This article is part of a collection of stories about balancing student loan repayments and prioritizing other savings goals. Read more about this topic.
Earlier this year, Americans broke $1.2 trillion in student debt. The growing student debt load is causing widespread economic ramifications, delaying home purchases, and influencing spending habits, typically for a decade after finishing college.
However, just because most graduates today are living with student debt for a large portion of their lives does not mean that you should. I made my last student loan payment 736 days after my graduation. That’s just a little more than two years. And I did it while earning a salary within $5,000 of the median income level in the United States ($51,371). Here’s how I did it.
Start paying during school.
The entire estimated cost of attendance for my MBA program at the University of Denver was $90,000— of which $67,000 was for tuition. Even for high earners, that is a lot of money to have on hand to pay for tuition and living expenses—so taking out some student loans was the inevitable choice.
People told me that it would be impossible to work full-time and go to school full-time, but I didn’t find that to be true. I kept a full-time job in finance while going to school full-time, and I graduated with a 3.74/4.0 GPA.
I had some savings going into school, but not enough to pay for everything as time went on. After I did some budgeting, I found that I could afford to pay around $7,000, roughly half of my tuition, each quarter out-of-pocket and get government-backed student loans for the remainder. By limiting my loans to Stafford loans, I knew I would be getting the best interest rate possible. And by paying what I could afford during school, I kept my total loan burden to less than $100,000.
All in, I paid $34,662.84 directly to the university and took out student loans for the rest. I didn’t wait to start paying them off—I started small, but immediately. Here’s how I looked at the situation: Just because I was allowed to wait until I graduated to start making student loan payments didn’t mean that I had to. So, while I was in school, I started making small monthly payments on the portion of my loan that was accruing interest to get into the habit of paying my loans and to keep them from growing.
Keep your expenses low.
While in school and after graduation, I made every effort possible to keep my expenses as low as possible. For the majority of my time in grad school, I lived with multiple roommates in an old house off campus. While there were nicer one-bedroom apartments in the area for well over $1,000 per month, I split my costs and my rent was only $400 per month. Even when I moved to my own apartment after graduation, to keep my costs low, I found one in the $600 to $700 range that was a little farther from campus and less lavish.
While the saying goes, “A penny saved is a penny earned,” I said that a dollar saved is a dollar to pay toward my student loans. Saving $500 a month on rent compared to some of my friends gave me an extra $6,000 per year to put toward my loans. At that rate, you’ll only need a few years and you will see major progress on even the biggest loan balances.
I saved in other areas, too. I lived near the light rail and took the train to work downtown every day. Other than the very coldest Colorado winter days, I always rode my bike to the station rather than drive, and the light rail was free while I was a student, so I saved on gas, parking, and wear on my car.
I took my lunch to work many days to avoid spending $7 per day—or $35 per week, or $140 per month—on burritos and sandwiches. I cut where I reasonably could while still living a comfortable life and having fun every once in a while. The bars in downtown Denver were my biggest ‘splurge’ expense on nights out with friends, but most months I was able to put $1,000 or more toward my loan payments.
Make a loan payment every payday.
Many people just pay the minimum balance on their student loans each month for 10 years until they are gone. But, there is no rule that says you can only pay once a month.
I always made a payment each payday, and sometimes extra payments when I came into a little extra cash, like with a tax refund. Making a payment every other week, rather than once a month, gives you 26 half payments each year—the equivalent of making a full extra month payment.
As a bonus, there is a small interest expense savings from paying bi-monthly. The interest accrues on a lower principal balance than if you were to wait the full month for your next payment.
Also, remember that your annual bonus at work and your tax refund are ‘extra income’ that you normally live without, so aim to put 100% of those toward debt payments to make huge steps a couple of times each year.
Follow a debt snowball.
My student loans were issued as multiple loans from different sources, which meant I had four separate payments I had to make each month.
I followed the debt snowball, a payment plan popularized by Dave Ramsey, as a way to pay down credit card debt. It is a plan to start with the smallest loans and then work up to the biggest ones. I focused every extra dollar each month on the smallest loan and just paid the minimum on the larger ones. When the smallest loan was paid down, I added that amount to the next loan’s payments, and so on until I was debt free.
You can do it, too.
All in, that 736 days of student debt after graduation did not cripple my future or destroy my lifestyle. I was living on a tight budget, but I still had plenty of fun, traveled, and had a great student experience.
Whatever your debt load, if you live cheaply, make the largest payments you can afford, and get into the habit of putting every extra dollar saved toward your loans, you can pay off your loans in half the time, or in less time than you had projected.
And when your loans are all paid off, don’t just start spending that extra money. Save for an emergency fund, contribute to retirement funds, and invest in your future. Just like with debt payments, every dollar counts, and you may be surprised at how fast it adds up.
The opinions expressed by Eric Rosenberg are strictly his own and do not necessarily represent those of Betterment.
More from Betterment: