Student loans seriously suck.
I don't say that in a whiny tone or even a, “Man I am a victim of unfettered lending”, I say that just because every month paying those student loan payments makes you realize how much money you could have to do the things you love.
Now don't get me wrong – lot's of things suck. Getting up early to go to work isn't always the most fun, neither is running the last half mile when you work out (The last half seems to always be the hardest for me).
So just because something might suck, doesn't mean we avoid or don't deal with it. Could you imagine simply not going to work or not exercising because you didn't enjoy it?
However, while student loans might suck at times – ultimately they did allow people like myself and my wife to get a degree that resulted in jobs with paychecks attached.
Maybe it is just time to stop worrying about student loans and find a solution to your student loan problem!
How did student loans get to where they are?
Here is the student loan problem in a nutshell… you ready?
- Most colleges used to be federally funded
- As federal funds were cut back, states absorbed those costs
- States were forced to raise tuition costs (Hence why out of state students pay more)
- As tuition costs and the idea that you NEED a college degree began to rise, so did student loan lending
- Schools started competing with other schools for students – dorm rooms, food, extracurricular – increasing the tuition even more
- Lending became unfettered. In other words anyone at any time could take out a college degree.
The 6 points above illustrate why in 2007 there was $700 billion in student loan debt, yet in the last quarter of 2018 their was $1,600 billion (or 1.6 trillion) in outstanding student loan debt.
But that is neither here nor there. It is always good to understand where a problem can be fixed for the future, but for many millennials, the damage has been done.
The student loans have been taken out and now it is time to start looking into how to pay them off!
Student Loan Help 101
Up until about 2015 I never knew to look for student loan help. I sorta just thought student loans were a matter of fact, just part of life sort of thing and I would pay the minimums until they were gone.
By lack of understanding simple compounding interest was pretty low – clearly.
Then my now wife and I started talking about marriage. We realized her student loan minimums were not even covering the monthly interest. So we started looking into the whole subject of, “How to pay off our student loans.”
We read and heard about people finding solutions for their student loans and paying them off… and paying them off really fast. We decided we wanted to be one of them.
Which is sorta how I started actually started Money Life Wax…
There was tons of student loan refinancing options out there, we just couldn't find the how to pay off student loan information. Then we came across personal finance blogs where people shared their stories.
My number one goal is to help the millennial generation with personal finance, specifically paying off student loan debt so they can live a great life on their terms – not interest rate terms.
Chances are if you don’t have student loan debt, you most likely know at least 10 people who do. It is not often a question of if you have student debt, but more like how much do you have.
The average college graduate in 2016 walked away with an average student loan balance of $37,000 and that same year, 72% of college graduates had at least one student loans.
But paying off student loans starts with something else believe it or not..
Beat the Label Millennials & Pay off your Student Loans
As much as millennials might hate the label millennial, the truth is the entitled kids of the late '80s early '90s were dealt a crappy hand in a sense.
They were told to go to school to be successful. Colleges upped their tuition and lending for student loans became commonplace.
I can speak for most people born in between 1982-2002 when I say that our parents thought the key to a good life was college. So when I say we were dealt a crappy hand, we just so happened to enroll in college right about the time when tuition, federal aid, and higher education exploded.
However, just because it has been engraved in us since we were in middle school to get good grades in high school, so you can get into a good college and get a good job that pays the bills… we don’t have to be a victim to what I call bad advice.
There is numerous ways to pay off student loan debt and the first step is recognizing the fact that most likely waiting on things like public service loan forgiveness or just paying the minimums isn't your best bet.
Here are some solutions that will help, ranging from how to pay them off to mindset.
Solutions for your Student Loans
I decided to create a cumulative article with some of the best Money Life Wax Posts that help with paying off student loans. I have come to realize that each person has a unique situation and each case is different.
For example – consolidating student loans can be really hurtful in the long run in one situation, but beneficial in another. Catch my trend?
I don’t fancy myself as a student loan expert, but in November of 2016 we had $261,000 in student loans. Today we have $83,000 (Never-mind the $17,000 interest charges that were tacked on to start 2017) with another $35,000 displaced (I will elaborate).
We went from not even knowing we should pay off our student loans to learning first hand how to go about attacking debt, and we have gotten pretty good at it.
The main ingredient – self-discipline and temporary lifestyle changes. So within all of that, in order to pay off student loans, I think it boils down to a few things:
- Inspiration or WHY to pay off student loans
- Mindset shift as a whole with higher education
- Applying the best strategy for your needs
- Refinancing at the right time.
Student Loan Inspiration
Everyone needs some inspiration to get started on their journey when paying off student loans.
You can read about how our student loan debt almost ruined our lives (like seriously $300,000 is a lot of student loan debt) and then check out how we were able to pay off $109,000 in 21 months. I also attached an article to student loan success stories to help get you started!
- How Student Loans Almost Ruined Our Lives
- How to Pay Off $109,000 in 21 Months
- Student Loan Payoff Success Stories
Mindset Shift & Student Loans
Being inspired is great, but sometimes it will take a little more to get the ball rolling. From living on a budget to understanding how student loans work, sometimes the thought of living below your means seems is almost socially taboo.
If you have never used a budget or you haven't created an emergency fund in the past, then you will need a shift in mindset.
Here my best picks for the mindset needed to start crushing your student loan debt:
- 8 Sacrifices we made to pay off $150,000 in student loans.
- Stop Comparing Yourself Financially to Your Friends
Pick a student loan strategy that works.
You are inspired and now you have the mindset that will help you pay off all of your debt in less than 2-3 years. Just imagine, two years from now you took all your monthly payments and put them in a vacation fund, how many vacations could you take then?
Typically the simplest strategy is to just line up all your student loans (or consumer debt, auto debt) from least to greatest. Still paying minimums on all debt, take extra income you freed up using the “Kill Your Extra Spending” post from below and apply it to the smallest debt. Aka the debt snowball.
As you pay it off, roll the balance to the next one. The reason being, you need to pay the principal off faster so the interest doesn’t accumulate.
As a bonus, if you own a home and want to use an acceleration trick that is not conventional, look below at a pretty in depth post on how we leverage a HELOC – which is not for everyone (see workout analogy at end of article).
Refinancing Student Loans
In some instances, refinancing your student loans can be your best option… BUT it is not what is best for everyone. Here are some of the pros of refinancing:
- Lower interest rate
- New loan terms
- Lower monthly payment
- Less money going towards interest
Just be sure to make sure you read about whether or not you should refinance your student loans.
Take into consideration the advantages and disadvantages of refinancing if you have federal loans. When you refinance privately, you lose some of the federal perks like deferment and income based repayments.
Additionally, sometime's it might be easier to pay student loans off when they consist of a bunch of small loans just by using the debt snowball approach.
If you decide to refinance your student loans check out either Penfed (who we used) or Lendkey.
My takeaway to finding student loan help.
Ever been to the gym and seen people doing yoga? Or maybe you saw someone else on the bike or treadmill, but you found yourself lifting weights.
Of the four above which one is the best for you? It depends on your personal needs.
Every situation, person, and need is 100% original and unique to that person in some regards. And while one solution or “workout” may work best for one person, that doesn't mean it is the best solution for you.
AKA if yoga isn't going to help you with your goals then why do it?
All that being said, most of the student loan help advice this article contains should cover most situations, if not all. From the extreme borrowers like my wife, to the normal borrowers like myself – there is a solution to your student loan problem.
My suggestion – take something from this article and apply it. Come back in 6-12 months and let's see where those student loans are now!
I hope you enjoyed this post! Feel free to share with friends and family that have student loans, or maybe someone in college right now.
Question: What strategy helped you pay off your student loans?
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.