I even cancelled my cable in 2011 to save the $70 per month I was paying Comcast to watch TV. Cutting cable both boosted my side hustle income (I spent time hustling instead of watching TV) and gave me extra money for my loans. Don’t discount the power of earning more to pay off your loans faster in addition to cutting costs. I never got cable again and I’ve saved about $6,000 on TV since!
Every lump sum goes to loans
The final slice of the pie came from lump and one-time income. I worked hard to get a job that gave me an annual bonus, and while it wasn’t huge I put every dollar of it into my student loans. The same was true for my annual tax refund, which gave me a couple thousand dollars more to dump into the loans.
Because you are used to living without the money anyway, don’t be tempted to spend one-time income on a vacation or a new Gucci accessory. Instead, funnel those dollars into your loan for a faster payoff.
This is why living on a budget is so important. If you don’t budget, you could find yourself in credit card debt or living paycheck-to-paycheck. In those scenarios, it is far more tempting to use lump income to pay for regular living expenses. You might even need it for high-interest credit card debt instead of your student loans. Budgeting is not optional if you want to pay off your student loans early.
A side benefit: my credit went up!
Paying off my loans early helped me free up cash flow for the future and gave me more freedom with how to use my newly disposable income. The main reason I wanted to pay off my loans early, however, was to save money on interest.
Interest charges compound based on the balance at the end of the month, so paying my loans early meant I also paid less interest. But while that was a great benefit of an early payoff, I still enjoy a higher credit score thanks to my early payoff.
My credit score was around 700 when I started tracking it around ten years ago. I’m now a proud member of the 800+ club thanks to my early student loan payoff!
Prepare for payoff day
Back to March 23, 2012. That morning, I made a single payment for $3,690.52 to close out my student loans for good. It felt great!
Screenshot showing my final loan payment amount. $3,690.52. Taken just a few days before paying off my loans for good!
That morning, I headed out into an unseasonably warm Denver day for work knowing I would never have to make another student loan payment again. I started saving that big monthly payment for a home down payment and my first year contributing the maximum to my Roth IRA. I turned that debt snowball into a savings snowball, and the momentum never stopped.
I didn’t use any special magic tricks. I just kept expenses low, put every dollar possible into my loans, and kept on going until the balance said zero. If you follow a similar approach to your loan payoff, it’ll be paid off before you know it!