Unfortunately, most of us are not lucky enough to escape the inevitable student loan debt. Life is life, and students loans are obviously not fun to pay back. Regardless of how much loan debt you have racked up, however, these loans can teach us so many important lessons and habits to continue through life. It’s important to recognize that while you may need to make some wiser spending habits, these loans do not need to ruin your life. You will pay them down eventually, and below are some steps that I used to help pay mine:
I started paying the month after I graduated. I understand why not a lot of people want to do this, but I think everyone gets so focused on having the financial freedom for six months that they miss the bigger picture. While yes, you do not have to pay for the first six months following graduation, but if you’re gonna have to make those payments eventually, why not start now? Doing this will automatically end your debt 6 months earlier, and save you 6 months of interest you would have had to pay.
I knew that if I went the six months without paying, that would be six months of forming spending habits that I would have to reverse once it ended. And I would not have been a happy camper once that time came. This forced me to get used to the payments and learn to adjust my spending habits right at the start.
I paid double what I needed to. My first year out of school, I decided it would be the best financial decision to move back home for a bit. Because I didn’t have any other expenses at the time, I pretended that I had a rent payment equal to two of my loan payments. This wasn’t hard for me to do, since I had a rent payment all throughout college. Depending on your minimum payment amount, I realize that this is not as easy for a lot of people. You may not be able to pay double like I did, but I cannot stress enough that paying more then the minimum will help a ton. Even if it’s just an extra $20 a month. $20 x 12 = $240 a year. Doesn’t seem like much, but if your loan is for 10 years that’s $2,400 which could knock off about 6 months.
Currently, I no longer live at home, and my rent is equal to those two payments I was making. I have an entry level job with a new car payment. Clearly, I am no longer in a position to be able to do this anymore. One payment is hard enough, so I am grateful that I spent that time wisely. But even so, I continue to pay at least $20 extra a month.
I paid my balance with money I wouldn’t miss. I was very fortunate to be in a position to help a family member out who needed to borrow some money. You see, I worked for 3 years in college, so I had a decent amount saved up. But I didn’t just have the money saved because I had a job, I had the money saved because I would pick up so many extra hours that I wouldn’t have time to spend it. I did this on purpose. I love to work and I loved seeing my paycheck grow.
At that time, I didn’t need the money I loaned out because I was living at home and my only expenses were my student loans (thank you mom and dad), and I knew I would be getting that money back within a year. During the time I didn’t have this money, was actually extremely helpful in creating wise spending habits. That money was mine, so mentally I knew I was not broke, but it wasn’t physically there. It was if I was playing this game with myself of ‘pretend you’re broke and once you learn how to live broke you can reward yourself with your money back..’Genius.
The point is that I learned to live without that money. I created wise spending habits, still felt financially secure, and proved to myself I could get by without it. So when I got that check with my hard earned money back, I cashed that baby right into the only account I wanted to see go down… my student loan. Sure, it wasn’t the easiest decision and I questioned myself to make sure I was making the right move. But the questioning didn’t last long. There was nothing more I wanted to accomplish than see that loan debt disappear as quickly as possible. And in one cash of a check, $3k down the balance went.
Now I’m not saying you have to run to a family member and tell them to hold your money hostage, I’m just telling you that this worked for me. However, you may already be lending your money out without even realizing it. This leads me to my next example..
My tax refunds went to paying off my loans. Personally, I always choose to claim zero dependents on my taxes. I know some people are against this because they feel they are giving the government an interest free loan, but I don’t care. I choose to pay extra in advance because I know what is left over will go back into my loans. It’s the same as the example I gave earlier. I get used to living on the paycheck I have once the taxes are taken out, so I continue this same practice every year. I know it’s not ‘extra’ money, because it’s just the change back from what I have paid already, but rather I like to think of it as paying back myself.
So again, this was my lucky (yet smart and dedicated) 12 months right after college. I could not continue the trend, and even after $12k I still have a long ways to go. I do not let my loans control my life, and I still find ways to put a little bit away for the things I enjoy. But I am committed to my goal of getting my 10 year debt plan reduced to 5 years. To do this, I will continue my wise spending habits, contribute more than the minimum a month, throw in my tax returns, and maybe even move back in with mom and dad one day. Who knows.