Are you thinking it’s time to pay off your student loans? Maybe they’ve hung around a little too long and it’s time to finally dig in and cut ’em loose.
Last year when I finished my degree I knew that my student loans were going to come out of deferral. Not just the loans from the last three years a Western Governor’s University, all the loans from the last 10+ years were coming home to roost.
For me, finishing college wasn’t a straight line. I did a year and half when I was 18 years old and just didn’t maintain any momentum. Once I had kids I had the motivation I needed to get moving but I was also making $10 an hour and couldn’t see a way to afford to pay for school. So I accepted what financial aid packages came through and in 2019 I fully finished my bachelors degree.
This meandering journey to a final degree left me with a in interesting pile of loans and years upon years of accrued interest. The trade-off is that it also left with a job where I definitely make enough to pay it all back! It will just take some time and focus to get it knocked out, but it’s possible!
Finally, after all this time, I am going to pay off these student loans!
Where to begin to pay off student loans
Once you know it’s time to get serious on these it’s also time to make a plan. Time to collect all the information on your loans and get it into one central tracker. My husband and I have loans managed by FedLoans, Nelnet, and Great Lakes, three systems we log into to manage and make payments.
To keep everything in one central spot we use the Debt Payoff Planner app. The nice thing about the app is we can use it to create payoff projections and visualize how far we’ve come. It’s an awesome tool for keeping track of your plan AND it’s free. You can’t beat free!
If you’re more of a spreadsheet person, you can also list out your loans in a sweet Google Sheet or something similar. I also have an ongoing spreadsheet tracker of all our student loans so I can pull them up on a computer whenever I want. Actually, I’m a spreadsheet nerd and I have a designated debt countdown sheet, a net worth sheet, a sinking fund sheet, a budget sheet, a projected annual spending sheet. There’s a lot of spreadsheeting happening over here. But, in a good and happy way.
One thing I like about the app is you can see the prediction of how long it will take you pay off your loans. It takes into account how much extra you have to add to your payments and then gives you a plan and a timeline. It also lets you choose how you’re paying off. So, if you’re curious about the timeline for a debt snowball vs a debt avalanche you get to toggle and see the stats.
Which brings us to the big paying off student loans debate.
Avalanche vs Snowball (and what is a blizzard)
OK. Why are all the debt paying methods have wintery/snowy/cold weather names? I don’t know but I think it’s hilarious! The names kind of make sense when you break them down, so keep reading.
The Avalanche Method for paying off debt is when you line up all your debt owed according to interest rate. You then pay off the highest interest rate first as you move down the list to pay everything off. The idea here is you save on interest over the long haul, making your money work the hardest for you.
When you start by paying off your highest interest rate you end up decreasing principle as well as decreasing the accrued interest on accounts each month. It’s a real win win. Especially if you have accounts with VERY high interest rates.
The only down side here is if the high interest debts are LARGE. Paying off debt is a marathon not a sprint and paying off debt can be tedious. When you kick off your debt free journey by paying off your highest debts it can make it exponentially harder to stick to. Keeping that in mind, always do what works best for you! If paying off the highest interest rate works for you, do it!
The Snowball Method for paying off debt is when line up all your debt from smallest to largest balance. Next step is to start tackling that debt and paying it off from the smallest balance on up. The snowball happens when you apply your extra money to the debt you’re working on and pay minimums on everything else. As you pay off a balance you take that minimum payment and keep applying it to the balance of the next. This way your momentum grows and your focused monthly payment grows too!
This is probably the method that people are most familiar with. Dave Ramsey describes this method in his book