How we paid off $160,000 of student loans in 4 years

How we paid off $160,000 of student loans in 4 years

without living in our parents' basement or in a van down by the river...

Our family in 2015 (2 years after graduation
in front of our apartment)

You may be wondering what a post about finances is doing in a therapy blog. Well if you have ever felt the chronic stress of being financially insecure, you know the answer! Finances affect your stress, relationships, anxiety, and so much more. I grew up being financially insecure, to the point that we had our water, power, and phone shut off and eviction notices at our door numerous times. When it came to food, let's just say I am thankful for the friends I had that fed me when I went to their house! They don't know how much it meant to me to have reliable access to food. Even after years of being financially secure, I still get a frightened feeling pressing the submit button to see my bank account. Logically, I know there is money there, but I still feel that worry from the past of suddenly not having enough to pay bills.

Enough about me though...

You probably came here to discover a way out of your student loans faster and be free from that stress!

As college tuition rises and graduate degrees become the new bachelors degrees, many people are faced with student loans. To be fair, one of the reasons we were able to pay off so much in such a short time is because my husband's career (pharmacist) pays more than the median income. However, that is also the main reason why we had so many student loans in the first place--only about $25,000 of the $160,000 we paid off was from my degree in social work.

1. Only take out what you have to in the first place

We were able to get by only taking out enough loans to pay tuition. Many people choose to take out money to live on as well, and I understand many have no other choice, it really depends on the situation. If there is any way you can work while you are in school or have you spouse work while you are in school, I would recommend it. You may be thinking, 'I can't work while in graduate school,' but you would be surprised what you can accomplish if you manage your time well. Many people work while in grad school, just don't expect to have a social life or hobbies during that time. Sleep also might be scant, but that busy schedule won't last forever. My husband was in an accelerated Doctorate program and still worked 10 hour shifts every Saturday. It wasn't always easy, and we definitely lived cheap, but our needs were all met and it was worth it.

2. Keep your 'poor student' mentality even after graduating

When you finish graduate school and start earning way more than you ever have before, it can be really tempting to start spending like you never have before! Don't fall into that trap though. Remember the money you are earning is not reallly yours yet because you still have a mountain of student loans. So many people feel entitled to 'treat themselves' after working so hard through school, and while some of that is reasonable, some it excessive and should be put off until the student loans are lower. Many people in my husband's graduating class went out and bought new houses, new cars, and went on fancy vacations soon after graduating. I will admit, we saved up and went to Hawaii in 2016, but by that point, we were already far along in our paying off goals. You can have some enjoyment, just maybe not a big vacation every year.

After graduating, we stayed in our same cheap apartment ($725 per month) and we kept our same cheap cars up until we traded one out for a bigger one once we had a baby a year after graduating. In fact, my husband still has his 2002 Toyota Corolla. We hope it lasts a few more years. We believe in paying for cars in cash, so it takes a while to save up among all the other things we are saving for right now.

Bottom line, don't worry about keeping up with appearances of other people in your income bracket. Your possessions don't make you a professional, your work and education has already made you a professional. Life isn't a contest to see who spends the most money. Maybe for some people it is, but your retirement will be a whole lot better!

3. Be smart about the interest

If you need to motivate yourself to pay off your loans rather than enjoy your money now, go ahead and look at how much interest you are paying! Do it now, I dare you. It is so depressing how fast interest adds up! Our first year out of school, we paid about $14,000 in interest! That is more than we have ever spent on a car. Grad school loans are usually much higher than other types of loans as well. If it makes sense for you to refinance to get a lower rate, then I would recommend it. Some people roll their loans into their home, and that can work well. We couldn't do that though because we were still renting our same apartment as mentioned earlier. 

(Side note: In hindsight, sometimes we wonder if we should've bought a home sooner. The market would've been better! Honestly though, it seemed like such a big commitment at the time because we weren't sure where were going to end up. We also enjoyed the perks of not having any yard work to worry about and having our landlords take care of any needed repairs. Home ownership is worth it and all, but it can also be incredibly expensive and stressful. We were worrying about other things at the time like adjusting to parenthood and me starting graduate school).

The reason we decided to take out loans for my tuition and use our money to pay my husband's loans was because the rate for his loans was higher. A few years later, I looked into refinancing with Sofi, but by that point, we were so close to having them paid off that their finance charge (5 year minimum) wasn't even worth it. We just kept paying off our loans so we could start saving a down payment and finally buy a house.

4. Commit to specific amount you will pay each month

The minimum student loan payment is nowhere near enough if you are serious about being free of student loans soon. Look at your budget and figure out what you can sacrifice to pay off more. It is easy to tell yourself you will pay more when you can, but when do we ever magically have more time and money in life? It also helps to track your spending because the little things add up. We like the Good Budget app that uses the envelope system. When we started tracking our spending more strictly, we realized how much we spend on groceries and were able to cut that number down. We also don't go out to eat very often, and when we do there is usually a coupon or gift card involved.

Paying off your loans faster will be worth it, and once you get going and see your momentum, it is exciting and you want to see that number go down even more! For our situation and income, we decided we would pay at least $3,000 per month. That was our self imposed minimum, and if there did happen to be extra money (tax returns, overtime, etc.), we would pay off even more. 

Sure we may have missed out on some luxuries along the way that other 6 figure income earners are accustomed to, but it was so worth it to pay off those loans fast and be free! 

Keep moving toward your goals and keep a long term financial perspective!