My Plan For Paying Down Student Loan Debt Early

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My Plan For Paying Down Student Loan Debt Early

“Hello everyone! I’m currently relocating to Vancouver by car (3,500+ miles) so life is kind of busy at the moment, especially with our young baby with us. That’s why I’ve scheduled another great guest post for today. This is a post from Taylor who just started his first blog over at Paper Stackers. When he’s not blogging, you can find him working out, brushing up on his history, or playing with his puppy Waldo. Let me know if you would like to guest post on Finance For Geek.” – Vincent

If you’re like me, then you have student loan debt. Yeah, it’s not special. Everyone has some. At least that’s the way I see it. Why not? A trillion dollars in student loans is a lot of debt (understatement of the day), and most of the people I know are out of college. To me, student loan debt seems like everyone’s problem and a big one too.

However, as big as it seems, there are plenty of people that don’t seem to have a real plan for paying down student loans. By that, I mean they don’t seem to understand that paying down tens of thousands in student loan debt is going to require more than just hard work, and it’s certainly going to require just a bit more than banking on the mere prospect of student loan forgiveness without understanding the program in the first place (pointing my fingers at some unnamed people out there).

By now, I’m sure you’re dying to hear my magic solution. This isn’t going to be one of those. However, it’s actionable and doable. You don’t need an intricate, infallible plan, but you need something to work on. Below I’m going to go over my plan for paying down student loans early.

Defer Payments for Six Months

If you’re a federal borrower, then you’re in luck. You don’t have to start paying down your federal student loans right away because you can opt for six months of deferred payments. During this time, you are not required to start making payments just like you weren’t required during school. Deferment may not sound like you’re paying down your loans early, but it’s necessary if you can’t even get started in the first place.

After I graduated, I opted to defer my payments for the full six months. Honestly, I didn’t have a job yet! It was embarrassing for me, but deferring my payments right off the bat allowed me to save money while I searched for my big boy job. It paid off, and I was able to secure a decent-paying job out in the real world in about four months. I used the remaining two months to save some money and get established before having to deal with a monthly student loan payment.

Just keep in mind that the initial deferment period won’t last forever. You need to have some way to start paying down your loans by the end of it. My plan hinged on this, and I spent all my time making sure it happened. Don’t take your time during this stage.

Make Bi-Monthly Payments

Here we are at the second stage of my simple plan; in fact, I am still on this one today. After securing a job and moving into a cheap apartment, I decided that I needed to start doubling own on my student loans by making payments twice a month. I did this for both personal and practical reasons. I’ll start with the personal reasons. To me, paying down debt feels like a big task, and I’m a completionist. Making two payments a month was the only way I could feel more at peace with my current debt situation, especially since I was in it for the long haul.

Moving onto the practical reasons, two payments a month are going to help pay down my loans faster. The first payment deals with whatever interest has accrued as well as some principal balance, and the second payment is going to attack the principal balance again. Extra payments mean less debt to worry about, and it also means faster repayment.

Of course, making two payments isn’t going to be affordable for everyone. There are two simple ways around this: make more money or budget hardcore. I’m pretty good at the latter, but it may be due to the fact that I don’t have anyone to hang out with on the weekends anymore. At any rate, you just need to find a way to pay more each month whether that is side hustling a few hundred a month or cutting expenses by a hundred a month.

Try Out Student Loan Refinancing

As I mentioned earlier, I haven’t actually reached this point of my plan, but I’m getting there slowly but surely! Student loan refinancing involves consolidating student loans with a private lender for a new, single loan with new loan terms. The consolidation part isn’t what I’m after. It’s the new loan terms.

If you can successfully refinance, then you can drop your interest rate by whatever number of percentage points. Reducing your interest rate saves you money each month since interest accrues and capitalizes at a slower rate. It should reduce your required monthly payments. If you combine this step with step two, then I’ll be on the fast track to paying down my loans! It seems that LendEDU is one of the most recommended student loan refinancing service out there, you should try it out it’s pretty easy to use and it takes only 10 questions to get you the best rates available.

However, a successful application is dependent on your credit score and income. I have the income, but I don’t have the credit score yet. With that being said, I am banking on step two to lead me to better credit alongside responsible credit card use (another topic for another time). After a couple years of consistent payments, I’ll be ready to try out refinancing.

There you have it: a plan. I’m curious to hear what you think. Yeah, there are other options, but I want to pay these loans back before ten years go by or without being locked into an income agreement. Also, this plan isn’t made out for those who are struggling, but it is at least ideal for someone with established income and an affordable living situation. And at this rate, I would still be able to pay down my loans early without refinancing. Get on the bi-monthly grind!

Author Bio: Taylor just started his first blog over at Paper Stackers. When he’s not blogging, you can find him working out, brushing up on his history, or playing with his puppy Waldo.
What about you readers? Do you have any tips about paying down your student loans early on? Let us know in the comments!

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  • Avatar for Finance For Geek
    Nov 27, 2017 at 7:55 PM

    For my loans, I take however much I have budgeted for the month (currently $1.2k) and divide it in half, and make that payment each check (so $600 a check). I even do this on the rare three-check months, making the loan balance go down even faster.

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