How I Paid Off My Biggest Student Loan ($20K) in One Year

I left college with about $35-$45K in student loan debt. But my biggest loan—which was originally around $18K—had accrued so much interest, that even after paying the minimum for five years, it was actually at a little more than $20K. By the time it hit that amount, my husband and I realized we had to do something drastic to pay it off once and for all.

Refinancing was our initial idea. We found this to be a great way to make my other student loans more manageable a few years ago, and have been happy with payments and experience since. The tricky part with this particular $20K loan was that lenders quoted us with interest rates that were just as high, if not higher, than what we were already paying. If we could have refinanced at a lower rate, then that’s what we definitely would have done.

So, with this loan steadily climbing at a 9% variable interest rate, we made the decision to pay down this debt as soon as possible. Our goal was to ultimately be debt-free by 30. What we didn’t realize is that we’d pay it off in just one year, at which point, we’d be on track to be debt free an entire year earlier than anticipated.

What was our secret to paying this loan off and getting ahead? It’s not much of a secret, really—it took hard work, diligence and a great budget. But there were a few tricks we used along the way that you can use, too.

Put Money Aside at the Beginning of the Month

One of our best strategies was (and still is) to put all of our money aside—in this case, toward the private loan—at the beginning of the month. This way, we had no excuses at the end of the month to put aside less than we had intended. Because our budget is very fluid, if we went over one month after all of our regular expenses, we simply allotted ourselves less spending money for the following month.

This structure allowed us to stick with our plan, regardless of what came up. Our family lives across the country, so plane tickets and trips back east end up taking a large portion of our fun money around the holidays. There was one exception to that, which was our weekend trips. Since we take a lot, we decided that paying for them would be a “regardless of what comes up” cost that we’d budget around.

There were of course months where we put much less aside, like around the holidays when we were spending and traveling a lot. But we planned for that by putting more toward the loan in the months leading up to those spend-heavy times.

Keep an Extremely Organized Budget

The reason why our strategy worked was because my husband keeps a very organized budget that he updates at least once a week. We always know how much we’ve spent, how much we have left, what we’ve put away, and how much extra we’ll be able to put toward savings or the loan.

Not only does this help us stay organized, but it’s motivating. We wanted to get better at putting money toward the loan, and seeing this progress, not just month-over-month, but week-over-week, was just the push we needed to keep working at it. Each month we’d high five over another great chunk of money paid off—it felt good to work as a team toward something that felt so daunting.

Funnel Money Into the Highest Interest Loan

My husband likes to read the personal finance sub-Reddit. One day, he read one very simple tip that changed our strategy: Pay off your highest interest loans (or debts) first and foremost. We had been paying about $220 each month up to this point, which was the minimum.

Our new goal was $500-$1,000 per month. To get the extra money we would cut back. As with many couples, we liked to go out to eat two, three, or even four times each week—not to mention going out with friends on the weekends and traveling, which I mentioned we do a lot of. To reach our goal, we had to cut back on the more expensive activities, and find ones that allowed us to spend minimally.

Much to our surprise, we were able to do it. We started having friends over to our patio more often, rather than going out on a Friday night. For our weekend outings, we stuck to camping trips, which are always less expensive. We also stopped going out to eat nearly altogether. Instead, we started using our grill more often—living in sunny San Diego allows us to use it year ‘round. As we spent less, we started funneling amounts closer to $500 toward the loan at the beginning of 2016.

Take on Extra Freelance Work

Putting aside about $500-$800 each month was great, but as I transitioned into a new career that allowed for more freelance, we were able to put much larger sums toward the payoff. Our last few payments were anywhere from $1,100 to $1,300, which was great, but the extra work wasn’t easy to maintain.

I had a full-time job, another part-time job, was running my own personal training business, and took on 10 to 12 freelance gigs each month. To say it was a challenge is an understatement—i mean, it was hard. But it was more than worth it to get where I am today.

Thanks to my full-time job as a contractor, we were also able to deduct a significant amount of our home bills and various purchases throughout the year. This led to a hefty return this past March when we filed our taxes.

With that, we were able to make the last, rewarding payment on the loan. We were finally home free.

Though the process wasn’t always easy, hard work, diligence, planning, and budgeting allowed my husband and I to rid ourselves of my largest and longest-standing debt in just one year. This was our first step toward being debt free by 30. With our current budget and financial planning, it looks like we’ll be there before we know it.

In the process of paying off your student loan? Consider refinancing your student loans with SoFi to help meet your financial goals.