Today’s typical college student graduates with over $20,000 in student loan debt. Unless that student sticks to a rapid repayment program, he can expect to pay thousands more in interest over the course of a 10-year repayment term. Although student loans are considered “good debt,” the combined cost of interest, penalties and deferment fees can actually exceed the cost of an entire college semester. It is not easy to pay off student loans quickly, but it is definitely manageable. You can repay your student loans in as little as one year as long as you work hard, stay focused and follow these steps:
1. Commit to a rapid repayment plan. If your student loan bills are $200 per month, force yourself to pay at least double that.
2. Make a budget and stick to it. The first paycheck from your first job out of college may be more money than you’ve ever seen in your life. Resist to the urge to run out and spend it.
3. Remind yourself that financial freedom is more important than that new pair of shoes anytime you get the urge to deviate from your budget.
4. Hold off on big purchases as long as possible. Unless you’re still running a computer in MS-DOS, you don’t need a new laptop until after your loans are repaid, no matter how old your computer is.
5. Move back in with your parents the first year after college if they permit it. This may be difficult for both you and your parents, but all of the money that you save from not renting an apartment can go straight toward repaying your student loans. Just don’t take advantage of their hospitality. Offer money for food, water, and electricity.
6. If you can’t live with your parents, find roommates to split the cost of rent. Choose the cheapest apartment that you feel safe living in.
7. Learn how to cook and start packing lunches. A large, homemade pot of spaghetti costs less than $5 and can provide meals for days. Going out to eat 5 days per week can cost over $5,000 a year. If you put that $5,000 towards your loans, you could cut years off of your repayment obligations.
8. Don’t buy any new clothes unless you need them for work. If you must buy new clothes, look at thrift stores and bargain hunt at the clearance rack. Before you turn your nose up, think about it this: paying off your student loans in less than two years means that you could have an extra $6,000 of unpaid interest to blow on new clothes.
9. Find ways to have fun for free. Instead of going to the movies, borrow them for free from your local library. Look for free concerts around your city.
10. Long commutes from your parents’ house to work are still cheaper than paying rent. Take good care of your car and change the oil on time. It’s cheaper to pay for regular vehicle maintenance than to buy a new transmission.
11. Try to work more than 40 hours per week. Ask your boss for overtime. Pick up a part time job if your schedule permits it. All of the extra income should go straight toward your student loans.
12. Find ways to stay motivated. Tell your friends not to tempt you with mall trips. Make a list of things you will do with all of the interest money you’ve saved. Cross off all the days on a calendar until your last student loan bill is due.
It is not easy to pay off your student loans quicly, but it is definitely doable, even if your first job out of college doesn’t pay as much as you hoped it would. The biggest factor is motivation. Knowing that you can be free from your debt obligations in as little as 1 year rather than 10 years can make all the difference in the world.