How I Paid Off $20,000 in Student Loan Debt

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Remember when you just graduated college?  The very last thing you ever thought about was student loan debt.

After all, you were so excited to take on the world.  You thought you had a plan for your life and, if you were lucky, you had a job lined up before graduation.

paid off student loan debtNo, you didn’t worry about budgets.  You probably didn’t even know what debt was.  Wasn’t a bill something your parents paid?

Then, you get your first paycheck and it’s not as big as you would hoped.  Taxes and all other fun stuff rob you of that juicy gross income.  Further, you get smacked with a student loan bill that you may have not even realized existed.

When Anna and I were just starting out, we neglected to keep a budget.  We paid for the big television package that had all the interesting business channels that we enjoyed watching.  Yes, we are news and financial nerds.

One Saturday night, in particular, we sat down to watch some TV before bed and on came Dave Ramsey on the Fox Business Network.  His opening line was (which is all too familiar to us now) was about living like no one else, so that someday you can live like no one else.

That line really stuck with us.  And it lead to a big mindset shift for us.

If you’re interested in getting a better handle of your money, check out these other blog posts on Run The Money:

We decided we would be different.

We looked around our apartment and saw a world that looked like everyone else.  With it, we saw a future like everyone else.  We decided we wanted to change.  My wife was blessed to have zero student loan debt because her parents refused to allow her to have student loans.

However, I was drowning in $20,000 of student loan debt.  And I was one of those guys who had the student loan bill show up in the mail and I said, “What the hell is this?”  I had NO idea.

Yes, I even heard the lines that having debt will teach me “responsibility” and that it was the average amount of student loans graduates had.  I had the same as everyone else.

We talked over the next few days and decided we were going to be different.  Sitting down and looking over all the student loan information (and there was a ton) felt overwhelming.  We had no idea how to pay it all off!

Student loan debt (or any debt really) is a source of stress.

Debt no matter what size it is causes stress.  Some people talk about debt like it is part of life, but the reality is there are very few people comfortable with owing more than they make each month.

We have all come to accept debt as normal for buying a home, but this is because the home is “supposed” to increase in value.  Car loans, student loans, and personal loans don’t increase in value.  Each value decreases with time, while the interest on the debt grows (along with the pit in our stomachs).

In order to change our future and to become the couple that lives like no one else, we had to make some radical changes.  We stopped going out and we stopped buying new clothes, electronics and furniture.  We socked away each penny that we made and stretched it to see how far it would go.

Still, the balance never seemed to change.

The thing with paying off debt is that you have to feel like you are making progress.  Hence, Dave Ramsey’s debt snowball.  I don’t really know if he invented this term, but since he is the one who taught it to us, we give him the credit.

So, how did we pay off my student loans?  And how does the debt snowball work?

Using the debt snowball to pay off student loan debt

The idea behind the debt snowball is to take your smallest debt and pay it off first.  Then, move up to the next smallest debt and continue up the line.

We took my student loan information and realized that there were actually three different loans.  The total amount we paid was divided up between all three.  This is why we never saw a difference — $100 extra spread three ways doesn’t really show up.

So, we looked at all three loans, we ranked them from smallest to largest and then looked at the interest rates. The two smallest loans were carrying a 6.5% interest rate, while the largest was carrying a 2.5% interest rate.

We chose to start with the smallest loan for two reasons: (1) we would see progress quickly and (2) we were paying more in interest than we would make in the bank.  Because the bank is paying so little and loans still cost more than savings brings in, the old adage “it pays to save” just doesn’t apply. We chose to stop saving and just keep paying.

For 15 months, we paid $1,000 a month on one loan at a time until each one was gone.  By paying so much, the progress was quicker.

Also, when they were gone, saving $1,000 a month became easy.  We just started paying ourselves instead.

What to consider as you begin the process of paying off student loan debt

When you are thinking of paying off your student loan debt (or any debt for that matter), you will likely be overwhelmed.  Trust me, I understand.  Debt makes people nervous.  Many of us don’t start out understanding money very early in life.  We struggle with it and then (hopefully) come to our senses.

Consider the following questions and suggestions below as you navigate debt’s murky waters.

Is this debt making me any money?

There are two types of debt: good debt and bad debt.  A house usually increases in value and, if you stay long enough and keep it nice, you will make a nice return.  Rental properties can pay off their own debt.  These debts can be okay to carry for the life of the loan in many circumstances.

Other debt like student loans, car loans, and personal loans have no value or even lose value.  A school loan got you an education, but after you get your first job, it becomes less valuable each year.  Cars lose value as soon as you drive them off the lot.  Identifying whether the type of debt you have is good or bad will go a long in way in determining whether or not you need to commit to paying it off right away.

Place debts in order from smallest to largest.

This is what I learned from Dave Ramsey.  Pay off the smallest first.  You will feel a sense of progress.  This is the debt snowball in action.  It’s like training for a 5K or studying for a class.  Every little action culminates in helping you reach your goal.  During your daily grind, it may not seem like much.  But, in the long-term, there is a huge impact.  That same mindset is true with your debt repayment.  Just keep going.

Pay off high-interest debt first.

If you are paying 5% on a $2,000 loan and 20% on a 10,000 loan, pay off the higher interest rate first.  There is no point in continuing to pay more and more on high-interest debt.  Continue to make the minimum payment on the low-interest debt, while throwing all of your extra money at the higher interest debt.  Work another job if possible.  Sell things on eBay, Craig’s List or Amazon.  Start a side hustle.  Do what needs to be done to rid yourself of the debt.

Is there even a point to save right now?

Depending on the markets, saving while having debt doesn’t always make sense.  If the money in the bank is making 1% a year and having debt is costing me 5%, is it worth it to save $500 a month? Absolutely not! By saving you are losing a net 4%. When the debt is gone, you will have a gain of 1%.

You can get out of student loan debt.

Don’t think for one second that being debt free is for other people and not yourself.  Get rid of that BS mindset right now.  You can get rid our your student loans or whatever other debt you have.  Why not even pay off your mortgage if you want to?

You just need a debt repayment plan and the ability to be hyper-focused.  That means cutting back on eating out.  That means giving up luxuries like gym memberships and magazine subscriptions.  It means living that nobody else for a time, so you live like nobody else later on (hat tip to Dave Ramsey again).

Do yourself a favor.  Do the hard work.  Make the commitment.  And pay off those student loans once and for all.

Did you graduate with student loan debt?  If so, how much?  Did you pay off your student loans?  Tell us below.

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13 thoughts on “How I Paid Off $20,000 in Student Loan Debt

  1. I like The Debt Snowball technique mainly because it uses psychology to motivate you to pay off your debt – by starting with the smallest loan and knocking it out you make yourself aware that you can knock out the next loan, then the next…it’s a great motivating cycle of paying off loans. Congrats to you guys for choosing to be different and crush your loans 🙂

    • Hey, thanks so much for the comment. Love your site! Yes, motivation is key, especially in the beginning. You need to see it’s possible, then the momentum will keep you pushing forward.

      Enjoy your weekend! Thanks again!

    • Thanks, Cody. Yes, student loans just flat out suck. It’s like getting your tab at the end of a great night and seeing all the charges. Wait, I ordered that?

      Joking aside, what’s your plan to pay them off? That could be a great future post topic for you! Good luck getting rid of that! You can do it!

        • Hmm … non-time consuming side hustles. That’s a tough one. Have you tried online surveys? You can also get paid for acting as a test user for websites. Could always sell things you don’t use or need. Just a few ideas off the top of my head. Yeah, blogging isn’t get rich quick, but there’s enough evidence out there that it’s possible if we’re diligent.

          • Clearly, I want to have my cake and eat it too, right? Haha. Thank you for the suggestions. I haven’t tried the survey thing, although I do see quite a bit online about that. We do sell a lot of our old crap and that money comes in handy.

            I have several ideas for online businesses I eventually want to pursue, it’s just a matter of finding the time. I am committed to growing Dollar Habits at the moment, but once I find my stride there, I’d like to branch out into something else as well in hopes of one day, through a combination of efforts, replacing the income I make from my full-time job.
            Cody @ Dollar Habits recently posted…Adventures in Blogging – Part IMy Profile

          • Hey, preaching to the choir here man. I think we share similar mindsets. I’d say put all your chips in the blogging basket. Just maintain focus until you replace your full time income. Other opportunities will be there after you’re blogging full time.

  2. Hi Dave. Great post! I am 36 years old, single, and living in NYC. Next month I will make my very last payment towards my debt and then be truly debt-free! I have two degrees and left college owing 50k in student loans. At its highest, I believe my credit card debt was 17k as well — and not from frivolous shopping or vacations, as I’ve always been quite practical, but just from LIFE (essentially living off my card while I finished up my second degree full time, then buying a ton of new furniture when I moved into my own place, etc.) Like you, I decided to put my nose to the grind stone and finish it up FOR GOOD about three years ago. Last year I was able to kill the student loans, and next month the last credit card payment will be made, at which time I will be able to start saving “for real” towards a down payment. Also like you, I divided out my student loans and paid more towards the highest interest one first, working my way down. I also made use of my excellent credit score and opened a great 0% card about two years ago that allowed me to transfer/carry most of my credit card debt interest-free for 21 months, thereby saving me a ton in interest. I eliminated cable, made my own antenna in order to get the basic HD channels for free, and also switched phone carriers. Those changes alone saved me about $120/month. One other fun tip I’ve been employing for a while now, which I’m sure you’ve heard of, is trying to use cash whenever possible fore more mindful spending, and then saving every $5 bill that comes into my possession from there. I don’t do this in order to sock the money away (like you said, what’s the point in having “extra” money sit in a savings account gaining a lame 1% interest if you still have debt to pay?), but instead to simply segment the money away until the end of the month when I may need some extra in those last few days before payday. If I don’t need it, I keep adding to it. But there have been many times that I have needed it, and being able to tap into that short-term fund has allowed me to avoid using my credit card – which I hate doing!

    In any case, I just wanted to share my story with you, and thank you for sharing yours! I love reading people’s success stories of how they dug themselves out of debt, and sharing my own of how it is possible to do so on only ONE income as well!

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