Perhaps you're looking for some six-figure debt success stories that will assist in motivating you to take some action?
Or maybe you feel really bad for a friend with student loans and you want to see how the heck you can help them manage it all.
I can tell you that when I wrote my first blog post ever about how student loans “Almost ruined our lives,” it seemed like we were years and years away from being student loan debt-free!
While today I can't tell you we are 100% student loan debt-free, I can tell you we are no longer in multiple six figures worth of student loan debt. Notice I put an emphasis on multiple because as of Sunday, July 21st…
Our remaining student loan balance was officially under $100,000.
So if you're someone who finds themselves in the six-figure debt club with $100,000 worth of student loan debt or more, than you're reading the right story, because rest assured, there is hope!
Our ($300,000) Student Loan Story
Now, if you're someone who has $40,000 worth of student loans like the average graduate, you're probably thinking $99,000 is still a boatload of student loan debt.
You're correct it is, but it pails in comparison to the original $300,000 plus my wife and I took out to go to college (My wife is such a champ, but I am always quick to point out I only had $40,000, she had over $275,000!)
Here is our six-figure student loan story in a nutshell, and how we paid off our debt so fast (Here goes nothing):
- In February of 2016, we had somewhere around $290,000 (left) in student loan debt
- Minimum payments were not covering the monthly accrued interest, so we decided to start paying more each month prior to getting married in July.
- By November of 2016, we had managed to whittle that number down to $261,000
- We started using some unique approaches to pay off our student loans in December 2016 that allowed us to get ahead of the interest.
- In 2017 we paid off close to $60,000 followed by $70,000 in 2018
- Today, I can officially tell you that we are under $100,000 and in “Five Figures!”
Whoever thought “Five Figures” would feel so good?
As of this moment, our remaining student loan balances are:
With a grand total of $98,420, we are well on our way to becoming student loan debt-free by the end of 2020. I can tell you that it wasn't always easy, and it wasn't always fun, but being able to say you're officially out of the six-figure debt club is super exhilarating!
That being said, you might be asking yourself this question:
How is it possible to pay off $162,000 in principal student loan debt in under three years?”
Lucky for you, my goal is to share how exactly we were able to pay off six figures worth of debt!
Three factors to consider for paying off six figure debt…
Whenever I tell people how we paid off so much student loan debt I am quick to let them know – it wasn't easy, but it wasn't hard either.
I also emphasize that what works for us might not work for you, but at the end of the day, our only goal is to provide perspective and value. Some pundits will say that we should have invested $162,000.
However, in our case, that wasn't a good move because our student loans were accruing more than $20,000 in interest each year. On the other hand, a good investment would only net us $12,000.
So our plan was simple:
- Pay off all “Quick debt” to increase cash flow
- Target one loan at a time
- Use the equity in our home to help us
- Delay some gratification
- Focus on earning and paying more each month
That being said, there are three factors you need to truly consider when it comes to paying off your six-figure debt problem:
- How much do you make and can you make more?
- How much are you willing to commit to paying down each month
- What is your goal for getting out of debt?
Let's dig in!
Step 1: What do you make?
This is a very important question, how much money do you make each month take home?
Annual salaries are great, but when it comes to paying off your debt, it is best to focus on what you bring home each month when you're developing a plan. Similar to how small base hits win games, home run's are great, but it is a bunch of small steps over time that are going to help you pay off your debt.
After taxes, health insurance, and 401k contributions, how much did you bring home last month? Step 1, know what you make.
Note: If you're commission based or have an inconsistent pay schedule, average your last three months to generate your number!
Step 2: What can you pay each month?
Now that you know how much you make, the next step is to decide how much you can contribute each month extra towards your six figures of debt. This doesn't mean you have to get on a budget if you don't want to, here is what I mean.:
- After you find out how much you make, figure out how much of that goes to fixed expenses each month
- Fixed expenses are bills like your rent, utilities, payments, cell phone, insurance, etc.
- Subtract your monthly fixed expenses from your monthly take-home
- What is the number that is left over?
Once you have your discretionary income (Leftover money after bills) you can now pick an accurate amount to contribute towards your debt each month!
While using a budget is a great idea, if you don't want to, you don't have to. Simply know what you make, subtract your fixed expenses, decided what you will pay extra towards your student loans, then spend on variables.
Note: Instead of focusing on a number to pay each month, focus on a percentage! For example each month we have a goal of paying at least 50% of our income towards student loan debt!
Step 3: How can you make more money?
So right now one of two things are going on in your head:
- Ok, wow, I didn't realize I was spending so much money in other areas, I can actually do this
- Ok, WOW, I don't have a lot of extra money to throw at my six figure debt issue, what am I to do now?
Hypothetically, if you're goal is to pay off six figures worth of debt in 24 months, not factoring interest, you would need to contribute $4,166 per month towards your debt.
For example, this chart shows how long it would take to pay off $100,000 based on your monthly contributions to your debt:
|Goal Time Frame:||Amount Each Month:|
As you can see the more money you contribute each month towards your debt, the quicker you can get out of debt.
That being said, don't freak out if you're only able to pay an extra $800 per month at the moment, every little bit helps! But you will need to make some extra money, here are just a few ideas:
Ways to make extra money:
- Walk dogs for $50 per week, creating an extra $200 per month
- Fill out surveys for an extra $25 per week, $100 per month
- Side-hustle as a trainer or tutor for $100 per week, $400 per month
- Manage a friend's companies social media accounts for $500 per month
- Start a blog to share your journey
- Rent a room out in your house for $650 per month
- Read a full list of side hustle ideas here
Perhaps you decide to train one friend in the gym for $200 per month and you fill out surveys during your lunch break and make another $100. While $300 might not seem like a lot, that is an extra $3,600 per year or $18,000 over five years!
Just $300 extra per month towards your debt can accelerate your pay off by almost an entire year!!! Now that you know a few ways to make some extra money, it's time to be strategic!
Step 4: Pick a debt pay off strategy.
What is the best strategy for paying off six-figures worth of debt? The one that works for you.
Using this debt pay off guide, you will quickly see there are plenty of ways to go about paying off your student loans.
However, that doesn't mean one strategy is better than the other, it just means there is plenty to choose from!
For example, we started with:
- The debt snowball
- Transitioned to a HELOC strategy
- We also use cash windfalls
There is no right or wrong way to pay off debt, so long as you adopt the philosophy that you will make extra payments. That being said, you can be strategic and avoid “Spraying your money.”
For us, using the equity in our home to crush the student loan principals allowed us to get ahead of the interest by $1,000's each year. However, this is an advanced strategy and it only worked after about a year of getting acquainted with using the debt snowball!
For exacts on how we paid $70,000 in one year, use this link.
Note: If you're considering refinancing student loans, there are several factors to consider. Flexibility to target specific loans one at a time being the biggest. Read in detail about the pros and cons of refinancing student loan debt here.
Bonus: Do you know your WHY?
This may be a bonus, but it is a huge bonus… do you know WHY you want to climb out of a six-figure debt hole?
Mentally, climbing out of debt will be one of the hardest things you have ever done. Physically, I can push through most discomfort. However, most challenging things in life typically involve mental toughness.
Learning to say no to certain events, delaying your gratification, staying disciplined and communicating about your financial goals is not always easy. Truthfully, climbing out of six figures of debt isn't supposed to be easy.
That being said it is 100% possible to do so in 2-6 years depending on your goals and how much you make, but the biggest thing to keep you on track is knowing WHY.
Kids & Family
Case in point, starting a family. We want to start a family, but like so many with student loans, we have delayed having kids in order to put ourselves in a financial situation that is stable.
Delaying what you want now, so you can have what you really want later. For us that has been kids. Becoming debt-free and eliminating the last $100,000 worth of debt is the last step in our journey.
It is the WHY that keeps us going!
Final words on paying off six-figures in debt:
No matter what you decide to do, my biggest suggestion is to think longterm! Right now you might be emotionally drained from dealing with debt or overwhelmed.
Remind yourself that it will all pass with some commitment and forward-thinking. Imagine what it will be like when you're debt-free and think of how accomplished you will feel!
While maybe most cannot relate to having six-figures in debt, once you climb out of the proverbial hole, you will be able to accomplish just about any financial goal you put your mind too!
Question: What has helped you pay off your debt?
Josh writes about ways to make money, pay off debt, and improve yourself. After paying off $200,000 in student loans with his wife in less than four years, Josh started Money Life Wax and has been featured on Forbes, Business Insider, Huffington Post and more! In addition to being a life-long entrepreneur, Josh and his wife enjoy spending time with their chocolate lab named Morgan, working out, helping others with their debt and recommend using Personal Capital to track your finances.