Last week, I got a letter in the mail from ACS. It said, “Congratulations! Our records indicate that you have successfully paid off your student loan.” I was thrilled, to be sure, but on the other hand, I'm 31 years old. I felt like I should have paid this off years ago.
I hardly resemble the college version of myself. I mean, the girl who graduated nine years ago hardly even knew about hangovers. She could get up and go to the gym on a Sunday morning, after being out on Saturday night. (She usually didn't, but she could have).
Student loan debt is considered “good debt”* by those who feel the need to classify debts as either good or evil, including the government (my opinion? Any debt where you are paying more interest than you could easily earn is bad, the others are okay). It's the curse of the middle class. Some wear it proudly. Some people hardly consider it at all. After all, they're paying a small amount of money (mine was around $100/month) and it comes out of their accounts automatically, so why should they think about it?
With savings accounts earning so little interest these days, I think there's more value in getting rid of your student loan debt than there is in stockpiling cash. Plus, you don't want to be the lady at the retirement home who can't play bingo because the government is garnishing your Social Security check to pay your student loan debt.
As usual, I have a plan.
The Plan: How to Pay Off Student Loans
Step 1 – Decide that Paying Off Your Student Loans is a Priority
The first thing you have to change is your mindset. Here's how to prioritize. Take a look at the interest you're paying. For me, that was 4.25%. Check around to see where else you can get a guaranteed return of that interest rate elsewhere. If you find a place, then don't finish reading this post. Otherwise, carry on.
Step 2 – Look at Your Minimum Amount Due, Then Double It
At least double it. If you can, triple it. Or, double your automated payment, and then throw extra bits of money at it throughout the month. Not only did I double my minimum due, whenever I'd have extra money, I'd throw it at my student loan debt.
Step 3 – Know When Your Expected Payoff Date Is
Use one of the free online money management tools that tracks goals (like Mint) or use a spreadsheet, and see what date you'll be out from under the student loan debt if you keep your payments the same, or if they are doubled. Think of this as “time to beat” and start putting more toward it. Gamification is a great way to help you build incentives to pay off your debt faster.
Step 4 – Do The Happy Dance!
Once you've finished paying off your debt, celebrate! And if you're tracking your payments as mentioned in Step 3, you can look back and say, “holy cow, I paid eight thousand dollars in eleven months!” or something similar. Treat yourself. Congratulate yourself. Blog about it! If you don't have your own blog, I can direct you to at least twenty people who would be thrilled to publish your debt repayment story.
Step 5 – Handling Your “Old” Monthly Payment
The minimum payment? That one you barely noticed? Automate that payment and put it in savings every month, or invest it. Check out The College Student's Guide to Get Started Investing for tips on investing now that you're debt free. It'll add up, I promise.
Step 6 – Stop Acting Like a College Student!
Get your act together (financially). Act like a grown up. I mean, there's nothing tying you to your college years now. So, start saving for retirement, save up for a down payment, and do other things that you were too cool to do when you were an undergrad.
I graduated from college in the spring of 2004. I graduated from college debt in February 2013. There was much more celebration in 2004. But I was a lot more proud in 2013.
It's funny — it's just a feeling, a sense of accomplishment. I feel much better about paying off my student loans than I did when I finally paid off the last of my credit card debt. I feel proud of myself. And I did it before my hair started turning gray!
Actually, how would I know? Due to the miracle that is the modern-day hair salon, I'll never have to go gray.