How to Pay Off Your Student Loans (U.S.): How I Paid Off $72,000 in 3.5 Years (And You Can Too!)

Got a huge chunk of U.S. student debt and wondering how the heck to pay off your student loans? I hear you.

When I was finishing college and deciding whether or not to do my master’s degree (which I’m so glad I did end up doing, for the record, even though I had to fund myself), I was STRESSED about my student loans. I already had some from my undergrad (which would keep accumulating interest during my master’s) and would be taking out a huge chunk more to pay my tuition fees and living expenses.

Then, after I finished my master’s degree (and before I had a full-time job), I saw my minimum monthly payments and panicked again. In the end, even though I think U.S. student loans are SUPER predatory (how could I possibly have made the decision to borrow such a large sum of money when I wasn’t even 18 yet?!), I’d say it was totally worth it. My undergrad in Switzerland gave me the opportunity to travel around the world as part of my studies. My master’s at Oxford was a) one of the best years of my life and b) set me up well for my current career path.

So, how did I manage to pay off such a large chunk of money in such a short amount of time?

Unfortunately, there’s no easy answer. It’s definitely possible, but I’m not going to be able to give you any magic tips for how to pay off your student loans in 6 months.

Believe me, when I left grad school, that’s also what I was looking for. All I wanted was to have this huge chunk of debt gone. I looked into things like public service loan forgiveness and refinancing my loans, as well as various side hustle options.

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So how can you pay off your student loans?

This is what worked for me:

1. I chose a job based on the income.

Now, obviously, that wasn’t my only consideration, but I exclusively looked at jobs with a high early career earning potential. In those first few years, I spent very little money and saved everywhere I could. I basically continued to live on my student budget even though I was now making a larger income.

Because I’m a bit of an anxious person, I started by putting a decent chunk of money aside for emergencies. I set aside about 1 year’s worth of expenses (if I lived SUPER frugally). Since U.S. federal student loan repayments are so flexible, I figured it was more important (and gave me more peace of mind) to have an emergency savings fund than to pay off all my loans immediately. For more tips on how to create a budget and save money, check out this article.

After that, I paid everything extra towards my student loans—including all of my bonuses. No fancy handbags for me—I was on a mission!

2. I came up with a strategy.

Since I had loans from my undergrad and master’s, I came up with a strategy for paying certain “groups” first. I paid off the ones that with the largest principal and highest interest rates first. Nelnet has some great tools for exploring repayment options so take advantage of them as well.

3. I largely left some of my lower interest rate loans alone initially.

Loans with what I considered to have a small-medium principal and a low interest rate were not my priority initially. Ultimately, I was trying to minimise the amount of extra interest I’d have to pay and those weren’t generating much.

4. I paid the outrageous suggested monthly payments.

Now, federal student loans allow quite a bit of leeway in terms of repayment. One month, my loan payments jumped to over $1,100 per month. This happened more or less out of the blue—when I called Nelnet they couldn’t tell me why it happened. They did offer to reduce the monthly payments and it felt absurd to be paying SO MUCH more than my monthly rent in monthly student loan repayments. However, I thought to myself, “the more I pay each month, the less interest I pay and the quicker I get these things out of my life”.

5. I tried to take advantage of good foreign exchange rates.

I was earning money in pounds and transferred large chunks of money back into dollars for my loan payments. While I wasn’t always so good at this when I was super busy at work, I tried to check exchange rates and projections in order to maximize my money.

When I did transfer money, I used TransferWise and I can’t recommend them enough. They offer low-cost international money transfers. They even offer a bank account that allows you to hold currency and have local bank account details in tons of different currencies/countries.

All About Refinancing

One of the questions I grappled with vis-à-vis my student loans was whether or not to refinance them. Ultimately, I decided not to.

If you’re thinking of refinancing, I’d recommend checking out this video from One Big Happy Life on YouTube. I’d recommend their channel in general if you’re looking for more advice on how to pay off your student loans and general finance tips.

They go through all the things you should consider in deciding whether or not to refinance your loans including the benefits of keeping federal student loans vs. having private ones. They also talk about what the heck refinancing actually even means (i.e. that you’ll be taking out a new loan in the amount of your original one to pay back your original loan, thereby replacing the old loan with an entirely new debt instrument).

Federal student loans tend to have higher interest rates. However, they offer better hardship protections and flexible repayment options. This includes the option to defer payment while you go back to school.

Because private, refinanced loans don’t offer income-based repayment plans, there’s a chance your monthly payment will go up. Furthermore, they may also have a variable interest rate. If this is the case, you need to take a look at the state of your emergency fund and your job security determine whether you’d be able to continue your payments if your financial situation changed.

Private loans do tend to have lower interest rates and you may be able to pay them off faster (but check your repayment term). You can even invest the amount you’re saving with the lower interest rate!

Hopefully, this post has Do you have U.S. student loans? What’s your strategy for paying them off?