You’ve probably heard of a dramatic student loan payoff story in which someone pays off $20,000, $40,000 or even $100,000 in loans in a few short months or years. Perhaps you’ve even read these stories hoping to get tips to help you pay off your loans more quickly. But you’ve probably also wondered how realistic these stories are and how applicable the tips might be to your own life.
While these extreme stories are often very inspiring, whether you can do the same and pay back your loans at an accelerated rate will likely depend on these 4 things:
1. How Much You Make
Some of the people who pay off their student loans quickly got jobs right out of college that paid them quite well and this allowed them to rapidly pay back their student loans. Obviously, if you have $30,000 in student loans and you get a job upon graduation that pays $70,000 a year, paying off your student loans in two years is a reasonable timeframe.
But not everyone gets a job immediately after graduation, let alone a job that pays well. In fact, many millennial graduates are unemployed or underemployed for significant periods of time before they find a job that pays them a reasonable salary.
Those years in which they struggle to find work or are underemployed often lead them to have to forebear or defer their loans which means letting interest accumulate over that time period. This could mean that they end up owing more on their loans a few years after graduating.
For borrowers who do get jobs right away, many will never make the high salaries that would allow them to pay back their student loans at such accelerated rates. While that doesn’t mean that they’re destined to be indebted forever, it often means that they might only be able to pay the minimum amount on their student loans.
2. Whether You Get Help
It’s important to note that some of the stories of people who paid off their student loans quickly involved a parent helping out either by contributing money directly towards their child’s student loan payoff or letting their child live at home while they were paying off their student loans.
If you’re able to live at home while repaying your student loans, it allows you to put money that you would normally have put towards rent towards your loans which accelerates your repayment.
But not every student loan borrower can live with their parents while they’re paying off their loans. If your job is in a different city or your parents don’t have the space or the willingness to allow you to live with them, then you can’t take advantage of this important rent saver.
Another group of borrowers get help from their spouses. If your spouse doesn’t have student loans or if they have fewer than you do, they can potentially help you pay yours off by consolidating together. If a couple works together to get rid of loans then they can likely pay them off twice as fast. And, by combining household incomes it may be easier to refinance student loans at lower interest rates. Income is an important factor when it comes to qualifying for student loan refinancing, so having a great income to report could potentially help.
3. Whether You Can Live Extremely Frugally
Some people actually enjoy the thrill of saving money and delight in seeing their student loan balances go down each month. Others feel like being extremely frugal is a form of deprivation and is incredibly draining. If you’re someone who has a difficult time sticking to a strict budget, it might be unrealistic for you to try to pay off student loans fast.
Accelerating your student loan payments will mean that you’ll have to do without for a while. If you had plans to do some traveling after graduation or before you settle down and have kids, you might not be able to do that if you’re focusing on paying back your student loans.
Some people also just naturally have higher expenses than others. For example, a borrower living and working in Kansas is going to be able to pay a significantly higher percentage of their $50,000 salary towards their student loans than a borrower living and working in New York who makes the same amount.
Also, some recent graduate have other responsibilities like taking care of family members or children. These responsibilities increase their expenses and limit the amount they can put towards their student loans.
4. Whether You Can Work A Lot
Many student loan payoff stories, like one we covered where a woman paid off $10,000 in 5 months, involve borrowers who aren’t making large salaries but find extra money to put towards their student loans by taking on side hustles. These side hustles include part-time jobs or side businesses that allow them to make more money.
While some people have the energy and determination to spend 60 or 80 hours a week working just to pay off their student loans more quickly – this isn’t a lifestyle that works for everyone. Some people just can’t work that many hours due to family commitments, health issues, or disabilities. Others don’t want to spend their twenties working all the time.
Everything has an opportunity cost. While you might end up financially ahead by spending all your time and energy in your twenties paying off your student loans, you might have missed out on doing a lot of things and you could regret that later.
So, Will Your Payoff Story Be Extreme?
Ultimately, you have to decide whether you’re able to pay off you student loans at an accelerated pace or if you want to take longer to do so. You need to find a balance that works for you.
Author: Dave Rathmanner
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