Repaying $60,000 in Student Loans: 5 Things I Learned

Repaying student loans can feel like climbing Mount Everest.

That’s because it basically is climbing Mount Everest. Student loans are exactly like a mountain.

They have different challenges due to the various payment amounts on a monthly basis, interest rates, tax benefits and so much more.

Just like a mountain, your journey to becoming student loan free will feature wins and losses.

There will be times where you feel like giving up.

When it’s all said and done, you will feel like you conquered a mountain and ready to take on a new financial goal. It’s truly an inspiring feeling.

Hey, I’m Kyle -- the founder of Millionaire Mob, a blog focused on helping others achieve financial freedom through travel hacking, passive income and investing.

I repaid over $60,000 of student loans in less than 5 years while building my credit score to a near perfect score. Additionally, I was fortunate enough to buy my first home within that 5-year journey along the way.

Looking back on it all, there are several things that I learned along the way that I thought you should know.

Why Repaying Student Loans Is So Important

I believe repaying student loans is extremely important for your financial future.

I didn’t always think that way, but over time it became more apparent that getting rid of student loans would be the only way that I could have the financial flexibility I wanted in life.

The benefits of being student loan free were a no-brainer for me.

This created a sense of urgency in my student loan payoff plan.

The benefits that I outlined from becoming debt-free were the following:

  • Being debt-free unlocks opportunities for you to increase your happiness.
  • I knew I wanted to travel the world and having student loans would definitely prohibit that.
  • Becoming completely financially free is the ultimate goal. To me, financial freedom means unlocking our most precious asset… Time. Therefore, I had to extinguish my debt to be able to unlock more time to do the things I truly enjoy in life.

Should I Invest or Pay Off Debt?

Oh, the classic dilemma.

How do you know if you should pay off your student loans or invest?

I developed a plan that would pay off my loans that had the highest interest rate first. I created a table that reflected my weighted average cost of debt.

I believe in optimizing your money in the best way possible.

Thus, I believe that you should first calculate your weighted average personal cost of debt.

Calculating your weighted average personal cost of debt

Here is an example of calculating your personal cost of debt.

You want to attack your highest interest rate debt first, which will push down the weighting on your personal cost of debt.

For every dollar you put in prepaying highest interest rate debt first you are saving money.

Weighted average cost of debt

Debt Amount Interest Rate Weighting (debt amount divided by total debt) Interest rate x weighting
Student loan #1 $10,000 6.0% 40% 2.4%
Student loan #2 $15,000 4.5% 60% 2.7%
Total $25,000 100% 5.1%

So, my approach is:

Once the weighted average cost of debt dips below the long-term average of stock market gains, it is better to be investing your money.

The stock market has historically achieved a rate of return of 6-10% per year.

If you are investing in your 401(k), you should prioritize your debt repayment to any additional interest rate of 6% or lower, you are better off putting that money in a 401(k).

However, if you're using a taxable account (i.e., you are investing out of your non-retirement account), your returns are more in the ~4-6% return on an after-tax basis (conservatively speaking).

Refinancing your debt

If you can push your rates lower by refinancing your debt, that is always optimal. This can save you thousands over the long term.

I refinanced my student loans, which helped me pay off my student loans faster and more effectively. 

Every percentage in the interest rate that you save is more money in your pocket and less in the bank’s pocket. Take that opportunity every chance you get.

Despite these methods, I knew that I only would be able to repay student loans if I had urgency and determination. Every day I had to remind myself of the end goal and why it was worth it.

After going down the route of my strategy outlined above, I learned several key lessons.

5 Lessons Learned from Paying Off $60,000 of Student Loans

There are five key things that I learned from my journey in paying off my student loans.

1. Getting started is the hardest part

Developing a strategy to repay debt isn’t hard.

Do you know what is?

Execution.

Remember when you get your paycheck and it feels like you have a lot more money in your bank account?

Well, taking that entire paycheck and putting it towards a mountain of student debt is challenging.

You might feel like putting $2,000 towards a $60,000 student loan balance won’t make a difference. It’s only 3% of the principal balance! That’s not true at all.

Each dollar of incremental principal that you put to your student loans has a compounding effect over time.

If you prepay your debt continuously, the amount that goes to the principal on your routine payments increases exponentially over time.

2. Automation is your friend

With a debt payoff plan, you should think about your time as an asset.

How do you free up your time?

You automate everything you need to do for your repayment.

A few automation tips include:

  • Use a personal finance app to track your payments.
  • Always have recurring automatic payments set up for your loans.
  • Earmark your checking account at a certain balance (ideally 3-6 months of living expenses). Any time it goes above that amount put it towards your student loans.

This is crucial for you to focus on the important things that can accelerate your debt repayment such as increasing your income and cash flow.

Cash flow is crucial for repaying student loans… Why?

3. Income matters

I’ve been a big fan of using side hustle income to repay debt and accelerate my investing goals.

If you can set up a strong plan to repay your student loans with your current primary income, any additional side hustle income you earn is gravy on top of your existing strategy.

Side hustle income can be an outstanding motivator for your debt payoff plan. Some of the most effective side hustles are done ‘as a service.’ 

You can become a freelance virtual assistant, proofreader, financial modeler, pitch deck creator and more -- your options are endless.

For me:

I had intensive financial-modeling experience.

I used some of my time on the weekends to build financial models on a freelance basis. It was a win-win because I was able to gain more experience, make additional income and create relationships from around the world.

If you know a skill or are willing to do a task, you can likely make money from it at any point in time and at any hour of the day.

4. Motivation beats strategy

Having a plan and strategy is essential.

One thing I learned from paying off my student loans was that I needed to have small reminders that continue to motivate me to become completely debt-free.

How can you motivate yourself?

  1. Print out financial freedom quotes to help you realize the grass is indeed greener on the other side.
  2. Want totally autonomy with your job and lifestyle? Create a spreadsheet that helps monitor your progress over time. This will help you track the depletion of student loans, which will continue to motivate you to get that balance closer to zero.
  3. Small wins add up. Getting a tax refund in the mail? Put all of that to your student loans. Earn cash back from your credit cards? Put all that to your student loans. Win your March Madness bracket? You probably get my point. Any additional income you have, you should put it directly towards the principal on your student loans.
  4. Under promise and over deliver. Set goals each year for your debt repayment are realistic and can be crushed. As you continue to hit your goals and exceed them, you’ll stay motivated to continue to push your financial boundaries.
  5. Reward yourself! What’s better than positive reinforcement? Every time you completely pay off a loan, take yourself out to dinner. You deserve it. Know that you’re not at the end of the road, but you are one step closer.

As you continue to stay motivated this will take your debt repayment to new heights. For every loan you payoff, you’ll feel that much better.

5. It's a gift that keeps on giving

Another learning point was that I never took my eye off the prize. You should know that repaying your student loans will be like a monkey off your back.

How can you save 200% more each month? You can do it by cutting your expenses by 50%.

If you’ve graduated with a significant student loan balance, your loans are probably a large monthly expense for you.

Imagine repaying all of your student loans?

You can find yourself with the freedom to take your wealth and lifestyle to the next level. The possibilities are endless, but here are a few things that stand out:

  1. Investing in real estate
  2. Starting your first business
  3. Being completely guilt-free on your purchases (going out to dinner, buying that new computer, etc.)
  4. Travel the world and explore

These are just a few, but every month that you no longer have to make a student loan payment the better the feeling.

Final Thoughts

Repaying your student loans is an everlasting gift.

The sooner that you pay off your student loans, the sooner you’ll be able to enjoy the finer things in life.

What are the key takeaways?

There are a few that stand out to me:

  • Have a plan upfront.
  • Optimize your cash allocations by refinancing your student loans where possible. Balance your assets between investing and debt payoff once your interest rate drops below a certain level.
  • Hustling will take your debt payoff to the next level.
  • Stay motivated and keep your eyes on the finish line. It’s all so worth it.

How are you going to attack your student loans? Please let me know in the comments below. I’d love to hear from you.

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