Sucky Jobs, a Low-tech Cell Phone, and other Secrets to Paying off Student Loans : Under30CEO Sucky Jobs, a Low-tech Cell Phone, and other Secrets to Paying off Student Loans : Under30CEO
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Sucky Jobs, a Low-tech Cell Phone, and other Secrets to Paying off Student Loans

| October 7, 2013 | 9 Comments

Student Loans

I graduated from college in May 2011 with high hopes for good job and easy living. It didn’t happen, at least not right away. For the first eight months after graduation, I couldn’t land a full-time job. And even when I did land one, it was for a position that didn’t require a college degree. So needless to say, I wasn’t “making bank.” Despite all this, I wanted to make my student loans a priority. I didn’t want to end up in deferment or having to register for a government repayment plan that could potentially cost me thousands more in interest. In the end, it worked out, and my wife and I are two months from being debt-free. Here’s how we did it.

Tough decisions

I made some important life decisions early on that allowed me to get ahead on my student loans while earning minimum wage (or close to it). I’m going to talk about some of these, and then we can get down to the nitty gritty of my repayment strategies.

I lived with my parents

This isn’t an option for everyone, I know. But luckily my parents were willing to help me get on my feet. I didn’t pay rent, but I did what I could to help around the house. My living expenses were about $50 per month.

I ditched the smartphone

To be honest, I’ve never had a smartphone. While most of my friends spend about $90 per month on their cell phone bill, mine is $25. I have a no-contract pay as you go plan with unlimited texts and more than enough talk time. This comes out to about $780 in savings over the course of a year.  That’s $7,800 over the course of 10 years (the standard student loan repayment period), just sayin’.

I took sucky jobs

I did well in college and went to a good school. It would have been really easy for me to play the pretentious/privileged card and stick my nose up to part-time work. I didn’t. Instead, I took any job I could get, and when I wasn’t working I was looking for a better, full time job. Part-time jobs I took include:

  • Managing a fireworks stand

For two and a half weeks in June and July, I stood in a hot metal shed selling explosives to people from all walks of life. Under $9 an hour.

  • UPS

For a month (seasonal position), I woke up between 1:00 am and 3:00 am to go to a UPS warehouse. There, I loaded about 300 boxes per hour onto a big brown truck. Well, three big brown trucks.  Under $8 an hour.

  • Landscaping

Anyone else see a “manual labor” theme here? I worked for a landscaping company, raking, cutting grass, mulching, and doing anything else to make some extra cash. $10 an hour.

  • In-home tutoring

This actually pays pretty well, and I recommend it to people all the time. I worked as a contractor with a tutor agency and went to students’ homes at night during the week. The pay was good, but I had to travel and only got to work about three to four hours a week. Again, it was something. $18 an hour.

As you can tell, my first few months after college were challenging. But I made it, and I was actually pretty comfortable. From there, I got a full-time job, got married, and got an apartment with my wife (who thankfully also had a full-time job).

But did we drastically change our spending habits? No, we remained frugal (no smartphones or cable!), I picked up a second job for about six months, and we continued to make payments toward our student loans.

How We Got Ahead

We didn’t just pay our minimum monthly payments. We wanted to get ahead, and here’s how we did it.

Other debt first

We had a car payment with higher interest than any of our student loans, so we prioritized it and paid off this account first. Not only was the interest higher, but the car payment didn’t have safety nets like our federal loans.

More than the minimum

Like I said, we paid more than the minimum payment so that we could get ahead. It’s amazing how much this saves over time. For instance, imagine you have $20,000 in student loan debt at 6.8% interest. Depending on your repayment strategy, here’s how much you will pay:

In a standard 10-year plan you pay $27,619, but you can reduce this to $21,447 in a two-year plan. Doing so will save $6,172!

These savings will be even bigger if you have debt with higher interest.

Highest Interest Accounts First

The other important rule that we followed is that we always put our extra payments toward the account with the highest interest rate. This is the most efficient way to pay off student loans, but many people don’t realize it. And, there isn’t a lot of information out there about it.

It’s actually quite confusing, especially if you have multiple lenders or servicers. I can’t tell you how many times our loans changed hands from one servicer to another. It’s important to keep track of who you owe, how much you owe, when payment is due, and the interest rate. Only with all of this information can you make the correct decision.  We organized all of ours in a spreadsheet, like this debt payoff table.

I’ve also heard some confusion about how lenders disburse extra payments. We want them to put the extra toward the highest interest rate, but will they? For some lenders, I was able to find written explanations of the process. For others, the wording was too cryptic or I couldn’t find it. If there is any doubt, call the lender to make sure your payment is applied correctly.

You Can Do It Too

My life after college was much different than I expected, but I made the most of it. I know there are many recent graduates and young professionals out there who have had similar experiences. If you are struggling, just try to find income sources wherever possible and look for ways to save substantial amounts of money. I hope these tips will help you make student loan repayment a priority in your life. Good luck!

Thomas Bright is a Content Writer for ClearPoint Credit Counseling Solutions, a nonprofit agency that offers free student loan counseling. Thomas writes about a variety of financial topics, and recently launched a blog campaign about how to pay off student loans. Check him out on Google+ and Twitter @PT_Bright but don’t laugh at his puny following!

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  • AR

    I agree with most of these but not all are realistic. A smart phone is needed if you have a job that requires you to check email constantly. Also, living with parents is not an option if they don’t live near your target city/region.

    However, the sucky jobs part is dead on. I have worked these types of jobs as a second and sometimes third job in order to pay off loans and keep the collectors at bay while getting established

  • Cory Cain

    Congrats on making this progress! Thanks for sharing.

    I graduated in 2011 and just finished paying off $30K in student loans. I also found success in limiting spending for eating out, alcohol and clothing. If you are disciplined, utilizing credit card reward programs can also help bring in additional cash and/or subsidize travel expenses (I was able to travel take around a dozen trips throughout the United States, visit Costa Rica and pay for a trip to Peru I will be taking this November in the same time frame I was paying off my loans).

  • Engineer grad

    Sounds good, but I have $200,000 of student loans to pay off. I don’t think my parents want me sticking around for 20 years, and there’s only so much Ramen I can eat before my skin turns yellow. No smartphone though, $5,000 a year is a rip off anyway.

  • Curt Styler

    I know the feeling. Also Engineering Grad, around $175K here. And I worked in financial aid for 3 years, so I should have known better.

    If you haven’t, try refinancing some of your loans to get them under 1 payment. I was able to get a job out of school and the steady income let me land a much better interest rate on my student and car loan.

    At the end of the day, there’s just 2 options:

    1) Adjust your living style to accommodate your $1800-2000 per month student loan payments (just guessing) for the next 10-15 years. (seriously, is this what banks expect? that we will all just live with our parents using 80-90% of our monthly income to pay them off for a decade?)

    OR

    2) Make more money.

    Neither are easy. I think number 2 is the best option. I don’t have a formula how to do it. But since we are all overly optimistic young entrepreneurial thinkers around here I bet you can get some good ideas somewhere.

  • Engineer grad

    Good advice, I will likely consolidate my loans sometime soon. And I agree, option 2 is the best bet, which is why I started a company straight out of college! Whether the bet pays off is yet to be determined.

  • Matt O’Brien

    What about the financial transfer we overlook, taxes? Student loan interest and mortgage interest are a big sources of a deductions. Avoiding interest does make sense but cash flow is king. Something to think about.

  • Thomas Bright

    Wow, yeah I feel for you guys. I was lucky to only be dealing with about $42k (between my wife and I). The numbers you guys are mentioning look tough.

    My 2 cents about refinancing are just to make sure not to refinance to a variable rate, and make sure to get a lower interest rate (like Curt mentioned). To do this, you essentially need to have a better credit score than when you first took out the loan.

    Also, NEVER consolidate federal and private loans together, as you will lose your federal loan benefits/flexibility.

  • Thomas Bright

    That’s a good (and often overlooked) point. It would be interesting to do some math on this. My gut feeling, though, is that you will save much more money in the long run by not letting interest accrue.

  • Thomas Bright

    Thanks Cory!

    Congrats on your progress as well. That’s a great point about credit card rewards, too. I need to look into that! Believe it or not, I have never owned a credit card. Ha. Sounds like it is working out well for you though.