In Education

Student Loan Repayment: How We Paid Off $50k in 26 Months

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Rochester, New York is mostly known for cold, blustery winters, Kodak, Xerox, and garbage plates. It is also home to Rochester Institute of Technology (RIT). With roots in photography and engineering, RIT has become a booming tech school with a variety of programs for all sorts of people. I decided to spend a bunch of my parents’ (and my own) money to attend in the fall of 2004. Mrs. TYMP joined me a year later. And after four long years of slugging it out in the depths of computer labs and lecture halls, we each got that magical piece of paper and thus begun our mythical journey of student loan repayment.

All said and done, we came out fairly unscathed for two undergraduate degrees from a private university, $50k of student loan debt between the two of us. Compared to some of my friends, this is either a tiny or huge amount of money to owe. Luckily for us, we had a plan. It was really, really simple: throw as much of our income towards repayment as possible. Sounds simple, right?

In order to do this, we had to buckle down and cut expenses. And to do that, we absolutely needed the right tool for the job. Sure, using a spreadsheet to manually track income and spending works, but who has time to enter each quesadilla purchase?

Way back in 2009 when we began repayment, Personal Capital was just getting started, while Mint was already established as the de-facto financial tracking tool. So we used Mint. Although today,  I would 100% recommend anyone trying to do this (yes that means you) to give Personal Capital a shot. It can handle more accounts than Mint, has a fantastically slick app, and the UI is damn sexy.

After the laborious task of entering login credentials for our combined three student loan accounts into Mint (as well as checking, saving, and credit card accounts), Mrs. TYMP and I began our battle against paying interest. At first, we paid an arbitrary amount each month, something like $200/month total. I don’t remember what the minimum payment was, but I do remember thinking “hey, $100 each sounds pretty good, let’s just do that.”

Increased Strategery for Student Loan Repayment

After six months or so, I decided to up the strategy (also this was around the time I got my first bonus at work). Again, we were lucky with these particular loans, the highest interest for one of the sub-loans was 6% (my federal loans were structured into multiple smaller loans with different rates, not sure if that’s the case now).

I logged in to the loan servicer website and saw that the 6% sub-loan was around $5k, so about 10% of the original principal. After a quick tactical discussion with Mrs. TYMP, we decided to apply my entire bonus (plus a little more from savings) to completely pay off this sub-loan. This strategy of paying off the highest interest debts first is touted by almost all of the Suze Orman’s of the world for good reason, it makes sense.

After eliminating this sub-loan, the next highest one was 3.5%, which at the end of the day is super manageable. Considering the rest were below that (I think the bulk of the remaining principal was at 2%), it didn’t really make sense to use what little savings we had at the time to pay more off. We were about to get married and thought it prudent to keep more cash on hand.

However, this was not the end of the mission plan. Over the first six months of adulting, we realized that we hated the bar scene, didn’t have any great restaurants or carry out near us, and loved cooking. By cutting out non-essential spending on food and booze, we were able to significantly cut our monthly bills.

Renting a one bed/one bath apartment in the DC metro area was, and still is not cheap. But we had a pretty good deal since all utilities (minus internet) were included. By staying put and not upgrading to something larger, we were able to increase the monthly student loan payment even more.

Finish Him!

We had the data, we had the funds, we had the motivation to be debt free. With these three weapons in our arsenal we increased the monthly student loan payment to $2,000! This did prevent us from saving each month, but we had an emergency fund which would hold us over for six months in case anything happened to one of our jobs. The final step in student loan repayment was my next bonus. Again we applied it directly to the principal, and boom, student loans gone.

Careful and structured spending played a part in making this possible. I wouldn’t say we were extremely frugal or pinched pennies or compromised our quality of living though. We still did fun things, occasionally ventured out to commercial eateries, and bought stuff.

If you can’t afford $2,000/month, don’t worry, have hope! More importantly, get better data. Use Personal Capital and figure out how much you are able to pay back each month. Actually, there is something else you can do: get a better interest rate. If you have to slowly pay back a loan (any loan, not just student loans), you generally want the lowest interest rate you can get. Luckily, refinancing has never been easier.

SoFi: Loan Refinancer Extraordinaire

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SoFi became known for student loan refinancing way back in 2011. It was the first company to refinance federal and private student loans together. In addition to being the largest student loan refinancer, it offers unique job-related benefits.

If you refinance with SoFi, you can meet one-on-one with the company’s career coaches to get resume feedback, tips for salary negotiations and advice about career transitions and personal branding. You can also apply to SoFi’s Entrepreneur Program to get a six-month student loan deferment and the opportunity to connect with mentors and potential investors.

You can get a rate estimate from SoFi through its online pre-approval process. This involves a soft credit pull, which won’t affect your credit score. The lender will do a hard credit pull, which will slightly hurt your credit score, if you decide to complete the full application.

Here are some key stats about SoFi student loan refinancing:

  • Fixed rates: 3.35% to 6.74% APR. Variable rates: 2.82% to 6.74% APR.
  • Loan terms available: 5, 7, 10, 15 or 20 years
  • Eligible loan balances: $5,000, up to the full balance of your student loans
  • Minimum credit 650
  • Current employment
  • Good standing with current student loans
  • No origination fees or pre-payment penalties

If your interest rate is higher than 3.35%, I strongly suggest you check out SoFi and see if you can reduce your monthly payments and start saving more.

Overall, I think we probably could have done a little better. Maybe we could have worked a few more hours per week while maintaining a full course load at RIT on the old quarter system (semesters are for wimps). Maybe we could have moved in with our parents for that first year out of college to really accelerate repayment. At the end of the day I am really happy we were able to eradicate all of our student loan debt in just over two years.

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