How We're Paying Off $80,000 in Student Loan Debt

We’re paying off $80,000 of student loan debt as quickly as possible! In less than four years, we’ve been able to take our student loan debt from $80,000 down to $35,000. Don’t miss my best tips to help you pay off your debt quickly too!

May 2018 student loan update. How we're paying off our student loan debt early!

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It’s time for another student loan payoff update! These monthly updates are where I share our progress as we work toward a debt-free lifestyle.

We decided to pay off our debt early after taking Dave Ramsey’s signature Financial Peace University course. Dave gave us the valuable information we needed to pursue a life of financial freedom. Since taking that course, we’ve been working hard to reach our big dream of being completely debt-free. If you’d like to pursue financial freedom too, I highly recommend reading Dave’s book The Total Money Makeover. It’s a wonderful resource that will change your life!

So let’s get back to today’s student loan payoff update. If you’re new around here, let me fill you in on our particular student loan situation. If you’ve been here before, feel free to skip the next section.

Our Student Loan Story

I graduated from college without any student loan debt. My cosmetology diploma, associate’s degree in business administration, and bachelor’s degree in business administration all came from affordable schools. I even took most of my classes online, so I didn’t have to pay for expensive student housing!

My debt-free education was a blessing since Josh had enough student loan debt for the both of us. Growing up, he didn’t have the same support system I had. He didn’t have anyone there to help him pick an affordable school, so he ended up at a very expensive for-profit university.

Don’t get me wrong. We’re very grateful for his education. His bachelor’s degree is in computer information systems, so he was able to get a good job one month after graduating. But that education came with a hefty price tag, one that he wasn’t fully aware of when he signed up.

The Grand Total

In all, he ended up with $75,000-$80,000 in student loan debt. We aren’t sure what the exact amount was because he had been making payments toward the private student loan before we got married. I didn’t keep track of his payments back then, and he doesn’t know how much he paid from March 2014 to August 2014.

When we got married that September, I began paying the bills and keeping meticulous payment records. That month, we paid off the remaining $11,000 private student loan out of our savings account and focused all of our energy on the federal loan, which totaled $64,000.

It’s kind of cool to see how much we’ve been able to pay from year to year. Here’s what our payments in 2014, 2015, 2016, and 2017 looked like:

So let’s talk about our most recent payment!

May’s Payment

When I made May’s payment, the student loan balance was $37,256.88.

I made a payment of $2,300, which brought the balance to around $34,956.88. This is just an approximation since the loan still accrues interest during the few days it takes for our payment to process.

So far, we’ve paid a total of $49,840 toward Josh’s student loan debt in just three years and eight months!

Thoughts on May

May was an excellent month for us as far as the student loan goes. It was one of those magical, three-paycheck months, so that extra paycheck went straight toward the loan. I love months like that, especially when they help us reach a new milestone!

Thanks to that extra money, we’re now below the $35k mark! I can’t tell you how good it feels to see that balance dip lower and lower with every passing month. We still have a long way to go before it’s completely paid off, but I’m happy to be able to see the light at the end of this very long and expensive tunnel.

How You Can Pay off Your Debt Quickly Too

If you’re in the process of paying off your own debt, then you may be interested in learning how we’ve been able to make such quick progress even though we’re a one-income family. Here are some things we do to maximize our student loan payments. They’ll help you pay off your debt quickly too!

Educate yourself

You can’t make the best financial decisions if you don’t have a solid understanding of personal finance. But don’t worry; it really isn’t hard to learn. Start by reading Dave Ramsey’s book The Total Money Makeover. That book will give you the information you need to manage your finances and tackle your debt the right way.

Make a budget and stick to it!

If you want to maximize your debt payments, you have to have complete control over your money. The only way you can do that is by making a plan for every dollar you expect to earn before you ever get a chance to spend it. That’s where a budget comes into play.

A budget helps you prioritize your spending so you can reach your financial goals. If you need some help, I wrote a post that teaches you how to create a budget.

Use the Cash Envelope System

Making a budget is one thing, but actually sticking to it is another challenge altogether! In my personal experience, the best way to make sure you stick to your budgeted amounts for each budget category is to use the cash envelope system.

Basically, each budget category (with the exception of bills and gas) has its own envelope. You might have envelopes for groceries, restaurants, clothing, gifts, entertainment, pets, household items, etc.

Once you make your budget and decide how much money you want to spend on each budget category, you withdraw the total amount of cash you expect to spend that month and sort it among your envelopes.

When you go shopping, you pay for your purchases out of the relevant envelope. Once the money is gone, you’re done spending for that category for the month!

This system holds you accountable because you’re limited by the amount of cash you have in each envelope. It’s much easier to stay under budget when you have a limited amount of cash to spend.

Find ways to save money

In order to maximize your debt payments, you have to spend less money on your other living expenses. It can seem hard at first, especially if you’re not especially frugal. However, there are lots of little things you can do that add up to big savings. Check out these posts to get some ideas:

And if you need some support with the emotional aspect of saving money, be sure to check out these posts:

Build an Emergency Fund

Once you get a grip on your finances by creating a budget, using the cash envelope system, and finding new ways to save money, it can be tempting to throw all that money toward your debt right away. Please resist that urge.

While you do need to hit your debt with everything you’ve got in order to knock it out as quickly as possible, you shouldn’t jeopardize your financial stability in the process. Before you tackle your debt with gazelle intensity, you need to have an emergency fund in place just in case something goes wrong.

If you’re just starting out, save up $1,000 in a starter emergency fund while you make the minimum payments on your debt. This starter emergency fund will serve as a nice cushion in case you have a medical emergency, your car breaks down, or you have an unexpected house repair to pay for.

Related: How to Build an Emergency Fund

Once you have that emergency fund built up, you can shift your focus toward your debt. But don’t ignore your emergency fund altogether! Keep adding a little bit to it each month so it can grow to a fully-funded emergency fund.

As a general rule of thumb, a fully-funded emergency fund has between three and six months’ worth of expenses in it. This should cover you in the event of a job loss or some other big financial burden.

Wrapping It Up

Well, I think that about wraps things up for today! Now you know how we’ve been able to pay off a significant portion of our student loan debt and what you need to do to tackle your own debt as well.

All you have to do is educate yourself, make a budget and stick to it, use the cash envelope system, find ways to save money, and build an emergency fund. When you do those things, you’ll be surprised by how quickly you’re able to pay down your debt!

And before you do anything else, don’t forget to check out that book I mentioned earlier, The Total Money Makeover. The principles in that book will change your life!

Student Loan Update: May 2018