About 3 out of 10 of you awesome readers would likely sell an organ to get rid of your student loans.
Yeah that’s right… 3 in 10!
The good news is you don’t have to go quite that far to rid yourself of that monster sucking the life out of your checking account every month. Perhaps you’re part of the 40% of people not paying anything on your student loans. Maybe you’re just sick of delaying your future money goals.
Regardless of which camp you’re in, I’ve whipped up this handy list to help stimulate your debt free mojo.
1. Fake Your Own Death Make More Money
I realize that it’s difficult to pay off that degree working as a barista at the local espresso joint. The first half of the debt freedom equation is self-evident: make more money.
Amazingly, over 50% of Millennials report being underemployed.
Many Millennials are graduating in degree fields that lack much of a positive job outlook, or their career path might not provide the income necessary to pay off their student loans. Some businesses require a new employee to put in their time at a lower salary before they can start climbing the corporate ladder.
Those underemployed graduates may need to start bringing in extra side-income or change jobs completely. If you can’t pay off your student loans in a reasonable amount of time (highly subjective value, I consider under 5 years reasonable) then perhaps it’s time to take a higher paying job with the important goal of freeing yourself of student loans. This could be outside your career aspirations, hometown, or comfort level completely.
Remember- sacrifice for a few years now for freedom the rest of your years.
If you are unwilling to make that big change, you might want to consider working a job on the weekends. Heck, delivering pizzas 5 nights a week will net you around an extra $1,500-$1,800/month to beat down your debt with.
2. Live on Less, or I can’t Help You
The biggest mistake for recent graduates (who likely have huge student loans) is to start living above the frugal college student lifestyle as soon as a steady paycheck starts start rolling in.
That old Honda Civic loses its sexiness when you park next to your coworkers Audi. Besides, how are you supposed to pick up that “special someone” in a hatchback!?
This post-graduation time is the best time to rid yourselves of student loans, and any other debt hanging over your freedom. You’ve been used to living a frugal life for at least 4 years, I implore you to continue that lifestyle until you are free.
Don’t fall into the “I deserve a new car” trap! You don’t deserve it, at least not yet. You do deserve to experience debt freedom. Focus all of your attention on reducing expenses and sending “all you got” towards the debt. Perhaps you should combine number 2 and 3 to eliminate debt that much faster.
3. Make it a Challenge
This idea may work for you- it totally did for me and my wife. After we got super pumped about paying off our student loans (~20K from both undergrad and graduate school paid off in 1 year) as soon as possible, we turned it into a highly visible challenge.
I printed out a thermometer that had increments of $500. As we paid down the student loan every month, we would fill in a level or two of the thermometer until we reached the top. We made this piece of paper highly visible (taped to the wall) so that it would stimulate excitement every time we walked by.
Seeing another thermometer level filled in with sharpie on that piece of paper solidified the fact that we were on the way to financial freedom while giving our debt-free-motivation some real staying power.
4. Avoid Repayment Plans
When your first student loan bill comes in the mail, it may seem like all the sunshine gets sucked from the atmosphere. Those far-off promissory contracts you signed back when you were 19 didn’t seem real when you started college. I mean, you had four years (or five for you overachievers) before you had to even think about repaying them. Four years is a lifetime right!?
Well, here you are staring down the barrel of Sallie Mae, and it’s finally real.
She has kindly suggested a repayment plan within this inaugural letter to grant you freedom after you turn 48 years old. However, the payments do seem reasonably low.
Don’t fall into this trap! By lowering the monthly bill, you will be paying down student loans for your entire working life and the interest charges will be gigantic! This recommendation was intended to make the bank money, not to give you an easier go of your post-college life.
Throw as much money at your student loans as possible so that you can live free. Usually Direct Loan Consolidations are also a bad deal as they mix multiple interest rates into one. What this means is that you can’t focus on the highest interest loans first.
5. Crappy Collectors Could Owe YOU a Refund!
If you are constantly being hassled by collectors beyond reason (yes- they are the scum of the earth), then you may be entitled for a partial or full refund. If the company is calling you before 8:00 am or after 9:00 pm then they are at odds with the Fair Debt Collections Protection Act.
In fact, Discover’s Student Loans wing was recently ordered to pay $92 to customers who received at least 5 calls outside of these hours and those who received over 25 calls are getting $142.
This seems to be only part of Discover’s Student Loan Fiasco as the Consumer Financial Protection Bureau (CFPB) recently ordered them to refund $16 million dollars to student loan customers.
If you think you’ve been duped by your student loan company, I’d encourage you to file a complaint with the CFPB here.
Final Note:
The title of this blog post may have been misleading. You may have read the title and been instantly swept in by the “live free” promise. Well friend, living free means something totally different here at The Drunk Millionaire than what you are typically accustomed to, chasing the American Dream.
To live as a free person is to live debt free. We have been sober debt free for 2 years now and trust me- we aren’t looking back. I would encourage you to continue living on less than you make unlike your compatriots who will stumble through life chasing one shiny thing after the next.
Why not buck that consumerist trend by saving and investing a little, and maybe retire early at 35 and have the financial freedom to do whatever you want? That’s what this blog is all about- building wealth early and achieving financial independence. If you’re into that sort of thing stick around or leave a comment below.
Remember: Sacrifice now so that you can live your dream later!
Well done becoming debt free so quickly!! I like the idea of making it a challenge. It should be looked at like that because it will be a huge step in anyone reach FIRE.
For sure! For those with a competitive bent, making it an challenge can make it go so much faster.
Definitely agree with your points. For sure you want to make more and live on less.
I’d add that everyone should refinance to a lower interest rate too, assuming you make a good income and aren’t looking for some sort of forgiveness program (which if you are in a high earning job, you probably aren’t in one).
I was paying under 2% interest for quite some time. When your interest rate is that low, you can really do some serious damage to the student loans.
Agreed! Refinancing (to a lower rate) will save a bunch of money over time!
Good luck! Increasing the income side will give you a much more powerful punch!