While I was in college I always knew that eventually I would have to start paying off my student loans. It wasn’t until I graduated that reality hit and the student loan payments began. After 9 years of aggressively paying down my student loans I was finally free!
I had done my best to avoid an extremely large student loan balance by applying for scholarships and working summer jobs. My loans came out to $20,888, which was just above the average debt of $19,646 in 2006.
In 2017 the average student loan debt is now $37,172. That is an increase of 89.21% in 11 years!!! As the cost of higher education continues to increase at a rapid pace it is more important than ever to learn how to pay down student loan debt.
I made my last student loan payment in 2015 and it was a relief to finally be free of debt. During the past two years I have been able to supercharge my savings and investments.
I want to share some of the strategies I used to crush my student loan debt. These tips were invaluable in my journey to become debt free.
One of the main reasons to consolidate student loan debt is to simplify your finances. It’s much easier to make payments when they are all going to the same institution.
The other benefit of refinancing your loans that you may be able to lower your interest rates (depending on the type of loans). The consolidation loan should be one fixed interest rate for the life of the loan.
You also have the freedom to choose a loan repayment schedule. In my case, I chose a 15 year loan from Great Lakes.
Another benefit of the consolidation loans is the Auto Pay discount. I was able to receive a 0.25% reduction in my loan by paying automatically from my checking account.
Save, Save, Save!
It’s very important to become an aggressive saver to pay down your debts. It takes hard work and determination to avoid the luxuries that a lot of people take for granted.
Skip the expensive vacations. For years the most expensive vacation I would go on was a local camping trip. Cruises and international getaways are a lot of fun but they will limit your ability to pay down your student loans.
Don’t waste your hard earned money at expensive restaurants and bars. Learning to cook your own food and find cheaper alternatives for fun are essential.
Reduce housing expenses! This was probably the most important way that I was able to save money after college. I was able to split the rent with a roommate for several years. Another option for many people is to live with relatives.
Make Extra Payments
By making extra payments toward your student loans you reduce the amount of interest paid over their life. The sooner you pay off the loans the sooner you can accelerate your savings and investments.
One strategy is to use credit card rewards. Some credit cards offer higher rewards for paying student loans. Whenever I was eligible to make a credit card rewards selection I would look for a student loan check payment. I was essentially using “free money” to pay down a debt.
Another strategy I used was to make one-time payments whenever I had extra money from raises, bonuses, taxes, gifts, etc. Rather than buying the latest tech gadget I would use this money to lower my loan principal.
Finally, after I had enough in my Emergency Fund, I would make $1,000 payments every few months. I felt that I was investing in myself by reducing debt. Over time these payments really added up and took a big chunk out of the loans.
It’s very important to get a handle on your student loan debt early. There are now loan programs for 30 year repayment with even higher interest rates. It is an obligation to pay off your loans and it should be done as soon as financially possible. By consolidating, saving, and making extra payments you can reduce the life of your loan and getting on the path to becoming debt free.