HOW TO PAY OFF STUDENT LOANS – 7 SMART STRATEGIES
People tend to argue that the price of a good education cannot be compromised while some millennial aren’t feeling the same. As a matter of fact, many graduates are always left to face the grueling task of paying off student loans within a time frame. I know, because I have been there. With medical school, only the lucky few were able to escape the claw of the student loan. With over 200,000 dollars in loans from medical school, tack on some undergraduate loans too, one must find a way to get out of that debt dungeon.
This is why when people asked me what was my motivation, for always trying to do well in school. My reply? Student loans!! Cosigned by family member. If I fail, then I might as well not return home.
If you fall under the category of students that want to pay off student loans, there is no need to worry anymore. This article will explain how to pay off your student loan quickly. If not quickly, at least faster than you think.
These strategies are mix bag of methods for different stages of life. Many of these strategies has helped us flip topside wealth wise. Continue reading. (Check out our disclaimer about affiliate marketing and sponsors before proceeding).
Get out of student loan debt now
Table of Contents
1. Negotiate student loan payment into your contract
My job ended up paying a part of my student loan. There were other benefits that I enjoyed too that made it worth the trade off. However, as a doctor, student loan repayment is a common part of negotiation. Especially, if you are working in a rural area, you have more room to negotiate. I have heard of instances in which student loans are paid off in totality. Just beware though; this kind of deal comes with a restriction. There is usually a stipulation that, if you leave the job before 3 years, you would have to pay back all or portions of money the company gave you. This is not limited to doctors only, I have seen nursing job that offered to pay $25,000 dollars on loan repayment.
2. Leverage your sign on bonus
The medical profession may be flawed in terms of compensation and how long it took to make decent money, however, the ability to have job security and be able to walk away during negotiation if the terms do not suit you is an awesome perk. I once saw a job posting in rural California that offered $250,000 sign on bonus. Of course, the job was swept off before I could get my act together. You would have to work in some shady condition for them to offer such an exorbitant amount, however, if that is what it takes to pay off your loans, well, one must do what needs to be done. Don’t believe me, here are some job postings with sign on bonus, including hair stylist and technicians.
I used contract diagnostics to negotiate both student loan repayment, sign on bonus and stipend. They review physician contract. They also got me a favorable severance cause. In case the job does’t work out.
3. Think of student loan like a mortgage
This is for everyone that can afford it. If you can, treat the loan like a mortgage and try to pay the larger part to cut down the principal more quickly. This is one of the best pieces of advice when planning to pay off student loans. Paying off a significant amount of the principal amount minimizes the duration of the student loan period and the interest that will be accumulated over time.
Another unique strategy that can help pay off student loans is adding payments and sending in checks every 2 weeks, instead of sending in checks monthly. Immediately the college loan is repaid, the benefits grow rapidly and you are one debt safe. Once you finish paying your student loan, any money you make can now be invested and used towards wealth building.
In fellowship, I did some extra coverage resident shifts and we paid off all of Mrs Breathe Easy’s student loans. I also paid a significant portion of my loans.
While I was doing this, many people tried to tell me that I would soon become an attending and why was I hustling so much? I know my plans and wanted to have positive net worth as soon as possible. Now as I write, we have crossed zero networth. Although we still have some low student loan at 4%, our investments have overtaken the loan. At this time, it gives me joy that we can pay off the remaining loan if we want to. My job is actually paying a portion of that loan too. That helps.
These other student loan payment tips works even if you are not a high income earner and you are serious about becoming debt free. It is better to start from college with the attitude that paying off that debt is your top priority.
4. Create a payment plan
A three to five years plan will be perfect to give you scope of when you should pay off your student loans. Having an end date gives you an insight into what you will be paying and how to make it happen. The pressure is on.
Establishing an annual budget with a time-bound goal will make you adjust your everyday life towards accomplishing the goal. Having a payment plan or budget will also make you aware that you can put more money towards diminishing the principal balance.
At the end of the timeframe set for paying off the student loan, you would have paid off the debt or you will be left with the insignificant amount to pay.
Live like a resident!! This is by far the best Mantra I picked up from white coat investor. Living like a resident has helped us pay our debt faster.
7 ways to get out of student loan debt
5. Create a college repayment fund
This is another tip to pay off student loan quickly. Place the money assigned for paying off the student loan into an account that you can’t withdraw from easily (e.g. saving in an account that you can’t easily withdraw with a card).
This type of accounts allows you to save money for the sole purpose of paying debts. It also allows you to set aside money to grow and accumulate wealth instead of spending them on a shopping spree, expensive dinners, hangouts, and designer clothes.
6. Get a side hustle
Start paying off the debt early by taking up a part-time job while in college.One of the ways to generate money to pay for college debt is to get a part-time job while attending college itself. The part-time job allows you to offset the loan more quickly.
If you take a part-time job while in school and you are able to pay close to $500 monthly, in a year, you will be able to pay off $6000 which will move you closer to financial freedom.
For many of us, we already passed the college stage. The same principle applies. Find a side hustle and use the money to pay off your debt faster. Like I said above, I was able to pick up some shifts during fellowship as extra coverage resident. That allowed us to pay significant portion of our debts.
Also, it is difficult to get part time job in medical school, so if you can’t do it, consider other options.
7. Don’t be a victim of the usual trap
Ironically, the desire and need for instant gratification are what holds back a student from paying off the student loan quickly. Delay in the payment of student loans results in a delay in fulfilling your dreams anyways. So why not pay off that loan?
Having a better plan ahead and understanding how the mind works allow you to make sacrifices in your budget to pay off the debt.
Don’t behave like everyone around you. Ensure you maintain a financial discipline which is always a difficult hurdle for many people. Have the discipline to save and you are a step closer to paying off your student loan. Live below your means.
The people who succeed at paying off student loans are those that save and live modest lives.
In conclusion, the best way to pay off student loan quickly is to negotiate better, do more than expected; pay more than the monthly minimum. The more you pay, the less you will owe, the less the interest and the quicker you pay off your debt.
Of course, there are many more ways to pay off your student loans. There are just 6 of them. Comment on more ways in the comment section to help others.
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Adebayo
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I am a pulmonary and critical care doctor by day and personal finance blogger/debt slaying ninja by night.
After paying off close to $300,000 in student loan debt in less than 6 months into my real job, I started on a mission to help others achieve the same. There is no magic to this than to strap up and get it done. Some of the ways we achieved this include side hustle, budgeting, great negotiation skills, and geographical arbitrage.
When I was growing up, common knowledge in Nigeria is that there is one thing you cannot trust anyone else with, and you guessed it – your money.
Being frugal came easily to me based on my background. However, the concept of building wealth did not solidify in my mind until when I finished medical school. I wish I knew what I know now when I was 14. Still, I don’t know enough and I am constantly learning to improve my knowledge.
My goal is to reduce financial illiteracy among young professionals. I am catering to the beginners – babies and toddlers in financial literacy.
