GUEST POST BY: Jacob Evans, author of www.dollardiligence.com
As a new college graduate, I thought that I had the world on a string — until my first student
loan statement arrived in the mail. I was $25,000 debt and about to start my first job as a high
school math teacher, with a starting salary that didn’t seem like it possibly could stretch to cover
the minimum monthly payments. How could I overcome this hurdle?
I was stunned to realize that despite my first-class education, nobody had ever really taught me
about finances or debt. Sure, I learned the basics of checking accounts and how to pay bills,
but when it came to how to handle money responsibly and how to pay off debt, I was clueless.
Overwhelmed by debt and stressed by the thought of being burdened by these loans for the
next ten to twenty years, I decided to develop a strategy for paying off my loans.
What Did I Do?
It wasn’t easy, but ultimately I paid off my $25,000 in student loans in just 15 months. How did I
do it? I started by learning as much as I could about my loans from people like Dave Ramsey:
who I owed money to, what the loan terms were, and what the interest rate on each loan was.
Then I applied to refinance my loans, obtaining a lower interest rate and a shorter repayment
term so that I could save thousands of dollars in interest.
Next, I cut costs by moving in with my aunt and uncle, and significantly curtailed my spending
habits. No more going out to eat or to bars, or unnecessary spending. If I wanted to pay off my
student loans, I had to get serious about my budget. Finally, I picked up some side gigs. In
addition to my full-time career as a teacher, I started working as a freelance writer and
photographer. I funneled all of my extra money towards my student loans, and before I knew it,
I was debt-free — and relieved of the major financial and psychological burden of those student
Along the way, I learned some major lessons about how to deal with debt. From coming up with
a game plan to deciding how to handle daily living on a budget, I found out that if you’re going to
be successful financially, you have to start with some basic knowledge. Read on to learn more.
Make a Plan
When it comes to anything that is scary or overwhelming, it is easy to be an ostrich. But
ignoring your debt won’t solve the problem, and may actually make it worse. The first step that I
took in getting control of my debt was the most crucial: coming up with a strategy for how I was
going to get rid of it. Once I knew exactly what kind of debt I was in, I had a better idea of what
it would take to get out of debt. Then I could start figuring out how I could work towards paying
it down, bit by bit.
Budgeting Is Crucial
Having a budget isn’t fun, and it isn’t sexy. But if you don’t know where your money is going
each month, you won’t be able to trim costs and come up with extra money to put towards your
student loans. The only way to get out of debt is to get a firm grip on your finances, and that
starts with a a budget. Sit down, and write down exactly how much is coming in each month
from your job (and any side gigs), and then subtract your necessary expenses. Track all of your
expenditures, and see what can be eliminated. From there, figure out how much extra money can be put towards your student loans each month. Even an extra $50 or $100 can help you
pay off your loans more quickly — and move you out of debt.
When you first take out your loans, you probably only think about the principal — the base
amount that you are borrowing. But the part that makes student loans most challenging to pay
off is not the principal, but the interest — the amount that you pay to borrow the money. This
gets added to the principal every month, and will often make it seem like you’re barely making a
dent in the total amount owed. Pay attention to your interest rate, and consider refinancing if
you have a high interest rate or a variable interest rate on your loans.
About the author: Jacob Evans paid down $25,000 in student loan debt in just 15 months. He chronicles his journey to financial independence over at Dollar Diligence. You can learn more @DollarDiligence.