How to Pay Off Student Loan Debt (and still have a life)
People tell me all the time that I seem to always be traveling or doing something fun. To which I respond, “It’s really easy if you plan for it!” I make it a routine to plan trips, enroll in activities, sports, and seek out the things that help me enjoy life. But this wasn’t always the case.
There was a time when I didn’t make enough to pay my bills and I was using credit cards to bridge the gap. It got to the point where I couldn’t stand it or my poor habits anymore. I talked to my roommate about downsizing apartments. At the peak adulting age of 23, we moved to a one-bedroom apartment and I started making all my meals at home to minimize my eating out to as much as I could stand my own cooking. That helped a lot, but my first big boy job still wasn’t cutting it and I realized that I either had to find a better paying job or move back in with my folks. Luckily, a friend of mine hooked me up with a better job in Dallas, TX, and I made the move to the big city. But even though my salary increased by about 20%, I had to face the consequences of living on borrowed money for almost two years. And that’s not all, during this time, my income had been so low that I was basically making interest-only payments on my student loans, so I basically made no progress on them. It was here that I wondered, am I ever going to have a life?
This financial problem is on 45 million Americans’ minds: how do you pay off your student loans and still have a life?
Well, let’s just start out by acknowledging the fact that it is also a $1.7 trillion dollar problem that the government, with all its subject matter experts and PhDs, has not found the answer to. So don’t feel bad if this is a topic that overwhelms you at the mention of it.
But you shouldn’t let that discourage you because, unlike the government, many people have successfully freed themselves from their student loans. Let’s instead learn how to make the most of this season of life. And the first thing to do is adjust your mindset to acknowledge the powerful truth that in the same way that school did not last forever, student loan repayment won’t either. Be comforted that many have accomplished this goal, and be certain that you will too.
Once you have rested on this truth, the next step is to figure out what is the best plan for you. Whether student loans are your only debt, or you have other loans as well, the word to keep in mind is PRIORITIZE. Prioritize means come up with an order of paying your loans that makes sense for your situation.
For me, this meant budgeting. I was budgeting every penny that made it to my pocket but just as I was getting the hang of it, I realized that I was miserable. What good was getting a college degree if I couldn’t even think about doing the things that I enjoyed? So, I made this one change that made a huge difference to me. I’ve always loved fitness and competition, so I budgeted for the gym and for a mountain biking event. The gym kept me fit and the competition gave me a reason to stay fit. It was what I needed and thankfully it fit the budget.
Ever since then I have found a way to budget an activity every year. After paying off my credit cards, I took a bucket list trip I had dreamt of since age 16, I backpacked through Europe. The best part? I paid cash for it.
Now that I have more disposable income, I realize that doing all of that budgeting taught me to control my spending. It now comes very easily since I have paid things off AND I make more than I did when I was 23. Looks like that college education paid off after all
Lastly, some people value paying off their debt as fast as possible to start living while others like me seek to enjoy every season of their lives. Whatever you choose to do, here are some dos and don’ts.
Do:
• Budget. It is easy to learn and now there are so many good tools out there to help.
• Always keep emergency savings. This will keep you from falling into more debt when emergencies come up. (Notice I said “when” not “if”.)
• Prioritize your debt in the order in which it makes the most sense to pay it off (the ones with the highest interest first or the ones with the lowest balance first).
• Focus your extra payments on your highest priority loan while you only pay the minimums on the rest.
• Make sure to review your repayment options for student loans at least once per year.
• Research loan repayment plans offered by employers. This is also something that some employers are willing to negotiate.
• Contribute to your employer’s retirement account (401k, 403b, Simple IRA, etc.) if they match your contributions. But limit your contribution to the minimum amount that will still get you the maximum match from your employer.
Don’t
• Do not take on more debt. Especially if your debt-to-income ratio is already higher than 35%.
• Don’t overlook essentials like your food, fitness, savings, and medical expenses in order to pay your debt faster. What is the benefit of paying debt quickly if you are decreasing your ability to enjoy it once you are debt-free?
• Don’t get caught up in the comparison game. We tend to make ourselves miserable because we always compare ourselves to the wealthy. If we can learn anything from the rich and famous it is that money does not buy happiness.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.