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Updated on Friday, October 30, 2015
Natalie Bacon did everything right. She went to graduate school for a law degree and worked as a corporate attorney making a six-figure salary.
But this came at a cost: she graduated with $206,000 of debt and she no longer wants to practice law. Natalie’s now a fee-only financial planner.
Despite the looming debt, Natalie is working hard to pay it off. She’s currently down to $124,000.
Unfortunately, Natalie’s story isn’t unique. According to the Consumer Financial Protection Bureau, the total outstanding student loan debt is more than 1 trillion dollars.
With the burden of debt looming over them, some millennials are using aggressive strategies to get back in the black quickly.
An Extra $10 a Month Shaved Off a Year in Repayment
Zina Kumok, a freelance writer and founder of Debt Free After Three, finished paying off $28,000 in student loans in November of 2014. When she started her three-year pay-off journey, it was easy to get overwhelmed by her debt burden.
“I know I used to look at that number and it would just seem really daunting,” Zina explains.
But her debt payoff started small with adding an extra ten dollars to each payment, and it made a big impact. “When I called the loan servicer to what difference that would make, I didn’t expect much. But they said that that $10 a payment would shave a year off the total time I’d be paying.”
After seeing what impact the ten extra dollars had on her debt payoff, Zina was inspired to do more.
“Ten dollars done consistently can make a big difference,” Zina says. “So that’s when I started thinking if that’s what ten dollars can do, what can twenty or fifty dollars do?”
Eventually, Zina was putting about half of her paycheck towards loans every month.
Getting Extreme: Sacrificing Heat for Debt Freedom
If you want to find money to pay off debts, cutting expenses is an essential piece of the puzzle.
Andrew Kaslewicz, a nurse, and Veronica Kaslewicz, a pharmacist, living in Pittsburgh, made major changes to their living quarters in order to pay off their $96,500 of student loans in two years. When they cut expenses, everything seemed like a sacrifice at first. The couple cut cable, switched the expensive gym for a cheap one, and started buying used and shared their journey on SecondhandMillionaires.com.
But to really reduce expenses, they changed their accommodations by renting a house with no central heat. Instead of a simple way to heat the home, Andrew and Veronica used a wood stove and a gas heater for two years.
While they did save a bunch in rent, it was a bit too far.
“On very cold winter nights, the house would drop to 40 degrees and frost would climb up the inside of some of the walls, even with the gas stove on full blast,” Andrew says. “The only way to warm it up would be to chop up some wood and start a fire. If you’ve ever had to go outside in the middle of a below-zero winter night to grab wood from the wood pile, baby the fire until it lit, and wait 40 minutes for the stove to heat up enough to warm the room you’re in, you know what a sacrifice that is.”
While not all student loan borrowers have to go so far to pay off debt, cutting major expenses like housing by sharing with roommates and living in a less expensive area of town goes a long way.
You Aren’t Stuck: Change Your Loan Terms
When it comes to tightening the purse strings, there’s one expense everyone wants to get rid of: interest. Optimizing payment plans can give borrowers lower monthly payments at lower interest rates.
Ethan Hancock, a software engineer living in Buffalo, NY, graduated with $90,000 in debt from his undergraduate degree. After graduation, he put his federal loans in forbearance to concentrate on paying down his $70,000 of private student loans. Ethan refinanced his private student loans with LoantoLearn.com. He was able to slash his interest rates from 9% to 2.2%. He then focused on paying off one loan at a time to reduce his four figure student loan payment down to approximately $450 a month. His payment is now much more manageable.
Natalie switched from the 10-year plan to a 25 year extended repayment plan so she could focus her extra payments down on the principal towards the loan she’s paying off. She still plans to pay it off in 10-years, but lowered her current monthly payments. Natalie now feels like she has a laser focus on paying off debt and isn’t worried about switching to a 25-year plan.
There are many ways to manage your loans so you don’t pay more than you can afford. You can switch payment plans to make the amount owed fit in your budget, and then focus on paying extra principal towards your loan of choice. Students can refinance high interest loans for better interest rates with private lenders. Some federal payment plans, like the Income-Based Repayment plan and the Pay-As-You-Earn plan, make payments affordable and forgive any remaining debt after 20 or 25 years.
Earn More and Work Like Crazy
Expenses can only be cut so far. In order to make big progress on student loans, earning more is necessary. Ethan made several moves to new companies to take his $45,000 starting salary to $72,000 in six years. Eventually, he was able to find a better paying job closer to home. Getting a better paying job was a crucial part of Ethan’s ability to pay off his loans.
Andrew and Veronica earned also extra money to accelerate debt payoff. The couple started a side business selling second-hand items on Ebay.
For Natalie, working like crazy is how she earns extra income to pay off the loans.
“Honestly, the big wins in paying off big debt are making large payments, which means you need to make a lot of money,” Natalie explains. “The bigger your payments, the faster you’re tackling your debt… I work all the time. I blog, freelance write, babysit, make jewelry, anything I can to make money.”
Debt Payoff is the #1 Priority
One thing was clear from all four of the student loan slayers. Paying off debt was their top priority.
“The goal and vision of being debt free are greater than anything else for me right now,” Natalie emphasizes. She knew she would never get ahead with over $200,000 of debts.
Zina echoes this point. “I made the decision early on that [debt repayment] was my priority. I knew that it was really important.”
She realized she could afford to pay off her loans quickly, but she couldn’t afford to do that and go shopping, go out to eat, or do a whole host of other things.
On the Other Side of Debt
While student loan debt can be overwhelming, the other side is worth it. Zina and her husband are now both self-employed and have just moved to Denver. She doesn’t think they would have felt confident enough to make the move if she hadn’t paid off her student loans.