Student Loans? Try These Hacks.

Student Loans? Try These Hacks.

You worked hard at college for 4 years (5 if you were like me), and are now entering the “real world”. Unfortunately, you probably have student loans like the other roughly 40 million people in this country. The good thing is that you are not alone, but the horrific thing is that you are really really not alone.

Everyone that helped put themselves through college seems to have this crushing burden, and we were only doing what we thought we were supposed to do. Now you probably feel like you are being punished…at least that was how I felt. The average person with unpaid student loans has $29,000 to pay back, and many have much more. I had $40,000.

You used that money to help better yourself, but now it is attached to you like a ball and chain that will slow you down financially for years. The great news is that paying back your student loans is a hard task, but totally achievable. I did it, so hear me out. If you put your head down and take on the challenge you can accomplish your goal of being free of this debt surprisingly quickly. I paid off my $40,000 in less than 2 years.

“That’s impossible. There’s no way you did that. There’s no way that could do that. I have so many more things to pay for every month than you did.”

I hear that noise all of the time. It’s usually pretty pointed and has an accusatory tone for some reason. However, I totally understand why people think those things. It does seem pretty ridiculous to pay it back as quickly as I did — especially on a teacher’s salary like I make. Here is what I say back:

It is possible. I did do it. You can do it too. I made a choice to have fewer things to pay for. It kinda sucked.

Paying back debt takes a ton of resolve and hard work, but I think that it is even more about changing your mindset when it comes to your personal finances. I had to trick my mind in every way possible to pay off my student loans. Let me show you what I mean. Here are my 5 money hacks everyone should know:

1. Keep less money in your checking account.

You probably are like this, because I know I was. After I got my job I really felt like I needed to keep a certain amount in my checking account to feel “safe”. My number was $1000 when I first started working. I told myself that I needed this amount of money there in case of some kind of emergency.

Looking back on it, I realized that I just wanted to feel like I had more money than I actually did. It’s the American way. We drive cars and buy houses we can’t afford, so why not keep more money in our checking account than we need to as well?

When I started paying my loans back I put a limit on how much could stay in my checking account. Even to this day after I’m debt free, I only keep the balance at $200 or less. Why? It makes me think harder before I purchase random crap. When you have more available cash, you will waste it on things that you don’t need that can stifle your ability to pay back debt. If you try this out for a month, you will be pretty shocked when you see the extra money you magically have. Hint: you need to use that magic money to pay down your student loans faster.

2. Build up some savings before you start paying extra towards your loans.

A lot of you are looking at #1 and thinking: “How will I pay for emergencies that come up?” Calm down, I’ve got you covered. Put away some money in your savings account before you start paying extra towards your student loans. Different people will say different amounts that you should have, but I built up about $3000 before I started paying back my student loans. Yes, I paid the minimum payment until I had this set aside.

This will do two things:

  1. You will have cash in the event of some kind of emergency.
  2. You will feel better about paying large sums of money towards your loans if you know you have something to fall back on.

Like I said earlier, this is all about mind games. You need to feel good about paying back your student loans while you are doing it.


3. Don’t take on any expenses that you can live without while paying your student loans back.

This is the hardest one because you need willpower. The American advertising machine is trying to get you to consume junk all of the time with your extra money. Everywhere you look, some company is attacking the vulnerable part of your mind and trying to make you want to buy their stuff whether you need it or not.

For example, your clothes have name brands on them for a reason — you are a walking billboard for those companies, and you even paid them for the privilege to do it. I’m always trying to identify subliminal advertising and blatant advertising that we as a society don’t even notice anymore, because it gives me an edge when it comes to using my extra money correctly. 

You need to understand that the part of your mind that is responsible for where your money goes is constantly under attack. Call me paranoid, but being aware of this has helped my bank account look a lot better.

Here are a few examples of things that you don’t need: Cable, a new car, nice shoes, new clothes every month, new cell phones (that you can put on a ridiculous payment plan now). While you are paying down your student loans you can use Netflix, drive a crappy car, wash your shoes if they look bad, make your clothes last longer by hanging instead of drying, and keep your cell phone until it doesn’t work any more.

If you can’t bring yourself to agree with the above paragraph then have fun paying your minimum loan payment for the next 15 years and thanks for reading.

4. Learn how to use an amortization table.

Finance majors are probably rolling their eyes looking at this. This is a really simple tool that most people don’t even know exists, much less how to use one correctly.

Go here and plug in the numbers for your student loans. If you want to see why I decided to pay my loans off, plug in my numbers:

Loan Amount: $40,000

Loan Term: 15 years or 180 months

Interest Rate: 6.8%

Loan Start Date: July 1, 2011

Click “Show/Recalculate Amortization Table” and look at the table that pops up. There are a couple of important things that you need to learn from this chart. If I had paid the minimum payment the way that Sallie Mae would have preferred, I would have ended up paying $23, 913.34 in interest alone. My $40,000 loan just turned into a $63, 913.34 burden for the next 15 years.That is unacceptable in my eyes, and I wanted no part of it.

Now check out the principle payment. It is way less than half of the payment I made. Most of my money went to interest! That’s messed up. However, if you scroll down the chart, you will see that the principle payment amount keeps going up. As you pay down your loans there is less money that can accrue interest, meaning smaller interest payments and bigger principle payments. That math is much more favorable to me and I wanted to take advantage of it.

Now change some numbers around:

Loan Term: 2 years or 24 months

This meant that my payment would have to be $1787.28 if I wanted to get my student loans done in two years. The bigger deal is that my amount of interest paid changed from $23, 913.34 into $2,894.69. That is a difference of $21,018.31! By paying off my student loans early, I basically put over $20,000 in my pocket over the next 10 years.

Interest is an extremely powerful tool that lenders use to make a lot of money over the course of your loan. Full disclosure, I actually put $2300 a month towards my student loans and paid it off even faster than the chart shows. I did this by following my own rules that I am trying to pass on to you.

Seriously, put your numbers in the chart and see what you can accomplish by paying your debt down early. Having a goal and seeing the light at the end of the tunnel will help motivate you to pay more towards your student loans. I promise.


5. Make your loan payment the first thing you do with your paycheck.

This is my last piece of advice. Every time you get paid, immediately make your payment toward your student loans. This will make sure that you don’t waste that money on something else, and will also help keep you on track to complete your goal. A residual effect is that you will learn how to manage your personal finances more efficiently, which will be a very useful tool as you go on through your financial life.

What do you think? Do you have any money hacks that have been helpful to you while paying down debt? Let’s talk about it below! 

Live differently, your bank accounts will thank me later. ~M$M

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2 comments… add one
  • Karl Lausman Mar 11, 2015, 10:38 pm

    Great help for millennials, and anyone in debt. I have been reading your blog and applying to my situation.

    Thank you!

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