Living debt-free is the goal of millions of Americans with student loans.
In the time it takes to pay off their student loans on the standard repayment plan of 10 years, college graduates will pay thousands of dollars in interest and, as we’ve heard from many readers recently, put a lot on hold – like getting married, buying a house and having a family.
But some people, we’ve also found, just don’t want to wait that long.
Greg Woods and Alex Stevens are two recent graduates who paid off their students loans in under three years. How’d they do it? Tenacity and diligence, fueled by frustration over interest payments. Their full stories are below – but first some context about Greg and Alex, who reached out to us via our student debt network.
Both were steadily employed while paying off their loans: Greg was making approximately $24,000 a year working for a non-profit, while Alex’s salary working for the federal government was $43,000. They each owed around $15,000 – about $10,000 less than the $24,301 US average student loan debt.
Here’s how Greg and Alex managed to pay off their debt while working entry- level jobs – and living on their own, not with the ‘rents:
What made you decide to get serious about repayment?
Greg: ‘The church asked that members become debt-free’
When I went to my credit union after graduating to talk about repayment, the loan officer gave me a printout of what I would ultimately pay with interest if I took 10 years. Then I asked her to print out a spreadsheet if I paid it back in two years. I was shocked about how much less interest I would pay over the long term.
Also, a while after graduating I started occasionally attending a church in Washington DC. The church asked that members become debt-free, so they can start living more simply and donating excess to charity in the community. Although I never joined the church, I was very impressed by their message. I have always tried to live as simply as possible, so having a connection to this church helped to further inspire me to get debt-free as soon as possible.
Alex: ‘I thought: I have to do something’
When my student loan payments started, they were about $110-120 a month. After paying my other bills, it seemed like another expense I couldn’t afford. I thought: “I have to do something.”
Moreover, after graduation, I had run up a small bit of credit card debt, maybe about $1,500 total. I noticed that even if I paid more than the monthly minimum, like $30 instead of $20 a month, it was still taking a long time to pay it off. I went on a trip for work where I ate cheaply, and used the money I saved to pay off a chunk of my credit card bills when I got back. When I saw how effective it was in reducing my bill, I decided I needed to do this to my student loan debt and my car payment, and avoid debt if I could.
Tell us about your budgeting. What was the hardest part?
Greg: ‘I imagined the freedom I would feel without debt’
I think the most challenging parts of paying off my loans was feeling too stingy most of the time. Sometimes I would go out with friends and not buy anything at all. This was hard especially in DC because the twentysomething crowds often went out for dinner and drinks multiple times a week. I would get through these times by imagining the freedom I would feel without debt. It helped that I had housemates who were great cooks and we shared food costs as a house. Also it helped that I never outgrew my childish love for hot dogs and peanut butter and jelly sandwiches. I was tempted by technology too, but I resisted. I was one of only a few of my friends in DC who did not have a smartphone or Blackberry.
Alex: ‘It was like a game watching my loan balance drop’
The first few months were hard as I was just starting out in life and I didn’t have much money to buy things like clothes for work or just things I wanted. I knew people whose parents were supplementing their income or didn’t have student loans or just spent more money and were buying really nice clothes – and I wanted those things too. But I kept thinking about how I didn’t like being in debt. It was like a game watching my loan balance drop. I started keeping a chart in my online journal to watch my progress to being debt free.
One thing that was really hard was moving. I had to rent a place that fit in my budget. While I knew others my age who were living in these nice, modern buildings, I decided to live in a place that was no more than 33% of my income. My first apartment had a murder across the street the week I moved in! It was kind of run down, and I sometimes wondered if I was safe. Sticking to the budget to save money was sometimes hard and there were definitely things that would happen that would knock out my extra payment money, but I just kept at it.
What has the process of repayment taught you? Has your life changed?
Greg: ‘I live more simply now’
Paying off my loans quickly taught me again that I did not need a lot of material stuff to survive. I already knew this, and I have not ever been that much of a spender in my life. It was a nice thing to reconfirm. Also, it has made me appreciate more about how I do spend my money. My fianceé and I try to live simply and cheaply. I still try to avoid debt as much as possible because I have seen the effects of longterm debt have had on family and friends. I want to reduce stress as much as possible in my life.
Alex: ‘If I can’t pay for it, I don’t need it’
I’m told I’m too hard on debt. Once I paid off my credit card bills, I never carried debt on them again; I pay my whole statement balance. If there’s something I want, I usually save up for it, put it on the card and pay it off when the bill comes. My goal is no fees on my bills. I use my credit card when I can for convenience, but I never carry a balance. I try not to gleefully declare to others that I’m debt free (except for the mortgage we have), but it feels so good to know that if you only buy what you can pay for, you can make credit cards work for you! If I can’t pay for it, I don’t need to buy it until I can.