We all know how important it is to have a college degree these days. It’s also a well-known fact that student loans suck! Right after that incredible graduation day, you come to the realization that you have a towering mound of student loan debt.
For fun, here’s the estimated cost of college for my daughter who is 2.5 years old. If I want to fully fund a 529 plan for her to attend my undergraduate college, Benedictine University, I will need $392,199 by the time she’s 18! If we don’t help pay that’s quite a large student loan debt total!
That’s some BS! Or maybe BA depending on what she studies.
In my case, I had to pay for my bachelor’s degree. I had previously obtained my associate’s degree from a community college where I did get financial help from family. Community college was the right choice for me at the time as I wasn’t ready to fully commit to a school and thought working was more important.
I don’t regret my decisions as it’s led to a great life.
Luckily, I saved money and was able to eventually go back to college to get my bachelor’s degree.
I ultimately decided to attend Benedictine University. The school was close to home which allowed me to keep working. I had also bought a condo a few years previously and due to the 2008 financial crisis…it wasn’t a great time to sell.
The cost to attend Benedictine University was roughly $25,000 per year at the time. Since I already had my associates degree, I only needed to attend for 2 years. My condo was within 10 miles so I didn’t need room & board. Benedictine had an adult program that met 2 evenings each week.
Luckily, the potential $50,000 cost was reduced by $15,000 due to grants & scholarships! That left me with $35k of possible costs.
I ended up switching employers at the time, with one main reason being they had an employer tuition reimbursement program. That company ended up paying for $10k of the total costs. Over the 2 years, I ended up paying down around $5k from my income and had $8,000 initially saved for college.
So, my student loan debt total that I owed after graduating was $12,000.
This was far less than it could have been but I despised the thought of owing this money for long.
The Right Mindset – Student Loans Still Suck
I am not a goal-achieving superstar. I wish I was but it’s just not me. If I was I’d probably be at the gym right now. The fact that I don’t have a six-pack is case in point.
From the day that I decided to head back to school for my bachelor’s degree, I had a plan and a goal. I decided to fully commit to reducing my student loan debt total as quickly as possible.
No matter when you decide to make reducing your student loan debt a major focus, setting a goal, and getting your mind focused on the commitment is key. It takes a lot of dedication over a period of time (this is the difficult part) but the day you pay your last payment will make it totally worth it.
Lastly, I read a lot of student loan success stories like this one to help get me motivated.
Budget For Your Student Loans
Once I was mentally committed to reducing my student loans, the next step was to dive into the numbers. I knew that my monthly student loan payment was going to be around $136 every month. The interest rate for my student loan was over 6%, which meant roughly $60 of that first $136 payment was going towards interest.
Next, I needed to figure out how much more I could add to my loan payments.
I love budgets and spreadsheets, don’t you?
No? Most people don’t, so you’re not alone. The key is to hunker down and just do it. The hardest part about a budget is getting it started. Once the structure is in place, you’re only having to make minor adjustments.
Identify Ways To Cut Expenses
Even before creating my budget, I had planned to pay $300 a month towards my student loan debt. That meant roughly $3,600 would be paid annually towards my student loans.
At that rate, my loan would be paid back in just under 4 years. Student loans suck don’t they? Well, I wanted it paid back sooner.
I had to find ways to reduce my spending and apply those funds towards my student loan debt.
Here’s the list of what I cut out of my spending:
- Starbucks Coffee – $9 weekly/$36 monthly/$468 annually
- Eating Lunch Out (cost was $8 daily but added $3 a meal to make my own) – $25 weekly/$100 monthly/$1200 annually
- Eating Dinner Out (cost was $35 each meal on average but added $5 a meal to make my own) – $90 weekly/$360 monthly/$4,680 annually
- Cable – I was able to get them to lower this by $25 monthly/$300 annually
My total spending reduction was $6,648 annually. Add that to the $3,600 I had already dedicated and my total principal reduction was $10,248 in 1 year!
That left $1,752 in principal and roughly $400 in interest for the year. So, a total of $2,152 remained.
Scrounging for Every Last Dollar
I had the $300 monthly payment for my student loan budgeted. I uncovered an additional $6,648 per year that would go straight to the principal balance.
Yet, I was still short of my goal to pay off this student loan debt in 12 months.
I thought long and hard about how I was going to find this remaining $2,152 leftover.
At the time, I was averaging about $1,600 each year in tax refunds when I filed my tax return. That trend continued as my refund was $1,675 that year.
Total remaining = $477
At this point, I’m a caffeine-deprived, ramen noodle eating proud graduate who just wants his student loan debt total to show $0.
Well, life wasn’t that bad and I was still spending time with friends…which meant going out for drinks.
Did you know that those $5 beers you buy at the bar are less than a dollar each at the liquor store?!
I wasn’t going out to the bars that often, but even 2-3 times a month can be costly. The average bar tab was $30. That totals $60-$90 per month.
Student loans suck so much that I was willing to give up some fun juice in order to pay them off early.
I cut my drinking bill in half (sniff sniff) AND HIT MY GOAL!
Student loans suck, but they are a necessary evil for those who can’t pay for school with cash. If you’re in the same position I was, here’s some advice.
- Don’t get overwhelmed. Take a breath, create a budget, and get to work.
- Employer tuition reimbursement programs make a difference and something to consider early on.
- The goal shouldn’t be to string your student loan debt out long enough for the chance it’ll be forgiven.
- Do your homework as early as possible, even before starting school. You don’t want to be in a position where you’re drowning in debt after graduation. It’s one thing to live frugally to pay off debt quickly, and another because you have mounds of debt and have to.
- Consider refinancing your student loans. Federal student loan rates are historically rather high. Due to COVID, refinancing federal loans isn’t recommended as no interest is being charged.
- If you’re considering an option to consolidate your loans, only do this if it offers you a lower interest rate. It may be annoying to have numerous federal student loans, but worth it if it means a lower interest rate.
- Stay motivated and take it day by day. The hardest part in budgeting is the beginning, once it’s in place and becomes a habit it gets easier.