top of page

THE SMART WAY TO PAY OFF STUDENT LOAN DEBT

  • Jessica Schwartz
  • Jul 8, 2014
  • 3 min read

Earning my Masters of Architecture also earned me $54,000 of debt to the U.S. Government. Paying this debt back to relieve the burden of feeling like I "owe" someone something is one of my biggest goals.

At the moment, I still owe

$49,000

That's a lot of money. Here's how I plan to pay it back:

Step 1:

I set up automatic loan payments through my loan servicer to deduct money from my checking account monthly. This lowered my interest rate by .05%, and let me tell ya, every bit counts. I set the payment to occur on the 15th of the month, so that I'm sure to have received my first bi-weekly payment by this time.

Details: My payments are based upon the Extended Graduated Payment Plan, which increases payment amounts by a small percentage every 12 payments. My mandatory payment is currently $282 on this plan. If I only paid this amount each month, it would likely take me 25 years to pay off my loans in full.

Step 2:

I pay an additional amount to my loans at the end of the month. I pay this amount to the loan with the highest interest rate. This means I am making a separate payment. I make this payment after I've paid all my bills for the month with the money I have budgeted to have left over.

Details: I strive to pay at least $600 a month towards my loans, because this would let me pay them off within 10 years (this amount will increase as my salary increases). That means that since my current mandatory payment is $282, I am making a second payment of at least $318. If I'm feeling ballsy, I'll make this payment mid-month, assuring that I have enough to pay mandatory bills first. Doing it this way forces me to budget my remaining income.

Step 3:

Any additional money/income you earn or acquire, give it to your loans.

Some examples:

a) If you are paid bi-weekly, there are 1-2 months a year where you will receive 3 paychecks in one month. Since you are probably accustomed to living off 2 payments per month, take those extra payments and apply them to your loans as soon as possible.

b) If you are paying your student loans, you may qualify for the Student Loan Interest Deduction when you file your taxes. If you claim 0 on your taxes, this may earn you some money back, up to $2,500. Check out if you meet the qualifications here. Apply this an any other amounts you get from income tax return to the loan with the highest interest rate

c) If you are employed, you may receive a small annual raise. Even if it's a mere extra 50 cents an hour, calculate how much extra money that makes you a month, and throw that extra money into the loan. Similarly, you may also get a holiday bonus.

d) If your parents, relatives, friends, or significant others enjoy getting you gifts for your birthday or the holidays, consider asking them to give you money you can apply to your student loan instead. Some people will even sigh at the relief of not knowing what to get you.

e) Find a side gig to earn you income doing something you enjoy. Make crafts and sell them on Etsy or start a Youtube site or blog that's monetized, or turn that hobby of photography into a headshots gig. Whatever floats your boat, find a way to hustle.

And that's the gist of how I plan to pay back my loans within the next 10 years.

 
 
 

Comments


RECENT POSTS:
SEARCH BY TAGS:

© 2023 by NOMAD ON THE ROAD. Proudly created with Wix.com

bottom of page