Student Loan Repayment: 7 Steps I Took To Get On The Right Path
The total amount of student loan debt owing in the United States comes in at over $1.52 trillion. There are close to 45 million student loans borrowers and the average student loan debt of recent graduates is $39,400.
Numbers like that are hard to even fathom.
In Canada the total owing in student loans to the federal government are over $28 billion. It’s not as unimaginable as $1.52 trillion but it’s still an inordinate amount of money.
Upon graduation, my student loans and education debt had totalled $38,000. Therefore, I was right in the range of the current average in the US. In comparison to some graduates or higher education professionals, that isn’t a jaw-dropping figure. However, in my life that was a daunting number as I stepped outside the classroom and into the “real world”.
My financial illiteracy and money mistakes weren’t helping the situation either. I was on pace to make no momentum with my money or form an overall student loan repayment plan as personal finances were yet to become a major priority.
Thankfully, I had an aha moment with my finances after some rocky times navigating the world of adulthood and consumerism. In turn this helped build a repayment strategy and shift me onto the right path.
Personal finances are indeed, personal.
What worked for me might not be feasible for your lifestyle, living situation or finances. Or what I did may seem inefficient and you managed to master your student loans and finances in another fashion.
This is what worked for my student loan repayment and the steps I took to get on the right path.
1. Refinanced To Lower Interest Rate
After my grace period ended and I’d started making my minimum payments within 6 months I’d luckily stumbled across the personal finance content that saved my financial life.
These books, blogs, podcasts and services quickly alerted me to the many mistakes I was making with money. One of the strategies I was alerted to was the possibility of refinancing my student loans to potentially save thousands in interest.
Thankfully, I was able to quickly consolidate my student loans into a private personal loan through my credit union at a 2.5% lower interest rate. In turn, this saved me thousands and expedited the repayment timeline.
Refinancing your student loans isn’t for everyone and every situation.
The opportunities available to you and decision to do so will depend on various factors: your location, government vs. private student loans, loan balance, interest rate, credit score, income and other variables tied to your personal situation.
Credible is a service that allows you to compare pre-qualified refinancing rates from up to 11 lenders. The service doesn’t affect your credit score, is 100% free and according to their website the average user saves an average of $18,000.
You just have to complete a quick 2 minute survey and then you’re on the way to exploring multiple rates from lenders.
SoFi has become an industry leader in the student loan refinancing industry. The company has refinanced over $18 billion in loans since 2011 and their website claims that the average members lifetime savings is $15,767.
The offer both government and private loan refinancing and the pre-approval process takes approx. 2 minutes.
2. Audited Spending To Find Savings
Next up was taking control of my spending based on all the lessons I’d learned from the content and resources I reference in the Personal Finance Resource Starter Kit.
Cutting expenses was an easy win given how much room for improvement I had. Diving into the numbers on Mint (a budgeting and tracking service) opened my eyes to the opportunities available.
Personal finances are personal.
What worked for my situation may not be applicable to your living conditions, lifestyle and career. However, understanding where you’re spending your money and getting a better sense of the savings opportunities that might be available is a practice applicable to most. Especially for those of us looking to take better control of our finances.
Right off the bat I was able to identify $200 of monthly savings (including the interest savings from refinancing).
- Better Grocery Planning: $90 monthly savings
- Reduced Cable Subscription Package: $40 monthly savings
- Refinanced Student Loans: $30 monthly savings
- No Weekday Beers Policy: $30 monthly savings
- Negotiated Cell Phone: $10 monthly savings
As I started to get a better sense of managing my spending, within 3 months that grew to another $200+ monthly savings. Cancelling unnecessary cable, setting a budget for entertainment and even smarter grocery and food spending boosted those savings.
When you’re spending money aimlessly, you have a wide margin for improvement. Hence, I was able to identify these savings.
There are a variety of apps and services to help cut costs on items you’re already spending on in your everyday lives.
- Checkout 51: save on everyday grocery and household purchases.
- Ebates: earn free cash back on your online shopping (Americans get $10 for free with this link | Canadians get $5 for free with this link). Check out this full review of Ebates to learn more about how it can make and save you money.
- Paribus: a free tool to check whether the price of any items you’ve purchased have dropped and if those stores owe you now.
- Trim: helps you save money on your subscriptions, bills and recurring expenses. It’s like an automated savings assistant.
- Credit Sesame: free service for Americans to monitor their credit score and save thousands in interest across your life.
- Borrowell: free service for Canadians to monitor their credit score and save thousands in interest across your life.
3. Increasing Payments
The savings created by performing a spending audit were immediately used to increase my bi-weekly payments from the bare minimum to almost double and throw additional sums against the principal.
At the time, I was still putting 12 – 15% of my take home into retirement accounts.
Could I have garnered better returns by investing every dollar of that money into the markets? Yes, undoubtedly. Could I have expedited the student loan repayment by moving those retirement savings dollars towards additional payments? Yes.
However, this was a tactful approach more so for a psychological reason than a quantitative one.
Personal finances are personal. This was the approach I took in my life and situation. You need to do what fits best for you.
I’d been so loose with managing my finances in the past I actively wanted to commit to building good habits – budgeting, saving, paying off debt, investing. Taking control of my money and life was of the highest priority.
I needed to learn by doing and the “not entirely optimized” allocation of my money during this time is worth every cent due to the habits, mindset and commitment I built.
This spending audit and initial increase of payments were amazing first steps for me. But I knew there was opportunity to make more momentum.
4. Mindset Shift From Scarcity To Abundance
The biggest cause for change in my life and financial trajectory is entirely rooted in shifting my mindset from scarcity to abundance.
Saving and better managing the money you have is one side of the equation. The other, often under discussed side, is earning more.
Increasing your income, taking risks, a willingness to change your life, understanding of the countless opportunities and the motivation to chase what you want by removing that idea of scarcity.
Stephen Covey talks about this in his uber popular book The 7 Habits of Highly Effective People.
In a personal finance sense that might mean the pie isn’t big enough for all of us. There isn’t availability for all us to get raises, promotions, open income generating businesses, diversify income streams or achieve our greater goals.
The stress and weight of my student loans helped create that scarcity mindset in my life.
We might build up a disdain or appreciation for success of others. We might spend whatever we have with a justification of who knows what’s coming tomorrow and focus on the short-term gain.
I tried to actively shift to flipping that mindset to one of abundance. Side hustles, starting a business, supporting and appreciating others, growing my professional income in order to unlock time and freedom in the future so I could live the life I wanted.
I was now looking at the world as an endless opportunity as opposed to a troublesome financial environment with finite growth or scarce resources.
Conquering my student loans and bettering my financial trajectory was an opportunity due to the abundance of opportunity.
5. Set A Goal Of Earning $2,500 Quickly
This new abundance mindset brought forth the goal of earning $2,500 through means outside my 9-5. The Side Hustle Show by Nick Loper was an amazing resource for opening my mind to the boundless opportunities of generating cash flow.
I wanted to make $2,500 dollars and throw it against the principal. The reason? Motivation, achieving a goal, showing myself I could earn more.
I can’t remember why I landed on that $2,500 figure but I printed it out and stuck it beside my computer screen with an empty bar graph. As I generated income through any means outside my 9-5, I’d shade in part of the bar graph and note the new total ascending towards that goal.
$0. $75. $200. $329. $1,173…until I reached $2,500.
What was I doing?
It started with micro-earnings via digital platforms like Swagbucks. Or PineCone Research, Survey Junkie, InboxDollars, Daily Rewards and so on. Plus walking dogs with Rover in the evenings or weekends.
These were nice little wins but wouldn’t suffice to cover the $2,500 goal or abundance mindset.
Luckily I made another drastic change in my life and started waking up at 5am. This was originally for health, fitness and productivity reasons but it quickly shifted to prime side hustling hours.
In the idea of abundance, my mind was telling me there is time, money and opportunity available to achieve more. I began freelancing digital marketing, business development and database management services via Upwork and Freelancer. In addition to the mornings, I set aside hours on the weekend to do so.
Based on relationships built and quality of work I’d done, I transitioned those clients off the freelancing platforms that were taking a % of my commissions.
So that side hustle income grew quickly once handling this on my own.
In the first two years of waking up at 5am and side hustling on a set block of weekend hours, I earned $14,500 through freelancing.
Based on your skills, experiences and time, there is definitely an abundance of opportunity available to you too. Whether it’s an extra $100 a week or a life-changing business idea for the long-term.
Wait, my goal was to make $2,500 quickly, right? I mentioned some micro earnings and side hustling income over 2 years. Where was the quick win to get to that $2,500 goal?
Let’s move onto step 6.
6. Sold Clutter And Unneeded Stuff
Knowing I wanted to achieve my $2,500 goal, I realized I had an abundance of opportunity built up all around me.
Consumerism had gotten the best of me during my late teens and early 20’s. DVD collections, sporting equipment, gaming consoles, shoes and so on.
This netted out to having a closet, storage unit, shelves and cupboards full of stuff. Things I rarely touched, used or thought about. I guess I had an abundance mindset for “stuff” in my earlier years…
It took me 45 minutes to clean items, take photos, write descriptions and post items to eBay. That 45 minutes of work netted me over $1,800.
What did I sell? Gaming consoles, golf clubs, hockey skates, sports memorabilia, textbooks and other items that really drove limited to no benefit or enjoyment.
Take inventory of the stuff around your house or apartment. Are there any income opportunities sitting there unused?
This was the easiest $1,800 I’d ever made (even though it was a net loss based on what I’d spent to collect this stuff).
7. Bonuses & Salary Increases Replicated On Payments
The final step in my student loan repayment plan and new abundance mindset is an obvious one: growing my income in my professional 9-5 career. And using that growth to reach my financial goals.
The blogger ESI Money has spoken about this topic multiple times. His post How To Manage Your Career To Make Millions More is an amazing read for any career-vested individual.
The Coles notes of ESI Money’s 7 Steps To Maximize Your Career are:
- Perform as well as possible at your job
- Be likeable or ‘more likeable’
- Network within and outside your organization and industry
- Be more ‘attractive’ (in the vein of dressing well and taking care of yourself)
- Continue learning and developing skills
- Manage yourself with systems for goals, company dynamics and find a mentor
- Market yourself
This has been the approach I’ve taken to increase my salary 81% over the last 4 years.
I’d seen too many people come do the bare minimum and make limited progression at my organization. Which is totally fine, to each their own and perhaps their goals relat elsewhere.
I knew by actively managing my career to put myself in the best position to grow, learn and connect, I could reap the benefits.
Those salary increases and bonuses aren’t to fund lifestyle inflation or take me back to my consumerism days (although I do enjoy nice things, travel, craft beer and experiences with my girlfriend).
Whether it was a 5% – 10% increase in the first years of my career or a 54% bump after a recent promotion, those dollars go directly towards my financial goals: eliminating debt, growing my investment contributions and in turn increasing my net worth.
I feel very fortunate for all this and the opportunities available to me. I encourage everyone to actively look to secure a raise or promotion.
Other Resources On Student Loan Repayment
There are dozen of websites, podcasts and books dedicated to the subject of student loan repayment. Two of those highly valuable resources that are well-respected and deliver amazing content for readers are Student Loan Planner and Student Loan Hero.
Student Loan Planner
Travis from the Student Loan Planner runs a website focused entirely on student loans. In particular, those with high levels of student loan debt.
The two podcast guest appearances by Travis noted below deliver so much knowledge and value, I couldn’t recommend listening to these enough.
Student Loan Hero
One of the most popular, respected and visited resources on student loans is Student Loan Hero.
Their site is full of content aimed entirely on helping you with your student loans. From calculators and repayment strategies to blog posts and advice columns, it’s an amazing resource.
The final thing I’d say is that after I had my aha moment and shifted my mindset, I actively tried to not let the debt consume me.
I knew it was going to take time and that the strategies I’d put in place were working. I just needed to let the system chug along and have the patience to see the momentum build. Removing that scarcity, stress and feeling of no control was essential.
Thankfully, I’m happy to say that before the close of 2018 my student loan repayment plan will have delivered me the ultimate goal.
A $0 balance.
I’m excited to close this chapter of my financial life and move forward to the next stage. However, I’m grateful for everything I learned about myself, personal finances, abundance and staying committed to a goal.
Personal finances are personal. Don’t forget that.
Did you graduate with student loans?
What strategies have helped you conquer or continue to conquer those debts?
Let me know in the comments below.
Here are some other posts to help you take control of your money and life:
- The Personal Finance Resources And Content That Saved My Life
- 6 Tips To Help Create Accountability With Your Personal Finances
- Free Cash Back, Money & Rewards – Best Websites, Apps & Services
- 35+ Rewarding Side Hustles Anyone Can Do To Earn More Money
- 55 Great Online Udemy Courses For Millennials, Entrepreneurs And Side Hustlers
- 25 Books On Personal And Professional Development