extra” payment, I pretended it was a real $450 bill, just like my rent or electric bill. That way I wasn’t tempted to spend that extra money elsewhere. I knew that paying monthly was the only way to reach my goal of paying off that big loan in 8 years (which would save me about $20,000 in interest).

Despite my best efforts to set up an automatic extra payment each month (step 8), my loan manager just couldn’t get it to work. For a few months they only took the minimum amount I owed so I had to manually make the extra payment online to stay on track. Then they started taking my money on the wrong date. It was frustrating because on a budget as tight as mine, I couldn’t afford to pay $450 to come out a week early or late.

Ways To Pay Off Student Loans Quickly

I called customer service to fix it, but after several painful phone calls, hours on hold and months of added financial stress, I finally stopped the automatic payments. I sacrificed the interest rate cut because I kept the big picture in mind: I wasn’t stuck saving 0.25% interest, I was aiming to save $20,000! The only way to do that was to make additional repayments each month, and I wasn’t going to let the loan manager’s failure get in the way. I ended up putting the bill on my monthly calendar and manually making the $450 payment each month.

How To Pay Off Your Student Loans

It’s hard to believe, but I only got a smartphone after my student loans were paid off, even though I really wanted to. I was teased by colleagues and it was incredibly uncomfortable. I had to use my old school GPS to get directions and I only checked my email or social media when I was on my laptop at home. But having a “dumb phone” with no data plan saved me thousands of dollars, helping me pay off my debt even faster.

I drove a small paid off car so I didn’t have a car loan. I had to commute 30 minutes to work and the best gas saver of all was carpooling with a co-worker. While carpooling wasn’t always convenient, it saved me a ton of money on gas every month.

I called my satellite TV provider, our internet provider, and our cell phone provider to see how I could lower my monthly bills. I was successful with the TV and cell phone companies, but I was blown away with the Internet company.

And I hardly ever bought new clothes. I spent an average of $20 a month on new clothes. My old clothes weren’t trendy, but they were good. And if there was a piece of clothing I really wanted, I gave it to my mom as a gift idea.

How To Pay Off Student Loans Fast In 2017

I also found ways to save money

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