Top Tips From Millennials Who Have Paid Off Their Student Loans
For many students, college simply wouldn’t be possible without student loans. While they are a saving grace for many young people, eventually the day comes when it’s time to pay them off, and that can bring stress and financial strain if you’re not strategic about it. Here we look at several millennials who have successfully, or nearly, paid off their student loans. Read on to find out their tips on how to go about it.
Caleb Rule, age 32, and his wife, each paid off $15,000
1. Go small: Rule and his wife took a frugal attitude even from the beginning with choosing where they’d go to school. They opted against more expensive schools for local and state schools. “If either of us had gone to a larger school, perhaps one with football, we’d have had significantly higher debts and thus would’ve taken longer–which would’ve meant longer to wait for our first house, etc,” Rule said.
2. Stick to your budget … and budget the debt: After graduation, Rule and his wife both struggled to find work, so their payments on loans were quite small. When they did find work, they budgeted more money for their student loan payments, “significantly more than the minimum. After all, the more you pay on the principal, the less you pay in interest long-term.”
3. Know what you need: The couple were realistic — they needed money to pay for their wedding, so in the months after the wedding, they kept student loan payments small. But eventually, they kept with the frugal program. “We got cheaper cars, didn’t go on expensive vacations, didn’t pay for expensive cell phone plans, and did things like sticking to our budget for eating out vs. cooking at home, which allowed us to continue chipping away at the mountain.”
4. If married, go all-in on one: “We decided to pay the minimum on my debt while we paid the absolute maximum we could on my wife’s, which allowed us to see more significant progress. Then, once we paid hers off, it was time to hammer mine home!”
Emma Geiser, age 36, paid off $46,000 in student loans
1. Commit: Emma Geiser, an ER nurse, had to get herself into the right mindset to pay off her loans, which she did by listening to money podcasts, which quickly motivated her to take action.
2. Take on extra work: As a nurse in California, Emma knew she could generate a large amount of extra income quickly. She got a side job and took advantage of overtime laws to work 16-hour shifts. “All the extra income went to loan payments. Once I started to see movement in the numbers, it motivated me to work even harder.”
3. Define your goal: Of course, that level of work was not sustainable long-term, so she made sure she had an end goal to avoid burnout. “I didn’t want to be doing this for years, but knowing I only had to do it for 16 months was highly motivating. I dreamed of the day I could quit the side job and work regular hours. It was pure bliss when it happened.”
4. Prioritize: Emma focused her financial priorities and adjusted her budget to be able to keep making the maximum payments. “Prioritization and figuring out what mattered most to me was key to debt payoff. I didn’t give up vacations or restaurants, but I stopped buying fancy scrubs–have you seen the cost of them?–and clothes because they didn’t matter as much to me.”
David M., 30 years old, paid off $40,000
1. Take advantage of low minimum payments: In the early days of paying off his loans, David M., now a lead software engineer, took advantage of the federal extended repayment plan to give himself as low a minimum payment as possible, which helped when he was single and making only $55,000 per year. “When I started off, having the smaller loan payment gave me the flexibility to pay extra on my loans one month, but the next month be able to pay for an ER visit or new tire for my car.”
2. Use budgeting tools: David said, “I’ve been a huge fan of the budgeting tool ‘You Need A Budget.’ It helped me prioritize my student loans and emergency savings ahead of my fun money so I was able to build a more disciplined budget right out of college.”
3. Gain a double income: David is clear that “the absolute biggest reason” he was able to pay down his loans so quickly, was more than doubling his income when he got married and prioritizing these payments with his spouse.
Abha Chiyedan, age 30, paid off $50,000
1. Live below your means: To really pay off your loans quickly means living below your means, Chiyedan said. “After I entered the corporate world, I continued living in student housing to keep my living expenses low.”
2. Avoid lifestyle inflation: Chiyedan moved up the ranks at a corporate job very quickly, fortunate enough to get multiple promotions and raises, but didn’t change how she lived. “I continued to keep my expenses low.”
3. Allocate 30% of your income to repayment: She recommends you attempt to allocate at least 30% of your earnings to debt repayment. “Start by saving a small emergency fund, then pay off your high interest loans, and then tackle the rest.”
1. Refinance or negotiate: Jean Yates, 39, an adjunct college professor, paid off her $15,000 through a combination of frugality and eventually refinancing her loan for a better interest rate. “To people already in debt, I would say shop around to see if there is a better option–change over your loans to a different company with a lower interest rate. Negotiate for lower payments each month, so you can more easily make the payments and avoid late fees.”
2. Employer loan repayment assistance: One tip that is frequently overlooked is to ask your employer for support with student loan repayment assistance, said Patricia Roberts, author and COO of GiftofCollege.com. “Make your employer aware of a recent change in Internal Revenue Code Section 127 that now allows employers to repay up to $5,250 a year per employee in student loan debt on a tax-free basis.” These payments can be taken as a business deduction for the business.
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