How I Paid Off $28,000 of Student Loan Debt in 2 Years

I graduated from college in Spring of 2013 with dreams, a degree, and some serious debt. $27,993.86 in student loans to be exact. My debt hadn’t concerned me while I was in school, and there wasn’t much to do about it anyways.

The few thousand dollars per semester I had borrowed to cover the costs of housing, food, and tuition seemed imaginary... Until the first loan bill came in the mail. Would I really be paying $300 a month for a decade (and $9,300 in interest over the term) to pay off my degree?

Today’s college graduates face the same questions. According to the Federal Reserve Americans hold $1.44 Trillion in student loan debt and the median loan amount for 2016 grads was $37,124.

People seem pretty comfortable with student loans in spite of them being a “crisis.”. One study found that on average borrowers took 21 years to pay off their loans. Paying off debt slowly is the American way. Finance a car, pay it off in 5 years. Finance a degree, pay it off in 10. Finance a home, pay it off in 30 (or never).

While chipping away slowly at student loans is popular, there is another way. Paying them off as quickly as possible. This strategy requires discipline and develops crucial money habits like goal-setting and living on less than you earn. And the peace that comes from being debt free, knowing your income is yours, it’s worth all of the work.

Here are 5 tactics I used to pay off my student loans in two years. They’re not complex or original, but they do work!

1. Create a Goal

Paying off debt “as quickly as possible” is a great notion but a terrible goal. In order to actually make progress, create a hard deadline and underline it on your calendar.

My salary coming out of college was $40,000, less than the median income at the time of $46,000. Below average or not, it felt like a fortune. It didn’t matter if my friends were making more or less. This was my money to manage and maximize. So I set an aggressive goal of paying off my loans in two years.

With a finish line in mind, I broke the goal into smaller milestones. I knew I needed to pay off over $1,000 per month but I couldn’t swing that right away. Here was my strategy:

• Beginning of the month: Pay the minimums on all loans.
• Middle of the month: Throw $500 from my paycheck  the highest interest rate loan.
• End of the month: Pay anything extra I could (while keeping enough money for rent, food, and $1,000 in emergency savings).

With a goal in mind and a strategy in place, my loans dwindled steadily, month after month.

2. Track Expenses and Net Worth

Each month I tracked my spending to the dollar with a budget and regularly monitored my net worth. Tracking expenses helped me identify trends, find big savings, and slow down spending, especially toward the end of the month.

I also kept a close watch on my net worth, a measure of wealth calculated as what you own (assets) minus what you owe (liabilities). It was negative for a while. But each month it nudged toward zero, providing a monthly reminder that budgeting works. I looked forward to a day when that net worth would swing positive and compound interest would be working for me rather than against me.

3. Minimize the Big Expenses

Financial gurus talk about cutting out the daily latte or a $10 monthly subscription to create margin in a budget.  That definitely helps. But for a big goal you need hundreds of extra dollars per month, not a few bucks here and there.

My mindset was simple: I had lived like a broke college student for four years. By retaining that lifestyle for a few more I could to pay off my degree. The two easiest areas to save big money were transportation and housing.

Housing: Before graduating my brother Charlie transformed my mindset about renting. He told me, “Jeff, pay as little as you can in rent. I overpaid during my twenties and could have saved so much money if I had not lived in as nice of places.”

After college three buddies moved to San Jose, California and we got an apartment together. Remembering Charlie’s advice, I told the guys my one stipulation: I would not pay over $600 per month in rent.

We found a 2-bedroom apartment for $1550 and the four of us crammed in. Fridge space was limited. Bunk beds were less than ideal. But my rent was under $400/month! I could have afforded my own room for $800 a month but over two years this one decision saved almost $10,000 to funnel toward loans.

Transportation: According to Experian Automotive, in 2015 four out of five of new cars were financed, with an average payment of $483. While commercials make a brand new look very tempting, financing a car will put you in reverse when trying to pay off loans. You end up deeper in debt, the payments create a monthly siphon on your income, and the car rapidly loses value.

My parents repossessed their mini-van when I graduated, so I found a gas efficient inexpensive car (2001 Honda Civic) on Craigslist and bought it with $4,000 cash. The table below shows the math that informed the decision. Purchasing a new Civic would have cost around $4,700 more over two years, delaying my debt-free birthday by 6 months or more.

4. Make Some Money on the Side

Limiting expenses is only half of the personal finance equation. While great defense is key, good offense helps too. With expenses under control any extra income income can fund your most important goals.

I made extra money by working side jobs coaching youth sports. Over two years I coached four lacrosse teams and three volleyball teams. Instead of buying new toys I threw the windfalls (around $7,500) straight into loans.

While coaching may not be your thing, consider trading your time and creativity to fund your goals. Build skills while freelancing in the gig economy or put your car to work dropping off people, pizzas, or Prime packages.

5. Stay Inspired

At first paying off debt was easy. I knocked off a loan every few months and celebrated the mini-milestone. But after a while it became a grind. Good personal finance feels more like a marathon than a sprint. The temptation to give up, or at least slow down, became very real.

The stock market soared and I wanted to invest. Friends traveled to Europe and I envied every selfie. I fell in love and wanted to visit San Diego every week. When doubts arose I found inspiration from others, steeling myself with the truth that soon I could do all this and more.

Friends learned about my goal and cheered my progress. Stories and podcasts from others working to become debt free provided hope and practical tips. Absorbing tales of sacrifice from others reassured me I wasn’t crazy and carried me along when I wanted to give up.

The Payoff

On June 1st, 2015, two years and one day after graduating from college, I made my last loan payment. Honestly, seeing the balance drop to zero was anticlimactic. No crowds cheered at the end of this marathon. But I was relieved to be done, and at the end of the month I saw the payoff.

In late June I found over $800 in unallocated money in my checking account. Money I could apply to new goals I had been delaying for months. The first two were investing in the stock market and buying a wedding ring. Paying off debt isn’t the end, it’s more of a starting point. And best of all, the habits I developed along the way applied to all my future financial goals.

If you don’t want to be laser focused on paying off your loans, that’s totally fine. That was my neurosis, and I liked it. But my hunch is you still have a big goal. Give it a deadline. Keep track of your finances. See if changing a major expense could make a big difference. Search for extra income streams, and find a team to keep you inspired on the way. Then go get it. You may be years closer to your goal than you think.

This post is part of BrightPlan’s Inspiring Stories series about people who reached their financial goals. Have a story you’d like to share? Send us an e-mail at hello@brightplan.com