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Updated on Monday, January 19, 2015
Many recent college graduates are facing enormous student loan debt, and a salary that can barely begin to chip away at paying it all down. While great options to refinance are surfacing, sometimes all it takes is a bit of determination and prioritizing.
This isn’t just wishful thinking. Since graduating college in January 2012, I’ve prioritized paying off my student loans on a low salary, while still being content with my lifestyle and eating more than instant ramen. In fact, I’ve even squeezed in some extra payments out of my meager income.
Student loans are the only type of debt I have, so I’m able to focus on it 100%. These strategies might not work for everyone as we are all in different situations, but I hope you can learn something from my experience.
Debt is NOT Normal
The first step in paying back my student loans was realizing that student loan debt isn’t necessarily normal.
This realization didn’t hit me until about a year after I graduated, mostly because many of my friends and coworkers had student loan debt. It’s almost rare to meet someone who had the luxury of a debt-free college education.
As a result, I thought along the same lines as everyone else – student loan debt is normal, what’s the rush in paying it back?
It wasn’t until I was out on a walk one night that I had an epiphany. I would be spending the next 10 years of my life with this cloud of debt hanging over me. Ten years. That seemed like an awful long time, and my student loan payments were already holding me back in many ways.
When I returned from my walk, I calculated the total amount my loans would cost if I kept paying the minimum amount due. I couldn’t believe how much interest I was going to end up paying – $5,500! If I paid an extra $60 per month, I could shave $1,649 off of that.
I started searching for information on accelerating student loan payments, and stumbled across a few fantastic blogs where others were sharing their stories. Inspired, I decided I wanted to get rid of my student loan debt as soon as possible, and would pay extra on them every month until they were gone.
Lessons Learned: Student loan debt shouldn’t be dragged out. The longer you take to pay back your loans, the more you’ll end up paying, as interest is working against you. Pay more than the minimum amount owed whenever possible – even if it’s just a few more dollars. It’s important to get into the habit of paying more.
Adjust Your Lifestyle
When I graduated from college, the first job I had paid $12 an hour. Not the most amazing salary, but we all know how that story goes. It was a salaried position, meaning I had no opportunity for overtime.
Thankfully, I had the foresight to be somewhat smart about my college expenses, and in the end, I amassed $18,000 of student loan debt, with a minimum payment of $200 per month. That’s peanuts compared to the six-figures some have to face, but it still felt like a heavy burden on a smaller salary.
What did I do to afford making extra payments? I simply continued living frugally after graduating. “Keep living like a broke college student” is good advice. It might not be glamorous, but I preferred being able to save money every month.
I was also extremely thankful that my parents only wanted $100 a month for rent, and for the most part, I was able to keep my expenses extremely low.
I was mindful of any spending I did – I went through every transaction and asked myself if a purchase was necessary. I waited days, if not weeks, on making bigger purchases. Instant gratification wasn’t in my vocabulary.
I grew up knowing that money is precious and shouldn’t be spent frivolously. That mentality greatly helped me keep my spending in control. Realize that whenever you spend on something else, you’re distancing yourself from getting rid of your loans.
Lessons Learned: Keep your expenses low whenever possible. Choose the cheapest living situation you can safely live in, as rent is often one of the biggest expenses we face after graduating. Live frugally and question the necessity of your expenses.
Ruthlessly Prioritize Your Student Loans
I wanted to maximize my spending to be sure I was only purchasing things that truly mattered to me. By making my student loans a priority, everything else took a backseat, and I was forced to take a critical look at how much I was spending elsewhere.
I had been paying $92 a month for my cellphone. When I realized that amounted to $1,100 a year, I switched to a $25 a month plan with Republic Wireless. My phone was not worth that much to me. I wanted my debt to be gone worse than I wanted my iPhone. I ended up getting a Moto X, and it works perfectly fine.
I relocated to city with a lower cost of living area with my fiancé with the hope that our expenses would be even less than they were before. We saw a dramatic decrease in rent, car insurance, and gas.
Any time I go grocery shopping, I bring a list. I leaf through circulars for sales and I know the best prices for the items I routinely buy. I also know the difference between a “sale” and a good deal. This helps keep our food budget low.
As for hobbies, mine are simple. I enjoy reading, writing, and spending time with family and friends by playing board games or enjoying a home-cooked meal with them. There is tons of free entertainment around if you just look for it.
The important thing to note is that none of this feels like a sacrifice. I know my efforts have helped me save and pay down my student loan debt, and I never worry or stress about making payments. To me, that beats living paycheck-to-paycheck, constantly concerned with where I’m going to get the money to pay my bills.
While my student loan debt is on the lower end, my fiancé graduated with about $30,000 in student loans. He was still working a $9 an hour retail job when his grace period ended.
He made his payments work by taking the same actions I did. Our support system for each other helped keep us motivated. Anyway taking action to quickly pay down student loans should find a buddy or support system because your peers won’t always bee encouraging. It’s hard to stay focused when your friends want you to hang out at the bar every night, or go shopping, and don’t understand why you decline.
Choosing to pay off your student loan debt early can make you the odd one out, but I’d argue it’s worth being out of the red early on in life. Make sure the company you keep is supportive of your efforts.
Lastly, my fiancé and I both eventually received raises. Instead of succumbing to lifestyle inflation, we were excited to increase our student loan payments. We took advantage of working overtime, and any extra money goes straight toward our debt. That’s the power of prioritizing.
Lessons Learned: Time to get serious. How much do you want your student loan debt gone? If you truly want to become debt free, you’ll ruthlessly prioritize your loans so your financial decisions are based around your goal.
Have a Positive Attitude
The right attitude and mentality goes a long way with paying off debt. I don’t view my college education as a mistake. I know it can be difficult not to, especially when you graduate with a degree you’re not using the way you expected to, but there’s no sense in dwelling on the past.
Having a bad attitude can be dangerous: I’ve seen friends flat out ignore their student loan debt situation. They think if they stop paying, it will magically go away. This is not the case! Turn your unhappiness or dissatisfaction into motivation to rid yourself of the debt. Don’t ignore it, as that solves nothing.
Lessons Learned: There’s nothing to be gained from having a pessimistic outlook on your debt. Figure out what you can do today to ease the burden instead.
As I mentioned in the beginning, refinancing options for student loans are on the rise, and there are other income-based repayment options available. If you find you truly can’t afford to pay back your student loans, there’s no shame in considering these options.
Be aware that some of them will extend the term of your loans, meaning you’ll be paying longer than 10 years, and subsequently, paying more overall.
I also need to mention the importance of earning more. Just because your primary job doesn’t pay well, doesn’t mean you have to be stuck with just that income. You can add onto your primary income in the form of a part-time job or online gig. Lots of millennials are freelancing on the side as a way to earn more, and if you find that easier than living on less, go for it!
Paying Off Student Loans on a Lower Salary is Possible
Overall, having a lower salary helped me to stay frugal after college. Even though student loan debt is still a thorn in my side, I’m grateful for the discipline and financial lessons that it has taught me. I don’t think I’d be managing my money as effectively if I had graduated debt free.
If you optimize your finances and ruthlessly prioritize paying off your student loans, you can succeed, even on a lower salary. Do what you can to better your financial situation, and remember that paying off your student loan debt will make a huge difference in your budget down the road.