Smart Strategies for Paying Off Student Loans Quickly: Real Stories of Success
Student loans are a common way for individuals to finance their college education, especially when family support or a large savings account is not available. Unfortunately, these loans often come with high interest rates, and many borrowers end up deferring their payments for years, resulting in significant interest charges. However, some borrowers have found smart strategies to pay off their student loans more quickly than average. Let’s explore their stories of success.
One effective approach is to leverage the proceeds from a home sale to pay off student loans in full. Rebekah Gummow, a Washington resident, was able to pay off $23,000 of her $30,000 student loan balance by using the cash from the sale of her home. Due to the difference in housing costs between Washington and California, where she lived before, Gummow had a substantial amount of cash that she could put towards her student loans.
Amy McElroy, a California resident, and her husband had around $100,000 in joint law school loans in the 1990s. Initially, they paid the minimum amount due on their loans. However, they decided to buy a fixer-upper house, remodeled it, and sold it for a significant profit after nine months. With the proceeds from the sale, they were able to completely pay off their student loans within five years of graduating from law school.
Refinancing is another strategy that can help borrowers pay off their student loans faster. Robin Levin of California and her ex-husband refinanced their house in 1992 to pay off their law school loans. By doing so, they were able to pay off the entire loan more quickly than if they had continued making regular payments. Levin explains that the interest on a home equity loan is typically lower than the interest on an educational loan. Stretching out the mortgage repayment term can also make the monthly payments more manageable.
For some borrowers, living with their parents temporarily can be a way to prioritize paying off their student loans. Heather Seggel, who completed her English degree in California, moved back in with her parents when her original rental situation fell through. Without the burden of rent, Seggel worked diligently to pay off her loans, and within three years, she was able to eliminate $13,000 of debt. Seggel emphasizes the importance of paying more than the minimum amount due to expedite the loan repayment process.
Joining the military is also an option for individuals interested in receiving financial aid for their education. Daniella Mestyanek Young, a former U.S. Army captain, managed to pay off her $17,000 student loans by enlisting in the Army. While she does not recommend joining the military solely for educational benefits, she advises individuals considering this route to thoroughly research all the available education benefits and understand the commitment required.
Lastly, some borrowers have resorted to unconventional methods to pay off their loans. Cassie Parker, a petroleum scientist manager in Louisiana, had $38,000 in loans for her petroleum engineering degree. Despite paying $100 over the minimum amount for ten years, the principal amount was not decreasing significantly due to interest charges. As a solution, Parker withdrew money from her 401(k) in 2021 to eliminate the remaining balance on her student loans. While tapping into retirement savings should be approached cautiously, Parker believes it was a necessary step to expedite her debt payoff.
In conclusion, there are various smart strategies individuals can employ to pay off their student loans more quickly than the average borrower. These strategies include leveraging home sale proceeds, refinancing, living with parents to prioritize loan payments, joining the military for education benefits, and, in some cases, using retirement savings. It’s important for borrowers to explore the available options and choose the strategy that aligns best with their circumstances and financial goals. By actively managing their loans and implementing these strategies, borrowers can achieve financial freedom sooner and alleviate the burden of student loan debt.
