Steps to Repay Your Student Loans in Under a Year

I am going to walk you through how I was able to paid off my $14300 of student loan debt in nine months. The steps I took years in advance of my graduation date and the steps I took after I graduated that allowed me to accomplish this. As well as some tips I considered but did not utilize myself since it wasn’t the best for me. If you have already graduated and from college then feel free to skip to tip five as the first four aren’t as relevant to you.

Tip One: If you are not sure if you even want to go to college or just want to start working to build a secure financial status with a trade or other higher paying job that doesn’t need a degree then please so. You do not need a degree to be financially secure and get to that elusive FIRE. I cannot stress this one enough for young people, don’t think you have to go to college just because your parents, friends, and community thinks you have to. That is a myth that has been fabricated, there are multiple paths someone can take that doesn’t involve college to be a well adjusted intelligent and capable adult. Unlike abstinence sexual education, abstaining from college is a 100% effective method of controlling the spread of student loan debt.

Tip Two: If you do decide higher education then attend community college. I went to a community college straight out of high school to figure out what I wanted to do with myself and school. This did wonders for me financially and mentally in the long run. It allowed me to think about what I might enjoy studying and doing as career. I was by no means ready to catapult myself into a 4 year school right out of high school. Had I gone to a 4 year, it would have been a disaster and wasted thousands upon thousands of dollars and maybe resulted in me dropping out. That being said, while I was attending community college I did hate it and did not even think about how this saved me from screwing up at a 4 year for significantly more cost. Either way, after about a year I finally figured out I want to do something in chemistry, and got into a cheap school with a low cost of living as well. 

Tip Three: The third tip comes from a piece of advice I got from my organic chemistry lab professor. Each lab recitation was at 8:30 in the morning and each one was packed full of so much information it was hard to keep up, but at the end of each one she would give a small piece of advice. Multiple stood out to me and I still remember them, but one completely altered my life path. One recitation she told us how when people are in university they are so focused on the here and now. What exam or paper was due that week or if they were a proactive student maybe they thought about what was due two weeks ahead of time. But either way, students and especially STEM students were so busy that they would forget to actually work towards gaining experience for the career that they were going to school for in the first place. So she urged us find the time to look for internships or shadowing opportunities or whatever else was out there. She knew we were all crazy busy and pressed for time as it was but that we needed to try and distinguish ourselves from everyone else who had our degree. This propelled me to start applying to summer internships in the area and I got an internship in laboratory based food safety. It paid $11 an hour but the experience was worth far more. As the internship came to a close, I was hired onto a permanent position with benefits and got a raise to $12.65 an hour. I Stayed at that position through the rest of my undergrad. I was only able to work part time so it wasn’t a ton of money but it covered my rent and some expenses. My parents made up the difference, which I’m very fortunate to have had. All of this reduced the amount I would have to borrow to pay for school. Not only that but it gave me practical work experience in my degree field and has paid me dividends to this day. I am endlessly thankful for those little advice pieces my professor gave me, those few words changed my life. The sequence of events in this tip are what most led to me getting the job after I graduated that really kicked my loan repayment into high gear.

Tip Four: Keeping with the principle from tip three. The four months leading up to my graduation, I went on a application spree. All the free time I could find, I would spend looking up jobs, applying to them, and reevaluating my resume. Of the hundreds of applications I sent off, I heard back from few and even few had good news. Till about one month before graduation, I got an interview with a major company. There was still no guarantee that I would get that job so I continued applying straight through graduation. It was starting to get discouraging not having more leads, but I had my food safety job to fall back on if all unless fails. Finally, in mid July a month after I graduated I got a call from that major company I interviewed with and was offered the job as a research technician at $59000 a year. I accepted on the spot and was ecstatic. I went from earning $12.97 an hour to $28.37 that’s over a 118% increase in pay. I had to relocate for the job, and they offered a very generous relocation package. The base amount of relocation money was $5000 no questions asked, but if you had your receipts for travel or shipping expenses among other things the amount would increase. I got almost $6000 before taxes, and after paying all the moving expenses I had about $3500 left over which I immediately threw at my highest interest and balance loan.

Tip Five: I had two loans between the $14300. One was $5500 subsidized at a interest rate of 3.860% and didn’t start accruing interest till 6 months after I graduated. The other was $7500 un-subsidized for a total of $13000. The un-subsidized loan started accruing interest at 4.660% immediately while I was in school still. So by the time I started to be able to pay, there was already about $1300 worth of interest I had to pay off first before I could even touche the principle. That being said, if you have a un-subsidized loan and can make tiny payments while in school definitely make the payments. It will save thousands of dollars when you graduate and have a higher income to pay the loan down more effectively. I did not realized my loan was un-subsidized till about my last year in undergrad even so, I didn’t make any payments till after I had graduated. I thought my budget was so tight I could not afford the payments. But that was a silly notion, I could have gave up some small things and been able to pay the un-subsidized loan down to avoid the compound interest. Similarly, another tip I could have used to pay slightly less overall when I was in the process of paying off the loan was to slit-up my payments per month. What I mean is, on average I was putting $1600 a month towards the loans as one massive lump sum each month. So that meant more time for the interest to compound on the loans. The way it works is each day your loan accrues a fraction of the annual interest rate. You can calculate your daily interest by simply taking your interest Rate/365. For example, say I have the $7500 loan with the 4.660% interest rate annually. That means each day the interest rate is 0.0128% compounding on the $7500. If I spent a full year to pay that off with payments of $640.89 a month I would pay $190.66 in interest over the year. However, if I take that same amount each month and cut it in half for biweekly payments of $320.44, that would be $168.73 in interest for the year. This would save you $21.92 in most one year by just cutting your normal payments in half. $21.92 isn’t a life changing amount but who in the world would want to pay more on their loans if they don’t have to and it requires no extra money each month and only slightly more effort. Also, the $7500 is a pretty small amount when compared to the average student loan debt people have, so obviously the higher the amount or higher the interest rate or longer the period of time would greatly increase the amount of saving you could have. I highly recommend you play around with this biweekly vs monthly payment methods calculator here and see how much you can save over the course of a loan.

Tip Six: After I got a new credit card there was a promotion that you could do a balance transfer with no interest on the transfer for a year. However, there was a 3% fee associated with amount you transferred that is applied immediately to the amount transferred. So for me I knew I would pay down this loan much faster than a year plus the interest would be less still since the principle would be dropping over time. Lets use our previous example. So say I have a $10000 limit on the card and did a balance transfer of $7500 to cover that higher interest rate loan of 4.660% that would mean I would pay $225 on the balance transfer instead of $190.66 or $168.73 (monthly vs biweekly) annually in interest. So for me this didn’t make much sense to try and take advantage of this, but if you are someone who will take longer than a year and or have much high loan amount and or a interest in 5% to 6%ish range or higher than this might be an option worth considering. Just keep in mind though if you do, do this you absolutely must pay off that balance transfer within a year since the interest rates on credit cards are significantly higher like in 26% to 30% range. So you have to think about this one carefully, whatever amount you do for the balance transfer can you realistically pay that off within a year while making small payments towards your loans still to avoid interest from compounding. This is the question you must answer first and make sure you use the payment calculator to see if this actually saves you money, but chances are this isn’t the best option for you. A similar but more universally better option for most people I think can be found in tip seven.

Tip Seven: Similar to the credit card balance transfer, you could take out a personal loan. The advantages of this can be that the personal loan you qualify for is at a lower interest rate than your student loans and like your student loans the interest would accrue over the year instead of all upfront. Another advantage of this is the loan isn’t required to be repaid in a year and is less stressful. Another option is to consolidate your students loans and refinance them to a lower interest rate through a variety of different outlets. A quick google search should provide a wealth of resources for student loan refinancing.

Tip Eight: Similar to tip six. If you get a new credit card and it has no interest charged for carrying a balance on the card you can use that to supplement your expenses and income a bit to free up your money and put more towards the loan. However, you must pay off whatever balance you are carrying before the year is up to avoid crazy high credit card interest again. This tip is most useful for someone who is close to paying off their loan or has calculated the rate they would reduce their loan balance would be greater than if they were just paying like normal and can afford the larger credit card payment by the end of the year. This will take clever planning, discipline, and budgeting for someone to execute effectively but can be a easy low risk method to pay off the loans quicker. Likewise, reduction in lifestyle expenses can go a long way in freeing up money to go towards the loan at zero risk. Giving up starbucks and making your lunch everyday and eating out less and other small luxuries will obviously give you more money to wipe out the loan.

Tip Nine: Another option if your loan amount is quite large is to consider being a public servant and paying the minimum amount on the loan for ten years to qualify for student loan debt forgiveness. If this is the best path for you then ignore all the other tips and look up student loan forgiveness and how to qualify and apply.

Tip Ten: This one most people aren’t going to like and think is dumb but hear me out. If you work at job where you barely make enough to pay rent and buy groceries and have next to nothing left over. Then you have to consider getting a higher paying job or pickup side jobs to increase your income. You need to have at least some descent amount of disposable income to be able to put that towards your loans and if you have basically none and cannot cut cost anywhere then you need to consider this option seriously.

TL,DR: (1) College absence is 100% effect in preventing Student Loan Debts (SLDS) (2) Community is a great show and community college is just like it (3) Mentors are the greatest and internships get you jobs (4) Applying to jobs before graduating gets you the monies and the honeys. (5) Look at your loans before getting them, split the monthly payments into biweekly payments and save that doe. (6) Credit cards are good if used responsibly. (7) Refinance that shit. (8) Leverage your debt to have more spending power. (9) Serve the people and all your problems will go away. (10) Increase your money.