Millennials, Here Are 7 Ways to Crush Your Student Loans

Lately, I’ve been talking to millennials in their early to mid-20s that have been asking for tips on paying off student loans. I’ll share my experience with student loans. Then, I’ll provide my best tips for paying them off as fast as possible.

I am no stranger to student loans. In college, I signed the papers year after year that added thousands and thousands of dollars to my debt load. I graduated with almost $27,000 in student loans back in 2007. On top of that, I bought a new car when I graduated and added another $12,000 in debt. I was almost $40,000 in debt before I read my first personal finance book and began to get my act together.

Related blog posts:

• Millennials, These Books Could Change Your Financial Life
• Where I Agree and Disagree With Dave Ramsey and My Debt Story

You can read my Dave Ramsey / Debt Story post (see link above) to see what inspired me to pay off my car in just over a year and pay off my student loans in just over 2 years.

Most recent grads don’t really see the effect of student loans until they see the money deducted from their bank account month after month. Then, for many, the number is so large that paying off the student loans in the near future seems hopeless.

Here are my 7 tips for crushing your student loans.

1.  Set a goal and track your progress. Out of all the tips I’m about to give you, I believe this is the most important. Set an ambitious but reasonable goal and track your progress each month. For most, I think at least $1,000/month is reasonable, especially if you are still living with your parents. I track multiple goals on my blog here, and I believe tracking my goals has accelerated my progress. The following three things will make you more likely to achieve your goals: writing it down, telling someone about it, and having someone keep you accountable. If you keep a blog, you are doing all 3 (public accountability)!
2. Stop making only minimum payments. If you really want something, you wouldn’t just do the bare minimum to get it, would you? In most cases, making minimum payments guarantees that you will be paying off your student loans into your 30s. Set your automatic payments a little higher and make extra payments on your loans if you can. Don’t have enough income to pay more than the minimum? Read the next step.
3. Get another job or a side hustle (See my EXTRA INCOME page) If you work for 8-10 hours a day and sleep for about 8 hours, you still have 6-8 hours per day of FREE time. On top of that, you likely have your weekends free. Using just some of this time to earn some additional income will make a HUGE difference. The pay may not be that great, but every dollar earned will greatly accelerate your progress and help you maintain intense focus on your goal. Got a car? Try driving for Uber or Lyft. Lyft usually offers a bonus for new drivers. (Related post: How Much Do Uber/Lyft Drivers Make?) Deliver pizza at night. Tutor someone. Start a blog or YouTube channel. Rent out a room on AirBnB. Get creative.
4. Target higher interest loans first. Dave Ramsey teaches attacking the smallest balances first so you can have small victories to keep you motivated. If your interest rates are within a narrow range, I suggest following his method. If you have a wide range of interest rates or have fairly large balances, I suggest focusing on the highest interest loan while paying minimum payments on the others. Once that loan is paid off, attack the next highest interest loan and so on. You may also want to consider refinancing your higher interest loans.
5. Make temporary sacrifices. What you do with the small stuff is a representation of how you will handle bigger things. Making small, temporary sacrifices for the sake of your goal will help you focus on your goal. What if for a few months or even a couple years you canceled cable TV? or even Netflix? Could you pass on ordering alcohol or soda at restaurants? Or even give up eating out for a little while? You could make occasional exceptions for getting together with friends. Take a look at your expenses and see where you could budget a little better.
6. Focus your finances on one goal at a time. Aside from a small emergency fund, I am suggesting that you put all of your discretionary income straight toward extra payments on your student loans. Dave Ramsey even says to skip your employer match on a 401(k) temporarily so you can get out of debt. I slightly disagree and think you should at least get the employer match. You get the idea. Reduce the flow of money to other sources and direct it all towards paying extra on your student loans.
7. Read books and articles about personal finance and getting out of debt. How you manage money will have a huge impact on your life, especially your future. It’s worth it to invest some time in your 20s to learn about how to manage it well. Read some stories about people who have paid off large amounts of debt. The stories may inspire you and show you that you can do the same.

If you follow all or even most of these steps, I believe you can pay off at least $12,000/yr and upwards of $20-30k/yr or even more. It will take hard work, commitment, sacrifice, persistence, and perseverance, but it will be worth it. So what are you waiting for? Set a goal now and start tracking. Good luck!