How I Paid Off My Student Debt
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I graduated university in June of 2015 with approximately $32,000 USD in student loans (for reference, I’m American). Compared to some, the amount of debt I accrued during my four years of undergrad was not too high, but it was still a hefty number for being 21 years young.
Before moving abroad to teach English, I wanted to pay off all of my student debt so I would be financially free and could use that money for travel. I worked really hard for two years after graduating university, and am proud to have successfully paid off my students loans in November 2016!
There was a good amount of self-motivation and determination involved in making this goal a reality. How did I manage to pay off $32,000 USD of student debt within 18 months? Here are 7 things I did (and what you can possibly do) so I could begin using my hard earned money for travel, passion projects, and more fun things in life!
1. Get a job
This seems obvious, but making money is crucial to managing your student debt. While looking for a job near the end of my university career, I told myself if I didn’t land an ideal job post-grad that I would take (almost) any job so I wouldn’t be broke. I made the decision that being temporarily underemployed would be better than being unemployed. Yet, I was fortunate enough to land a job at a nonprofit in Los Angeles and started earning a “living wage” shortly after graduation.
2. Do the math
Doing the math behind your finances is important because you need to be aware of what you can afford and how that impacts your lifestyle. My goal was to pay off my student debt as quickly as possible while still socking some cash into a savings account and contributing to an IRA. I had to seriously focus on how to stretch my paycheck through effective budgeting while keeping my financial goals in mind to figure out the maximum amount I could devote to my student loans. Once I figured out that amount, I was determined to more or less stick with it.
3. Budget
Budgeting is integral to successfully pay off any type of debt. Creating and sticking to a budget will help you manage your spending and debt, making it possible to do more of what you want and build a life you’re proud of. Check out “Budgeting Preparation” and “Budgeting for Beginners” to get started!
Tip: Live with your parents/ family for a little if possible! In larger cities it’s becoming increasingly difficult to find reasonable and affordable housing. For example, a bedroom in a shared apartment in Los Angeles can easily cost between $700-$1,000 USD every month—and that’s just rent! I was lucky because my parents let me move back home after graduating and did not charge me rent, although I was financially responsible for other aspects of my life. I was able to commute to work, save money, and pay off my loans. If moving back home is definitely not an option, try sharing spaces with friends or find which areas in cities tend to be more affordable.
4. Lifestyle change
Budgeting and lifestyle go hand-in-hand. If you’re living above your means—spending more than you earn—it’s time to reflect: Maybe it’s time to find a better paying job. Or, maybe you really need to re-evaluate your spending habits. Possibly, it’s time to embrace the side-hustle and take up some part-time work. (Personally, I began tutoring after my 9-5 job for some extra cash.) Whatever the reason for your overspending, you need to identify it and make appropriate lifestyle changes to accommodate your financial goals. Sometimes, that means sacrificing a couple small luxuries to start living at or below your means. Check out my “Minimize Spending” blog for some inspiration!
5. Consolidate loans
With students loans, the main issue (other than them existing whatsoever) is the interest rate tacked on to them. These high interest rates are what kill many young people—not solely the original loan amount. It may be in your benefit to consolidate your loans, as some loan providers will decrease the overall interest rate if you choose to consolidate. Depending on the types of loans you have and the overall total, a lower interest rate could benefit you in the long term to allow paying off your debt more feasible.
Tip: Pay high-interest loans first! Do you have one loan with a higher interest rate than others? If you do, try paying that loan off first so you’re paying less overtime.
6. Pay on-time
Making timely payments is critical, as this impacts your credit score and helps you stay accountable. If your payment is due every month, you can automate the payment to be withdrawn from your bank account. I recommend setting this to be withdrawn a few days prior to the actual payment date, so if something goes wrong you have time to fix things. Having the payment automatically withdrawn also forces accountability on your part because the amount must be present in your account.
Tip: Set the monthly automated payment amount to your owed minimum. This will ensure you’re always paying the minimum and you’ll never be late on a payment. Additionally, setting the minimum rather than a large sum to be withdrawn allows room to shuffle funds in the case of financial emergencies or unpredictable events, like car troubles and medical expenses.
7. Make frequent payments
Piggybacking on paying on-time, making frequent payments helped me manage my money exponentially better while slowly chipping away at my student debt. Instead of making huge monthly payments and cringing every time the money came out of my bank account, I made three payments: one automatic and two after getting paid. The automatic payment was withdrawn from my account, but I received my paycheck on the 15th and last day of every month. Thus, I made two additional payments toward my student loans and my budget revolved around these two paychecks. As a result, I budgeted in two-week increments, which greatly helped me stay on top of my finances.
There you have it: 7 ways I obliterated my student debt! Try to implement them in your life and remember: slow and steady wins the race. Bear in mind that there are always trials and tribulations when learning how to effectively manage your money, but good habits and lifestyle changes create positive impacts in the future.