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5 Essentials For Paying Student Loans

By Frugaling 9 Comments

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Student loans net work Mint.com account
My student loans were careening out of control. Now, I’m looking at the finish line: zero debt.

Today, I paid off more student loans than ever before: $4,000, to be exact. This hefty deposit was made directly to my loan servicer, which will pay off federal aid debts. In May 2013, I had nearly $40,000 in debt. I was careening out of control, and my only solution was to take out more student loans. Instead, I started Frugaling and changed my entire financial future.

Even though I’m making more money than ever, it’s important to safely and smartly pay off debts. While it’s best to prevent excess debt via proactive budgeting, paying it off can be dangerous, too. In my situation, I paid off this huge chunk of debt by following the proceeding five essentials. Hopefully these will help you to safely pay off more student loans than ever!

1. Pay Off Active, High Interest Student Loans

Okay, I’m going to get a little technical here. I have two types of federal aid: A and B. My “A” loans are subsidized (no interest gaining) until I graduate from school. Unfortunately, my “B” loans are a running taxicab of interest and piling debt.

The first goal needs to be paying off high interest student loans that are active. My “A” loans are not active, and as such, do not need to be the focal point. Meanwhile, my “B” loans are ticking along at about 6.7% APR. All my energy and funds are going towards these second, active interest loans right now.

2. Pay Off As Much As Your Budget Can Bear

It’s tempting to start taking some of my newfound money and buy things. Somewhere between things I don’t need and things I’ve long wanted – oh, how wonderful that would be to buy the unnecessary but awesome!

To prevent this human reaction, I’m digging deep and paying off an uncomfortable amount of student loans every month. It hurts to pay this much because I feel uncomfortable having this little in my savings/checking accounts. Conversely, it helps me pay off more each month, and prevents needless purchases while my budget is being corrected. The less access to money you have, the less you’ll spend!

3. Subsidized Loans Are Free Money While In School

The “B” portion of my loans are my enemy, while “A” is a friendly sort. My student loans started out as a subsidized group, when the country cared about educating the masses affordably and fairly. That’s sort of changed.

I have $8,500 in subsidized loans that are protected from gaining interest until I graduate. Phew! This mass is scary and will be a priority at some point. While I’m in graduate school, I’ll aim to stock up my bank account, build an investment portfolio, and diligently follow my budget. Later, after I graduate and the interest becomes active, I’ll redirect this built up liquidity to quickly pay off the rest of my loans.

4. Keep Some Handy For Emergencies/Tax Season

This might seem contradictory, but part 2 says pay as much as you can possibly bear. Does that mean you should scrap any emergency funds to pay off student loans immediately? Well, it depends on your liabilities.

As a car owner, with certain financial obligations, I need to have some money on hand in case something goes awry. Likewise, this is the first tax season where I’ll be paying Uncle Sam. While I’m happy to do it, I need to prepare for significant budget buster in mid-April (when my payment is scheduled). The key here is to pay as much as you can, while insuring yourself against totally tragedy.

5. Recognize Your Accomplishments

giphy

Bring in the reinforcements! Good habits are largely built from strong, positive reinforcement behaviors. Pavlov and Skinner are the two psychologists credited with founding the field of classical and operant conditioning. If you’ve ever taken a psychology course, you’ve likely learned about them.

Those two stodgy, crotchety scientists were pioneers in the field of education and behavior management. Skinner’s operant conditioning reinforcement schedules are as important as ever. Simply put, when you’re done paying off a significant chunk of student loans, reward yourself! Today, mine will be an extra coffee before work. What’s yours?

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Filed Under: Loans Tagged With: Budget, debt, graduate school, Habits, high interest, loan, positive reinforcement, skinner, Student Loans, subsidized, taxes

Comments

  1. Dear Debt says

    February 26, 2014 at 9:57 am

    Wow, 4k in a month! Great job. I think it’s important to celebrate the wins and keep the momentum going. You are doing so well and will be debt free before you know it!

    Reply
    • Sam Lustgarten says

      February 26, 2014 at 1:48 pm

      Thanks so much! 🙂 It’s felt pretty incredible taking my active interest loans below $10,000! 🙂

      Can’t wait to be done with debt.

      Reply
  2. Anneli @thefrugalweds says

    February 26, 2014 at 3:23 pm

    Congrats on winning against student loans! The sooner you’re rid of it, the better 🙂

    We earmarked more money for savings once we got rid of the hubby’s student loans! Not much for celebrating, but we were so excited! Ok, maybe we went out to dinner or something, but we kept it pretty tame and responsible. 🙂 I guess that’s all part of congratulating yourself LoL.

    Reply
    • Sam Lustgarten says

      February 27, 2014 at 4:44 pm

      Anneli,

      Thanks for your comment! 🙂

      Recognizing that accomplishment needn’t be opulent. Haha. Just enjoy and recognize and reinforce. You can do it!

      Reply
  3. Syed @ The Broke Professional says

    February 26, 2014 at 4:24 pm

    Very motivating article. Great to see the red stuff in the graph going down!

    Reply
    • Sam Lustgarten says

      February 27, 2014 at 4:43 pm

      Thanks Syed! 🙂 It’s an incredible feeling.

      Reply
  4. Adrienne says

    February 27, 2014 at 4:54 pm

    Congratulations! Proving you can do nearly anything once you put your mind to it! This is quite an accomplishment.

    Reply
    • Sam Lustgarten says

      February 27, 2014 at 5:13 pm

      Adrienne,

      Thanks so much for your support! 😉 It’s a great feeling.

      Reply
  5. Shawna @ Money Misfit says

    March 2, 2014 at 3:23 pm

    wow, 4k! Kudos to you as that is quite an accomplishment!

    Reply

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