How to Pay Off Student Loans Now

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Last week we discussed the darker side of student loan debt as well as various strategies for staying out of it in the first place. But what if you’re a recent graduate already carrying an over-sized student loan balance, is there hope for you?

Absolutely, but it won’t be easy.

Exactly how difficult that will be will have a lot to do with how much debt you have; the larger the loan balance the tougher the choices you’ll face.

Why you need to pay off student loans as quickly as possible

How to Pay Off Student Loans Now

When you finish college it’s natural to want to get on with your adult life as soon as you can. You want a new car, a place of your own and to begin experiencing some of the adventures you couldn’t afford when you were in school. A few years later you might be looking at marriage, buying your first home, and for some, having children or starting a business. All will cost money, and some will require new loans.

In addition, careers and jobs aren’t as stable as they once were. Even though you have a job upon graduation, it’s hardly inconceivable that you might be unemployed just a year or two later. If that happens, you’ll need all of your financial resources to deal with the crisis at hand.

Student loans will interfere with all of that, and that’s why you should pay them off as soon as possible. Not only will they be a drain on your future cash flow and your ability to deal with a job loss, but they could also limit your ability to borrow money to buy a home or finance a new business.

How quickly you’ll be able to pay off student loans will depend on both the size of your debts and on your personal situation upon graduation.

Loan size

Though the average student loan debt is just over $25,000, the amount owed can vary by individual, anywhere from a few thousand dollars to well over $100,000. If your debt is at the lower end of the range, you can manage the pay off without making too many sacrifices. But if your debt is into the tens of thousands, you’ll need to make sacrifices, some of them life changing.

The bigger your student loan is, the greater it’s ability to interfere with your future plans, and the greater the need to get rid of it as soon as possible. You may be able to blend the pay off of a $10-20,000 student loan into the rest of your financial life, but if you owe more in student loans than you earn in salary, you’ll have to step out of your comfort zone to make it go away.

Your employment status

We hear and read a lot these days about graduates having student loan troubles, and though much of that has to do with loan size, employment is a more common problem. Let’s face it, it’s hard to pay back a large debt when you’re either unemployed or under employed. And more grads are falling into either category than ever, which is yet another strong reason to pay off student debt as soon as possible.

If there’s no work in your field of study, or you can do no better than minimum wage, there are certain student loan relief programs that may help you. It’s a long shot that you’ll qualify for any of them, and if you don’t you’ll have to be prepared to roll up your sleeves and get busy.

Strategies to pay off student loans

The best time to accomplish this is when you first get out of school. Life becomes more complicated as the years pass and as they do your ability to pay off the loans will decline. Here are ways to make that happen. You should easily be able to find an extra $10-15,000 per year to pay toward your student loans.

Housing on the cheap. There are several choices here: 1) move back in with your parents, 2) rent a room close to work, or 3) share a house or apartment with one or more roommates. If the choice is renting an apartment by yourself for $1,000 per month, or sharing a small three bedroom house for $1,200 with two roommates at $400 each, you’ll have an additional $600 per month, or $7,200 per year, to pay toward your student loans.

Employment plus. Take a second job and dedicate it entirely toward the pay off of your student loans. Even if you only make $8 an hour, if you work 20 hours per week, you’ll earn $160, or about $8,000 per year. Even allowing for taxes you’ll still have a good chunk of money to put toward your debt. And two bonuses: 1) with a part-time job you’ll spend less time at home with your parents or roommates, and 2) since you’ll be working, you won’t be out spending money!

A “beater” to the rescue. Buy the cheapest car you can afford to buy without taking a loan. If that’s a $2,000 beater, then that’s’ what you buy. While a new car may be very desirable after graduation, buying it with a loan will just add more debt to an already substantial pile, and cut down on the amount of income you’ll have to devote to paying off your student debt.

Staying out of other debt. The last thing you want to do while paying off your student loans is to run up your credit cards or take other loans. That’s just a matter of exchanging one form of debt for another.

You can use all or a combination of several. How far you’ll have to go will depend on how large your student loan debt is and how much you want to make it go away. But the sooner you do, the better the rest of your life will be.


Do you think it’s a good idea to make paying off of student loans a high priority after graduation? Share your thoughts.

photo by Victor1558

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1 Patti

Kevin, I definitely agree that student loan debt should be a top priority after graduation. I can’t stand to think about the interest I would be paying if I took the full 10-15 years to pay them off. All that money, tied up, can be used for other things like a down payment on my future home.

It’s also important to remember to live in the moment and be present. I used to go crazy thinking about the loans, but now I contribute extra when I can and not beat myself up for not doing better. I can’t change the past, but I can make the future a happier place for myself.

2 Kevin Mercadante

Hi Patti–Good for you for making an effort to pay the loans back ahead of schedule. Most people it seems have a casual attititude toward student loans and make no effort. The loans follow them for years while other things are happening in life.

I agree we have to live in the moment, we’re guaranteed nothing in life. Still I’d want something like student loans gone as soon as possible. It makes for more pleasant moments in the future.

3 Kathleen @ Frugal Portland

This is my goal. I am 30 and I am planning on being out of student loan debt before I turn 31. I have the second job, I’m making room for a third, every dollar goes to that debt. I’m close now, and according to Mint I’ll be out of it by November 1!

4 Kevin Mercadante

Hi Kathleen–That’s an excellent goal to have. You’ll be free to go on with your life and the debt will be behind you. I’ve seen people carry student loans deep into their 30s and even 40s. They can have a negative effect on what you do later on. Getting rid of them now is the best course of action.

5 V

If you graduate in your late 20s, paying off student loans into your 30s and 40s is the reality for some of us, depending on various factors. Luckily, with yearly salary increases, bonuses and paying down credit card debt to free up more money, I’ll be able to double and even triple my monthly payments in the future.

6 Kevin Mercadante

Hi V–At least you have a plan.

7 V

Thanks Kevin, a plan is a start toward a debt-free future. I look forward to it happening sooner than later.

8 JDRobison

I really appreciate this particular post. My loans are manageable with my salary, but my wife graduated last December with an education degree, and schools really only hire once a year (when school starts in the fall). We are really holding out that she finds a job, but if she does not her loans will be a pretty big financial burden. She is working three part time jobs, but it is just not the same as a salary with benefits. Paying off our loans is a struggle we are really trying to figure out.

9 Kevin Mercadante

Hi JD–that’s the careers and jobs issue that’s almost unique to this time. Jobs and careers are less certain now at a time when student loans are larger than ever. It’s a very real double whammy.

I know very little about employment prospects in education, but from what I’ve heard, math and science teachers are in a pretty strong position. Is she in either of those?

10 Brad

I am on a teachers salary and I have $80,000 in student loan debt. Many of the sacrifices you have listed here I implement just to survive pay check to pay check. The goal is to pay off my debt early but it is very taxing to maintain a mindset for being so frugal. I went to college so I could live a good comfortable life and here I am imprisoned by my student loan debt. I made plenty of mistakes along the way and take full responsibility for them but it is mentally exhausting dealing with student loan debt. You can read about how I deal with this debt and how to prevent it on my blog. Nice Post.

11 Mike Young

Great post Kevin. It is really sad how much student loan debt cripples people. I meet with people for financial coaching who are still struggling to pay off their debt in their 40s and it is so frustrating for them! There are studies showing that a large amount of people delay getting married and having kids b/c of student loans. It’s really just sad!

12 Kevin Mercadante

Hi Mike–Even worse is that student loans often set grads up for a lifetime of indebtedness. Once you graduate and have to begin repayment, student loans effectively reduce your income. You might make that up by borrowing elsewhere to cover what your reduced paycheck can’t cover. It’s a vicious cycle and I’ve seen the fallout of this playout many times in exactly that fashion. Student loans are infinately more difficult to get out of then they are to get into.

13 Mike Young

That is for sure!

14 Mahesh

Students loans are often vicious circles. Involving in more work like a second job may be frustrating to many. Not many can think of it. Still managing a student loan can be a good experience to begin , because there are plenty of loans to come by later in the life.

Your article is nice, Thanks

15 Kevin Mercadante

Hi Mahesh–the vicious cycle is really the deepest issue with student loans. You start out in life with a large debt, and as time goes by you add more debt on top of it. Before you know it you’re trapped.

This is why I think it’s important to be very intentional about paying them off as soon as possible. Student loans can turn debt into a financial lifestyle.

16 Felicity @ Waist & Wallet

I’m working on knocking out the student loan debt and dreaming of a day when every extra dollar doesn’t have to go toward paying off debt.

17 Kevin Mercadante

Hi Felicity–It may be that every extra dollar is going to pay off the student loan debt, but just visualize how good it will feel when they’re gone. A lot of possibilities will suddenly open up for you!

18 Slane

Thanks for the insightful article. I am finishing up my Ph.D. right now and will be 80k(ish) in debt due to student loans. I have already made the decision to continue living as a student as a student for the years it takes me to aggressively pay off my debt. I will be living on half my salary so that I can pay my debt off in 3 years. I know it’s a miserable time to be in my early 30s and living as a pauper, but becoming entirely debt-free and having a great credit score will be beyond worth it for my future lifestyle, peace of mind, and one-day-retirement abilities. 🙂

My partner and I have decided that I won’t consolidate my loans, rather I’ll keep them in them in the 16 different small lumps they’re in and focus on paying back the ones with high interest rates the fastest. I plan on burning each loan receipt every time I close out a loan debt.

19 Kevin Mercadante

Hi Slane–I think you’re handling this right. $80k is a lot of debt and the sooner you get rid of it the sooner you can get on with your life. Maybe this is a bonus, but I think that the frugality you’ll learn in the process will be worth more than anything. For example, once you’re done with the loans, you can divert the extra money into savings and investments and build up a nice bankroll in a hurry. Living on next to nothing while paying off your student loans will prepare you for that. Low living expenses + big cash balance = financial independence!

20 James

I disagree heavily with the whole “buy a beater” idea. Cars on their last leg cost more than simply paying a small auto loan payment each month. $800 to fix a radiator problem, $1000 to get a new clutch, $400 to replace brakes that you didn’t know need replacing–shit adds up, and they’re ALL unexpected expenses. While your car is in the shop, you’re stressed out at work and having to find alternate arrangements.

21 Kim

For all the educators out there- Visit the elementary, middle and High schools and get on their list of recommended tutors(if you have to prove yourself then maybe you can offer a free sesson to the secretary or her/his kid). Not only will you be paid better then a part time job(I have to pay my two boys math tutors 50.00 per hour each) and we only do it twice a month-most people get tutoring once a week. All of the tutors in our area(Seattle) have waiting lists. Plus, if you always go back and thank the school secretary for the referral then it will be great Networking(you cannot imagine how much power the secretaries have-they practically make all the decisions behind the scenes.. Good Luck to everyone paying off loans..

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