Pay off Student Loans in Two Years

A calculator and a list of bills, as a visualization of the planning needed to pay off student loan debt.
The exact steps I took to pay off Student Loans in two years
The exact steps I took, to pay off $38,497 in student loans in two years to travel more. These are all of the numbers. You can do it too.

I made the insane decision when I was an 18-year-old child to commit myself to a $50,000/year private university. Granted, I did get a massive presidential scholarship from the school, on top of several organizational scholarships, and I am also fortunate enough that my parents help pay for some of it. I know I was extremely privileged to be in that position at all, and I am very grateful and do not want to brush over that. But I also want to be honest. Student loans suck. Paying off student loans sucks. Kids don’t know what they’re doing when they sign up for them. How can you pay off student loans in two years?

At the time, I didn’t think it would be that much money because of all of the scholarships. I was convinced by society that I had to go to the best university possible to succeed in life. Especially after the hard work I put in taking nine AP classes, playing three varsity sports and barely sleeping for the whole of high school. I figured I’d be making bank when I graduated. Paying my loans would be a non-issue, just a fact of life. With no concept of how much $50,000 really was, when I looked at expected (pre-tax) salaries for recent graduates, it seemed like I would have no trouble paying off a few loans.

How did I get here?

When I started my debt journey 5 years ago, after graduating from college and getting my first job, I did not put much thought into the hole I had dug myself into. Once I landed my job, I took out a loan on a brand-new car (brilliant, I know). After the 6-month grace period for student loan deferment, which I spent furnishing my one-bedroom apartment, I set up all of my student loan payments to be making the minimum payments each month. I didn’t think about the total number I owed, I just figured everyone else was paying loans, and it was my turn to be indoctrinated into another typical, mundane, routine part of adult life. To me, this was “adulting”. In total, I started off with $53,000 in loans.

For three years and two months I made $900 worth of minimum payments each month (totaling to $34,200). I still had $36,000 left in loans and, although better than before, it felt like I would never reach the end. At this point, I had also just bought a condo, after coming to the conclusion that the rent I was paying was higher than what my mortgage could be. The total number for my debt, $114,000, looked scary and insurmountable. I wanted to spend my money on traveling, not on paying off loans. I was determined to pay off my student loans in two years.

Beginning Steps to Pay Off Student Loans in Two Years

Then, I had a conversation with my best friend from college who had just paid off her and her fiancé’s student loans. Amazing. How is that even possible? With different loans, how do you decide which ones to put extra money towards. She’s a Dave Ramsey pupil, and introduced me to the snowball method.

If you aren’t familiar, the snowball method for paying off debt is pretty simple: you take inventory of your available income each month (in other words, what is left after all of your bills, minimum payments, and necessities). Then take your smallest total loan balance and put as much extra money as humanly possible towards it each month, while still maintaining your minimum payments on your other loans. Seems obvious, and it is a fairly common method, but it profoundly changed the way I approached paying off loans. With each additional payment, I avoided paying extra interest (i.e., above where I said I paid $34,200 for only $17,000 in payoff). This also helped me gain mental confidence and momentum in paying off the loans.

Listing out all of the numbers for each loan

So, two years ago, I listed out all of my loans and minimum payments:

Private Student loan: $2,500 (minimum payment: $105)

Car Loan: $6,700 (minimum payment: $350)

Federal Student Loan: $27,000 (minimum payment: $275)

Mortgage: $78,000 (let’s not worry about this for now…)

(Also, I’m aware that this is wildly low for a mortgage in the United States. I live in a city in the Midwest. I recommend living somewhere affordable if you want to prioritize paying off debt — you’re going to have a hard time doing it living in a pricey one-bedroom apartment in a trendy neighborhood in a high-cost-of-living city. If you are living somewhere that is too expensive to pay your debts when there are cheaper options available, then your living situation is your priority. Which is fine, if it is the most important thing to you.)

I started with my lowest loan, the private student loan, which was $105 each month, and paid an additional $245 each month on it. This would take 6 months to pay off, including making a lump sum payment of $1,000 using tax return money. Once I finished that loan, the plan was to put that $350 towards my next loan, which was $350. So now I would be paying $700 on that loan it each month. I estimated this would take another 13 months to pay off. Once I paid that, my next and last loan was $275 each month. Determined, I decided I could squeeze another $25 each month and make it an even $1000. That should take 23 months to pay off.

In total, I was looking at an additional 42 months until I could pay off my loans (beside my mortgage). But at least an end was in site.

Finally Making Progress to Pay Off Student Loans in Two Years

Once I began this strategy, I became much more motivated to pay off each of my loans. I was also dedicated to saving 12% of my income in retirement, which was taken out of my paycheck before I could even see it so that I didn’t miss it.

I found ways to squeeze money out of my savings each month. It helped to pay off a little bit extra here and there. The key, for me, was to not be afraid of having only $1000 left in my savings account for emergencies. Whenever I realized I had a little extra money, I would pay it towards the loan. Or if the loan was only down to $1000 and change, I would just pay it off and end it. And in doing this, something amazing happened.

I ended up paying off my first loan, which I planned for 6 months, in 3 months. The next loan ended up taking only 11 months after, since I had already increased what I dedicated to paying off loans each month.

The Light at the End of the Tunnel

When all that was left was my last and largest loan, with a balance of $22,000 at the beginning of 2020. If you recall, this was the federal loan, and when COVID-19 hit, all interest on student loans, as well as payments on student loans, was deferred. I was determined to pay off my loans while the interest was non-existent, so I became even more motivated in my strategy. I reduced my retirement savings to 5%, which is the maximum matching for my work.

At this point, my biweekly paycheck was looking like this: $1,100 went to my savings account with interest, and all of that was to go to my student loans in a lump sum payment. $400 went to my mortgage and other housing fees. I took home $700 to spent on my bills, groceries, and other needs/wants.

A law was also passed at this point, deferring social security tax. This made my paycheck much higher than it would have been. I saved $8,800 (8 paychecks) in my saving to go towards the loan. I put it all towards the $22,000 loan, leaving $13,200. Seeing how close it was to the single-digit-thousands, I scraped some extra money from each of my accounts. I used my stimulus check, and paid it down to $8,800. I saved up my next 5 paychecks, then made a big payment of $5,500. Then I was left with $3,300, in December 2020. This made me feel so close I could taste it. Four paychecks later, (I needed to use some extra money for Christmas gifts), I finally got that number to zero. In only 24 months since I started executing my plan.

Never Give Up, and You Can Pay off your Student Loans in Two Years

Paying off debt can become a mental game. You want to beat yourself up when you look at the numbers. The key is to go in with a strategy and never back down, only go harder. Take the payments automatically from your paycheck, but always know where your money is going. Doing this, I was able to pay off $38,497 in two years. I completely paid off my student loans, and invested an additional $40,000 into my retirement. To think, if I started no debt two years ago, I could have pocketed that $38K, plus the interest, by now! Now, I can take the amount I would have used towards paying loans and save it each month.

I know that this plan will not work for everyone, depending on your circumstances and income. You may also have different priorities. The reason I write this because I know there are people who have more income or less debt than me, who are still bogged down by debt. By not making a plan, you are furthering the interest you have to pay over time. No matter what your debt situation is, if you make a plan and start now, your future self will thank you.

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