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How We Paid Off Our Student Loan Debt Fast!

Jun 23, 2020 | Blog, Budgeting

Having debt is stressful.

Even though accumulating debt is very easy (and often fun!), paying it off can take far longer than it took to accumulate it.

Not only can debt cause you emotional stress, financial stress, and relationship stress; it can also be stressful because everyone has a different idea about how you should deal with it.

Should you only pay the minimum monthly payments? Should you pay off the largest one first? Should you pay off the smallest one first? Should you keep the loans because having debt and making payments is good for your credit?

When Ross and I got married, we had $20,000 of debt in student loans between us. And that was after we had worked our booties off to pay for as much as we could while we were in school.

In this post, I’m going to share exactly how we paid off the debt within 18 months while living on a very small income.

How to Pay Off Student Loan Debt Quickly

1) Make Sure Everyone Is On The Same Page

If you are married, you and your spouse need to be on the same page as far as wanting to pay off the debt.

You should also decide together how you are going to pay it off.

Working against each other will only cause frustration and make you give up before you accomplish your goal.

What To Do If Your Spouse Isn’t On Board

I knew that I wanted to pay off our debt as quickly as possible… but Ross wasn’t entirely convinced.

He had heard that having student loan debt was “good debt” and you shouldn’t try to pay it off quickly.

So how did we get on the same page?

We did the math. We looked at what would happen if we kept the loan for the life of the loan and made minimum payments. We would have ended up spending thousands of extra dollars on interest if we hadn’t paid it off quickly. This will help you and your spouse get on the same page if they are more of a logical person.
We looked at our goals. We knew that we wanted to have one parent at home full time when we had kids. If you have a large student loan payment every month (or any type of debt payment that comes out monthly) it is much harder to feed and care for your family on one income. Looking at your goals for the future will help you and your spouse get on the same page if they are more of an emotional person.

2) Write Down Your Why

Next, write down your reasons for wanting to pay off your debt.

Writing down your reasons and goals for paying off debt will help you stick with it.

No matter how exciting it is to think about paying off your debt right now, it will get less exciting when the days turn into weeks, and the weeks turn into months and you are still paying off your debt.

Keeping your WHY front and center will help you stay the course.

Our WHY’s were:

We didn’t want to pay thousands of extra dollars in interest.
We wanted to have the freedom to travel before we had kids.
We wanted to build up our savings accounts, which is much easier when you don’t have monthly payments.
And we wanted me to be able to stay home when we had kids.

3) Continue to Make Minimum Payments on Each Loan

As you pay off your debt quickly, remember to keep making minimum payments on all of your debt.

Why do you want to pay the minimum payments on all of the loans?

You don’t want to default on any of your loans.
Having the minimum amount set aside will help you pay off the loans faster once you get the first one paid off.

How does this work?

Once you pay off the first loan, you will take the minimum payment from that loan, and add it to the minimum payments on the second loan.

Once you pay off the second loan, you will take the minimum payments from the first loan and the second loan, and add it to the minimum payments on the third loan.

Once you pay off the third loan, you will take the minimum payments from the first, second, and third loan and add it to the minimum payments on the fourth loan…

I think you get the idea.

4) Decide How to Tackle the Loans

There are three basic ways that you can pay off your debt: you can start with the largest amount of interest, you can start with the largest loan, or you can start with the smallest loan.

But if you want to pay off your debt quickly you need to start with a loan with the smallest dollar amount of principal left on the loan, no matter what the interest is.

So if you have 4 loans, one for $1,000, one for $2,000, one for $4,000, and one for $8,000, you will start by tackling the $1,000 loan first.

But what about the interest rates? Doesn’t it make more sense mathematically to pay off the one with the highest interest rate first?

Yes, it does, but if the $8,000 loan has the highest interest rate, it is going to take you much longer to pay it off first, which means you will end up paying more in the long run at best and get discouraged and give up and worst.

When you are tackling the first loan, that is the least amount of extra money that you will have to throw at the debt since you are still making all of the minimum payments.

And if you have the smallest amount of money to attack the debt with, you should pay off the smallest loan first.

Getting rid of the smallest loan first will get your momentum going so that you can pay off the rest of the debt more quickly.

5) Decide Which Loans to Pay Off

For us, we decided to pay off everything except for our house.

Since we bought our house right before we had our first baby, it wasn’t practical for us to pay off the house on one income.

Some people want to include the house in their debt to pay off, and if that’s you, go for it!

Think about how much freedom you would have if you don’t have any payments!

But it’s best to sit down with your spouse or significant other and make sure that you are both on the same page for which debts you will be paying off.

6) Start a Budget

If you want to pay off your debt, you need to get you budget in order.

Every dollar that you make needs to have a place in your budget. And you need to stick with your budget religiously.

You can even use it as an excuse if you have to say no to someone. Just tell them, “Oh sorry, I’d love to do that, but my budget won’t let me.” It takes some of the pressure off!

If you haven’t started a budget before, check out How to Start a Budget.

7) Cut Back Like Crazy

If you want to get serious about paying off your debt, you have to cut back to the bare minimum.

And by the bare minimum, I mean other people will think that you are crazy for living so cheaply.

I have a larger list of things we did to save money so we could pay off our debt here, but some of the craziest things we did when we were paying off our debt were:

We lived without a dining room table (we borrowed a card table from Ross’s uncle).
We lived without a TV (yes, there was no TV in our house for the first couple of years we were married).
We shared a vehicle (we got really creative when we both needed to get somewhere!).
We almost never went out to eat.
I cut both of our hair at home!

I’d be lying if I told you we never got grief from friends and family for being so cheap. But we didn’t care because we knew our WHY!

Say goodbye to expensive hobbies, cook at home, share a vehicle… do whatever you need to do to get this debt out of your life!

Check out 10 Frugal Living Tricks for Cutting Expenses for more ideas on how to cut back.

8) Determine Your Extra Payments

Now that you know your budget and you’ve cut your costs, determine how much extra money you can put toward that smallest loan.

It doesn’t matter if you can only spare an extra $20 a month, that $20 needs to go toward paying down your debt.

Remember: Every. Little. Bit. Helps.

Pro Tip: When your paying extra on your debt, be sure that the extra money you are paying each month is going toward Principal Only!

If you just send the money to the bank without any explanation, they will use it as an additional monthly payment, which includes the interest you are paying on the loan.

But if you specify PRINCIPAL ONLY on the check, it will go toward the total dollar amount that is left on the loan.

You want to make extra payments on principal only because if you are paying off the loan early, you won’t need to pay the entire amount of interest. The interest is based on you having the money for the full term of the loan (which is however many years you were going to keep the money before paying it back in full).

9) Get a Second Job

If you are living paycheck to paycheck and barely scraping by, you need more income.

When we first got married, I desperately wanted to get a job in marketing… you know, that thing that I had a degree in and why I had all this debt in the first place… but living in a low unemployment state seemed to mean that everyone is employed and keeping their jobs indefinitely.

Any job that I did find to apply for needed a minimum of 3-5 years of experience.

I applied anyway, but got a lot of rejections.

So did I just keep waiting and applying until I got my dream job? Nope!

I went to the local temp agency. Yep, a temp agency.

Did I get my dream job through the temp agency? Ha, Ha. HA!

I got a job doing data entry. AKA, something that didn’t align with any of my passions!

In short: I hated it.

But I did it anyway. I had a goal and a plan and I knew we weren’t going to be able to pay off our debt with just Ross’s income.

That is why knowing WHY you are doing this is so important!

After a few months of entering data, one of our friends offered me a job at the warehouse that he worked at, which also happened to be owned by the company that Ross worked for (win for carpooling in our single vehicle!). It still wasn’t a marketing job, but I got to wear shorts and a T-shirt every day and make some really fun friends, so I considered it a move up in the world!

As I was working these jobs, half of my income went to making extra payments on our loans and half of my income went to savings.

If you are a stay-at-home mom who doesn’t want to leave her kids to get a job, no problem! There are so many jobs that you can do from home or with your kids right now. You could drive for Grubhub, set up a profile on Upwork, or reach out to an influencer or online business and see if they need anyone to manage their social media accounts.

Get creative and you can find some way to make extra money!

How to Pay Off Student Loans: The Quickest Way to Pay Off Debt

10) Live On One Income

If you already have two incomes coming in, cut everything back until you can live on only one income for a while.

Even when I finally got a marketing job (a YEAR after we got married), we didn’t raise our standard of living to account for the second full-time job. Being able to live on one income is a handy skill to have in your back pocket in case someone loses a job down the road or you decide to become a single income family.

And it will help you pay off your debt WAY faster.

11) Throw Any Extra Money That You Can Find At The Principal

Tax Returns, Stimulus Checks, Unemployment Checks, Anyone?

Any extra money that you receive needs to go toward these payments until you aren’t in debt any longer.

It can be tempting to spend these chunks of money on something fun. After all, you deserve it, right? You’ve been working so hard to pay off your debt!

But you don’t want to reward yourself before you are finished paying off your debt.

Keep that momentum going and put any extra money toward the principal!

12) Sell Things and Put The Money Towards Your Debt

You will be amazed at how much money you can make off things that have been sitting around your house collecting dust.

I had an old violin that my parents had bought off of ebay for me when I was 14. Every time I tried to learn to play it, I broke a string from tuning it…

So I never ended up learning how to play. And every time I saw it I just felt bad that I hadn’t learned to play it yet.

I finally decided to sell it. I asked my parents how much they had paid for it, and they said $75.

Great, I figured I would list it for $75 and someone would talk me down to $25-$50.

But I sold it for $75! When The guy came to get it, I pulled it out and showed him all the broken strings, and he said “Great! I love trying to figure out and save old instruments! This is exactly what I was looking for!”

Your trash may be someone else’s treasure!

Plus you will Declutter Your House at the same time!

13) Don’t Accumulate Debt As You Are Paying It Off

As You pay off your debt, don’t get into any more!

If you struggle with putting things on a credit card when you can’t afford it, only pay cash for everything until you have solved this problem.

If you can’t afford something, don’t buy it!

14) Determine a Reward

Ross and I love to travel. When we got married, we each picked a destination that we had always wanted to go to and decided that we would travel to each destination before we had children.

The only catch was that we weren’t allowed to do any traveling (aside from driving to see Ross’s family) until we paid off our debt.

Once we paid off the debt we took our trips (without going into any additional debt… we didn’t want to start that again!).

If you only have one bank account, I recommend that you open more (at least 7!) to be able to track how much money that you have saved for fun things like rewards, while maintaining a healthy emergency savings account.

Check out this post for more details.