How I Paid Off My Student Loans
No travel, lots of privilege, working weekends, and avoiding adulthood
Ok, boomer, we’ve heard you: Millennials are the worst. We’ve murdered the napkin industry in cold blood. We told Big Dog Food that our precious fur babies deserve more than kibbles or bits. And we’re not giving you grandchildren for selfish reasons like being too broke and also not wanting to bring children onto a planet that doesn’t have enough clean air for everyone.
Sociopaths, all of us.
But you’ve got to admit, Old Economy Steve, that one way millennials have been uniquely burdened is student debt. These numbers don’t lie. Members of my generation are more educated, more productive, yet we earn less than previous generations did at our age. That means it takes us approximately forever to pay off the debts we incurred as teenagers.
When I enrolled in college at age 17, I didn’t realize that my debt would haunt me into my adult life. How could I? Every force around me, from my well-meaning family to my overworked guidance counselor, told me that I could just take out loans, pay for school, graduate, and then pay them back. Because I’d definitely have a job. It was so possible! Anyone can go to college if they just fill out the right paperwork!
Ah, the optimism of youth.
Six months after graduating, as I huddled near the steam heater of my tiny apartment eating beans from a can (okay, that’s an exaggeration, but not much of one), the payment notices started coming in. And as I looked at the slips, which told me that my final payoff date would occur in my mid-forties, I realized that having the audacity to try to raise my economic status would cost me a lot more than I’d anticipated.
Like in all other aspects of the American economy, it’s expensive to be poor.
This is, of course, not news. The plain truth is that if you can afford to pay for your tuition, books, and more, upfront, your college education is cheaper. If you have to take out loans, you’ll pay interest — possibly a lot of interest. And the longer it takes you to pay them off (like if you need a graduated plan that lowers the payments at the beginning), the more you’ll pay — sometimes up to three times the sticker price of your school.
Like in all other aspects of the U.S. economy, it’s expensive to be poor. Which means, fundamentally, that it’s more expensive to be a person of color, a new American, or any other person on the margins. Neat.
But last month, I’m proud to say that despite my lower-class background and my desire to work in silly, frivolous, low-paying trades like journalism and politics, I made my final student loan payment. Just 14 years later, here I am! Free of student loans!
I know, I know. The ticker-tape parade in my honor hasn’t been scheduled yet. But as soon as I get the permits from the city, you’ll be invited to join in the jubilation.
So how did I do it? How, just a mere 10.5 years after graduating with a bachelor’s degree from a state school, did I manage to free myself from the chains and binds of my poor decision-making skills as a teenager?
Great question. Here are the basic steps I followed to pay off my student loan. I’m sure you’ll find them super-helpful because they are very actionable and can be applied to just about anyone’s life.
1. Have some degree of privilege
This is very important. You really should consider being born with some kind of wind at your back if you want to pay off your debts early. This can include a range of different benefits — whiteness, having parents who are at least emotionally if not financially supporting, being able-bodied, and thin — but you’ve got to have at least a few.
Otherwise — and I know this is hard to believe because of how fair and equitable everything is! — you are more likely to pay more. According to research from the Brookings Institute, “differences in interest accrual and graduate school borrowing lead to black graduates holding nearly $53,000 in student loan debt four years after graduation — almost twice as much as their white counterparts.”
So, you know, something to think about.
2. Don’t buy a house, get married, have kids, or have anything that resembles a normal, middle-class life
Okay, so you can’t change where you were born or who your parents were or how our culture disproportionately values whiteness and wealth. But you can change your actions! So, in order to pay off your loans quicker, you might want to consider putting all or nearly all of the trappings of a Norman Rockwell-esque American life on hold, maybe forever.
A woman named Linda called into financial planner Jill Schlesinger’s radio show with this exact problem. Six figures in debt and living in the Bay Area, Linda wanted to know if she should have kids and buy a house before paying off her debt.
Schlesinger was frank.
“You are not buying a house right now. It will feel like you are drowning,” Schlesinger said. “To me, it’s too risky for you to take on this thing called a mortgage.”
However, Schlesinger did encourage Linda to go ahead and have kids because her “biological clock... is ticking.”
After all, a kid is only about 2.5 times more expensive than her student debt, so it certainly makes sense to do both at once.
You’re going to have to make a Solomonic decision to ensure you don’t get buried.
NerdWallet disagrees; their advice is to see if there are any first-time home buyer credits you can take advantage of and then do some clever math to try to save for a down payment while whittling away at your loans.
“You may find it’s more feasible than you thought, especially when you choose a house you can afford.”
Unfortunately, one of the current president’s first acts in office was to make home buying even harder for young people by increasing the cost of insurance on a loan with a lower down payment. But if you move to a place where houses are cheap — how do you feel about Ohio? — you might still be able to do both.
These answers make one thing clear: You’re going to have to make some tough choices. Whereas your parents were probably able to buy a house and have a whole sedan full of kids by the time they were 35, you’re going to have to make a Solomonic decision to ensure you don’t get buried.
3. Don’t go on vacation
I mean it! I know that your friends are always dashing off to Greece for the ‘gram, but you don’t have that luxury. Yes, sites like SoFi will tell you that as long as you travel with friends, work while you travel (so, you know, it’s not actually a vacation), or go in the off-season, you’ll be able to do both.
A blogger named Kate told Student Loan Hero that she was able to do both because she had already checked the first box on this list.
“I’m fortunate in that my student loans are public, not private, so I was not subject to sky-high interest rates that would have made traveling much more difficult,” she told the website. “When my seven-month trip turned into five years of full-time travel, I just kept budgeting my loans as a monthly expense.”
Great work, Kate! Your whiteness, ability to work in a decent-paying field of online marketing, encouraging middle-class parents, and relatively low loan balance ($15,000) meant you were able to quit your job at 26 to travel full time and pay down your loans. That seems very feasible to many people.
But come on, reader. You’re no Kate! If you’re serious about this, instead of plopping down $450 to go visit your nana in Boca, you should really just throw all of that at your loans. It’s the only responsible way to go.
4. Don’t limit yourself to one job at a time
Our grandparents and great-grandparents stood on the picket line so that we could have a 40-hour work week and weekends to do what we please. And what we please is paying off our debts, right? That means those extra 40 hours “for what have you” can and should be spent doing even more work.
Millennials have been credited for pioneering the world of the side-hustle, in no small part because we’ve had to. Our average earnings have been on the up-and-up but then, so has everything else. As CNBC reported earlier this year, “though American households may be earning more, salaries still aren’t going as far as they used to to cover the necessities, let alone the soaring cost of college, housing, health care, and child care.”
We’re just going to have to work even more to pay off those loans. For example, because I’m fortunate enough to be a writer and a lot of companies think writing is basically low-cost witchcraft, I worked every weekend for a solid two years writing terrible copy about casinos and car insurance. When the client finally fired me because I had the audacity to remind them that they were a month delinquent on my payment, I allowed myself a few free weekends. And what a gift they seemed!
An August 2019 survey from SunTrust Bank* reported that more than half of Americans had some kind of side-hustle, “pulling in $8,794, on average per year.” Think of how much more quickly you could pay off your loans if you just dedicated all of your spare time to earning more money.*
So whether it’s schlepping tech bros around in your Prius, delivering McDonald’s for people who definitely won’t tip, or tending bar after work, consider the 40-hour work week a special miracle that is only for people who have already paid off their loans. Time off is for closers!
*Based on that SunTrust figure, it’s like, $4,000, because any and all side-earnings will do a number on your taxes and you really need to save for those, too. More on that in the next point.
5. But also don’t earn too much
Okay, so this is also an important point. Way back in 2010, the American Opportunity Tax Credit was unveiled as part of the overall package to help bail folks out of the recession. People who’d paid interest on student loans, both federal and private, would be able to get up to $2,500 off their total tax bill. This credit was initially going to be allowed to sunset, but it kept getting extended and now it’s been extended several times and is basically tax gospel.
It’s a good credit for a lot of folks with student loans. It has helped incentivize education spending and it helps offset the steep cost of interest rates for folks who are on long-term repayment plans. However, it also sucks in a few key ways.
First, it has never been increased. The cap has always been $2,500, which seems like a lot but isn’t. For most people, especially in the earlier part of their payment plan, they easily pay that much in interest per year, if not much more.
Here’s what NerdWallet has to say: “With a 5.8% interest rate on $30,000 of student loans, a borrower would pay about $9,600 in interest throughout 10 years.”
But Debt.org states that the average borrower in 2017 comes out of college with a balance that’s closer to $38,000. And even if the average is somewhere in the middle, it’s not as though you can just divide that interest number by 10 and say you’re paying around $1,000 per year in interest. The bigger the balance, the more interest you’re paying. In fact, in the first few years of paying your debt, you might be paying almost exclusively interest.
Additionally, very few people pay off their debt in 10 years; the average is closer to 20. So if we calculate the total interest over 20 years on a pretty typical degree, we see that people are paying a lot of interest back to the federal government, which doesn’t really seem to need it that badly.
That’s almost $23,000 in interest alone over the life of your loan. And again, that’s assuming you’ve only got $38,000 in federal loans, which is the average amount, which means a lot of people owe more and, as a result, pay more.
Which brings us to the fact that the tax credit has never been increased, even as it’s been extended year after year. Between the 2007–2008 school year, just before the AOTC was rolled out, and the 2017–2018 school year, the cost of a degree at a public four-year college has increased by about 30%. But this tax credit hasn’t changed.
It’s never been increased — but the amount we pay certainly has. Which means it’s grown less and less helpful with every single year that it can be applied. Compare this to, say, the tax credits around mortgages, where homeowners can reliably write off all of the interest on their primary home and secondary homes. You can see how this is really not as awesome as it could be.
Not only has the maximum deduction of $2,500 never been increased to keep up with inflation, but the earning cap hasn’t been changed, either. For the last 10 years or more, that cap has remained the same, at $80,000 for a single person.
You might be thinking “pfft, what kind of person making $80,000 per year needs a tax credit?” But if you are, the answer is “many of them.” Because the median income for millennials is $69,000 (nice), which is more than it’s ever been. But it still hasn’t kept up with the cost of everything else — which is why our purchasing power remains lower than that of our parents when they were trying to be adults.
There is no InstaPot recipe that can keep your budget lean enough to make the necessary huge payments you need.
What’s especially difficult to wrap one’s head around is the fact that this increase doesn’t come from better wages, it comes from more work. Specifically, it comes from women who are working full time and then some, contributing more to their household than ever before, and paying more taxes proportionately than they were 10 years ago.
So that’s where this advice comes in — get a side-hustle, but make sure you don’t earn too much. Because until you can buy a home, you’re not really going to be able to get a break on your taxes if you tip the scales to $81,000.
And there you have it
That’s my advice on paying off your student loans. I hope you weren’t looking for shitty tips like “make your lunch at home” because if you think you’re going to pay down that mammoth debt $20 per week at a time, you are sorely mistaken. I assure you, there is no InstaPot recipe that can keep your budget lean enough to make the necessary huge payments you need.
Yes, paying down your loans requires some real tightening of the belt and possibly reimagining how you thought adult life would actually be. It means moving to a town that you hate where there’s no work because it was the one place you could buy a house. It means deciding that having a family doesn’t sound that great anyway. It means working every available weekend because if you’ve got time to burn, you’ve got time to earn!
You may think I’m being dramatic, but come on. Look at my life! I’m a lifelong renter who is basically the neighborhood childless hag and hasn’t left the country in more than 15 years. But I’m also out from under my student loans for good.