My name is Kelly Russell, and I have $92,670 in student loan debt.
It’s not as bad as it sounds, though. Last October, that number was $104,105. I also paid off the remainder of my $7,000 car loan in September.
We’ve all seen plenty of articles with titles like “How I Paid Off $20,000 in Student Loans in Two Years,” and these stories are worth celebrating. Paying off your student loans is a huge accomplishment, no matter how big they are.
But while the average student loan debt is around $30,000, many of us have a much higher balance. Whether it’s from attending a private university or deciding to pursue graduate school, paying off a six-figure student loan debt means playing in a whole other league — especially when that loan doesn’t result in a six-figure salary.
If you’re facing a massive negative number, know that you’re not alone and you can pay off that balance before you hit retirement age. Here’s how I’m working on paying off my student loans — without making a huge salary or working two jobs.
How I Racked Up More Than $100,000 in Debt
I graduated from a small private college in 2011 with about $35,000 in student loans. I went straight into grad school and my loans were deferred. Since I didn’t have to make regular payments during the three years I worked part-time toward my master’s degree, I didn’t — and it was the biggest mistake I ever made.
I was always fully aware of my loans and the amount of interest that was accruing on them. But for some reason, I wanted to pay off a big chunk of my loans all at once. This sounds great, but in reality, it meant that while I was building up that extra money in my savings account, my loans were growing even faster due to interest — which, for most of them, is 6.8%.
In my defense, I did pay almost $15,000 upfront while I was in grad school for various expenses, including tuition, parking passes and those vague “student activity fees.” It didn’t directly add to my loan balance, but it did mean that I couldn’t put that money toward paying off the loans — so the balance kept on growing.
Chipping Away at My Debt
Last fall, I woke up from my delusion of paying it all off at once and decided to get serious about paying off my debt. In September, I paid off the remaining $7,000 on my car loan so I could focus solely on my student debt.
In October, I put $6,000 towards my student loans. In the following months, November through April, I paid an average of $1,400 a month towards my student loans. In seven months, I knocked $14,400 off my student loans. If you include my car loan, I paid off $21,400 of debt between September 2014 and April 2015.
However, if you look at my total balance in October and now, you’ll notice that the difference is only $11,435. Why? Even as I’m paying down my loans, interest continues to accrue and add to the balance. It’s like taking 14,000 steps forward, then 3,000 steps back.
My Most Effective Debt-Reduction Strategy
Here’s the thing: I don’t earn a six-figure salary (not even close!) and I don’t work multiple jobs. I have my 9-to-5 job and occasionally do some freelance work on the side.
But I do have a secret savings weapon: I live at home. Yes, at the age of 21, I moved back in with my parents. I’m now 25, and I plan on staying put for at least another year. Drastic student loan balances call for desperate measures.
While I would love to live on my own or with a roommate, I’ve consciously prioritized paying off my student loans. Not only does living at home let me avoid paying Massachusetts rent costs, but I also do not have to pay for food or utilities. And instead, all of that money can go straight toward my loans.
This might not be an option for everyone, and I know how lucky I am that I’ve been able to move home. But if your family’s open to the idea, try it for at least a year. It might seem like a big sacrifice now, but it will be well worth it when you’ve paid off your loans in five or 10 years instead of 15 or 20.
Create a Budget and Prioritize Loan Payments
A budget helps you see exactly where your money is going. Take your monthly income and look at what it needs to cover — the essentials — plus what you’d like it to cover — hobbies, socializing, etc. Look at what you absolutely must put toward your student loans each month, and then find ways to boost that amount by cutting down on other expenses.
Decide what expenses or nice-to-haves, like a cell phone plan or cable, you can cut from your budget to pay back more of your loan each month. While I splurge occasionally, I don’t spend a lot of money on shopping or going out to bars with friends. Instead of buying a new shirt I don’t really need, I put that money toward an extra loan payment each month.
Pick a Payment Method
Most people focus on paying off their loans in one of two ways. With the snowball method, you focus on paying down your smallest loans first. Each month, you pay the minimum amount on all your loans, except the smallest one — you put as much money as possible toward this loan. Once you’re finished paying off the smallest loan, you move on to paying extra each month on the next smallest loan.
In contrast, the avalanche method involves putting more money each month toward the loan with the highest interest rate. It may take longer to pay off that loan because it may have a higher balance, but you’ll save more money overall by knocking down the total amount subject to the highest rate of compound interest. Once you’ve paid off the loan with the highest interest rate, you shift your focus to the loan with the second highest interest rate.
Other than living at home, my main strategy for paying down my debt is similar to the avalanche method. Each month, I make a little more than the minimum payment for each of my loans, and then I put larger sums towards my two loans with the highest interest rates — . Coincidentally, these two loans also have the highest principal balances.
In addition, instead of making one big payment each month, I break the “loan payments” section of my budget into four amounts — one payment for each week. This strategy helps keep my interest amounts a bit lower. Making payments more than once a month means less accrual of daily interest, so more of each payment goes towards the loan’s principal.
Paying off a six-figure student loan balance isn’t going to be easy, but I’m on my way. If you’re facing a similar amount of debt, I’d love to hear your strategies for paying it off!
Your Turn: Do you have a lot of student loans? How are you paying off your debt?
Kelly Russell is a marketing professional with a goal of paying off her student loan debt in five years. She currently resides in Massachusetts.