Paying off Student Loans: The Complete Guide

Disclaimer: This post may contain affiliate links. Please read my disclosure for more information.

the millennial money woman blog post "paying off student loans"

Wondering how to pay off student loans? Find out everything you need to know about paying off student loans in this complete guide.

In this article

Paying off Student Loans: The Complete Guide

A few days ago, I reflected on my journey through college. 

Although it’s been a minute since I last attended college, the memories are still sweet and I certainly miss the close-knit group and team-based projects, bringing my class closer together. 

Do you recall those moments walking with your friends to class ready to sit through another lecture from an accomplished professor? 

Do you remember the late nights studying in the library? Or perhaps the countless times you spent with friends, experiencing new adventures? 

College certainly has a certain appeal – especially as you just start your path through the four (or more) years. 

It’s kind of like opening the doors to opportunity – the world being your oyster. 

You not knowing what lies ahead of you – good or bad.

Yes, those four years at university certainly can be some of your best – be it because you find your purpose, make lifelong friends, or discover your passion through academia. 

However… the show likely stops when you receive your first student loan bill. 

And that’s why I am here today writing a post about student loan debt.

Student loans… What a disgusting word, right? 

It makes me cringe just thinking about it, and I’m sure I’m not the only one. 

Student loans often are cited as one of the major reasons why millennials today do not want to marry, become homeowners, or contribute in other ways to our consumer-driven economy. 

Understandably so!

Who is in the financial capacity to purchase a house when student loans (easily reaching north of $100,000) are looming above your every move. 

Moreover, on time and every month you receive that student loan payment bill for a few hundred dollars – or a few thousand dollars – to make your repayment. 

That’s the unfortunate reality for so many of our college alumni today. 

Trust me, I have seen first-hand how student loans can truly curtail a millennial’s potential in every aspect. It’s saddening. 

But – there is something you can do about paying off your student debt at a faster pace so that you can enjoy financial freedom much earlier than you would have ever thought! 

My plan today is to teach you some of my tricks that I have taught my peers. 

These tricks have helped my peers successfully either lower their student debt bills or completely eliminate them. 

Be warned: If you’re really going to do this – if you’re really going to eliminate those student loans – then you better be in the game for the long run. 

You can’t take short cuts and you can’t “take a break” for a month or two. 

Point being: If you want to win at the student loan game, then you have to be committed.

person thinking about student loans

What are Student Loans?

Before we get into the details and craft your plan of action to eliminate your student loans, let’s start by exploring what student loans are.

Particularly, I want to examine the sad reality of student loans in today’s society – and if taking on student loans is actually something for you.

Let’s examine some shocking student loan debt facts: 

  • 44 million Americans hold student loan debt.
  • Collective student loan debt = $1.6 trillion. 
  • The average college student graduates with more than $29,000 of debt, per The College Board.
  • A survey by Bankrate found that 56% of millennials have delayed major life milestones including marriage, having kids, and saving for retirement due to their student loans.

So, of course, now the question rests in whether it makes sense to even go to college for a degree or to by-pass the massive burden of college tuition all together in favor of starting life as a millennial debt-free. 

What would the best option be for you?

Below are some questions to ask yourself to determine whether attending university is the right path for you.

Do you already know what you want to do?

If you don’t know what you want to do in your future, maybe it’s worth starting some paid internships (or even unpaid internships) so that you can explore some possible routes that may be of interest to you, before applying to college. 

You could also simply search for interesting job opportunities and apply to these positions to see if you a) are accepted, and b) upon your acceptance to this job, discover the ropes of the business to see whether you enjoy the work or industry sector. 

I suggest you be very sure of what you would like to do before heading off to college and spend potentially tens of thousands of dollars. 

I wish I could take my own advice, as I studied mass communications for my undergraduate degree and now I’m an online blogger in personal finance! 

What is your purpose for going to university?

If you are simply going to college because you believe others expect you to – or because society expects you to – then STOP. 

Don’t go just because you believe that’s the expectation. 

Go to college because you know you want to learn more about a specific topic, because you found the job of your dreams and need a degree to enter it, or because you want to further your education in a specific subject matter. 

Don’t simply go to go.

Do you enjoy academia?

Another important question you should ask yourself before heading off to college is whether you actually enjoy – and flourish – in an academic environment. 

Are you a strong test taker? 

Do you enjoy classroom lectures? 

Do you feel engaged in team projects? 

If you answer “no” to any of these feeler questions, then take a step back from your college journey and reconsider your options. 

College is NOT the only thing out there to further your career’s trajectory. There are many other steps to take in order to achieve financial freedom (and a high-paying job). 

For example, you can simply work your way up through the corporate ladder in a job. 

This may be more difficult in today’s environment, but this strategy certainly can still succeed. 

Another example is learning a trade at trade school. 

These schools typically are much cheaper – and they also oftentimes teach you to become a skilled worker. 

Even better? 

Often those who study at trade schools open their own businesses – and can earn more than what an employee would earn who studied at a regular (and costly) college.

Have you considered the potential consequences of going to college?

In other words, let’s assume you do come out of college with tens of thousands of dollars in debt – are you willing to put your life milestones on hold? 

Do you want to delay being a homeowner

Delay being a parent? 

Or delay marrying the person of your dreams? 

If you have thought about these things and still believe heading off to college is the right choice for you – then, my friend, I think you will be successful as a college graduate because you are putting everything on the line to further your education and ultimately, your career.

Good luck!

person weighing money and books

Subsidized vs Unsubsidized Student Loans

So let’s assume that you asked yourself these four questions and still decided that college is the place for you – that’s awesome!

Now let’s say that you do have to take on some student loans. Ugh. 

There are two types of student loans: subsidized and unsubsidized loans.

Know the difference – and choose accordingly.

Subsidized loans:

Subsidized loans are specifically for undergraduate students who have financial need. 

When you apply for subsidized loans, you do NOT accrue interest while you are in school (assuming you attend college at least part-time). 

Moreover, interest will NOT accrue for the first 6 months after graduating or leaving your university. 

Unfortunately, the loans you can take out will likely not all be eligible for subsidized status. Often times, the institution you attend will determine how much of a subsidized loan you will be eligible to take. 

However, if I did have a choice, I would look for subsidized loans all the way. 

Unsubsidized loans:

Unsubsidized loans are loans where interest will automatically start accruing while you attend college. 

Unsubsidized loans are not based on financial need and are available to both undergraduate and graduate students. 

Once again, your institution likely will determine how much you will be eligible for unsubsidized versus subsidized loans.

Note: If you are a graduate student taking out unsubsidized loans, your interest rate will almost always be higher than undergraduate students. 

Pay close attention to the interest rates and DO NOT squander your loans.

True Story: A good friend of mine once received a $30,000 student loan for her undergraduate program. 

(This was before we knew each other). 

When she saw the $30,000 in her name, her eyes grew large and she thought that the $30,000 was hers. 

To spend. 

And by spending, I don’t mean spending on college tuition, books, cost, etc. 

I mean that she literally took the $30,000 and spent it on upgrading her college dorm. 

How do you even spend $30,000 on dorm upgrades? Don’t ask me.

From what I found out, she had her own room and purchased top-of-the-line furniture, expensive flat screen TV’s, etc. 

Yes, she had the talent to squander the $30,000 and still be left penniless as she attempted to pay for her college education.

By now, she has repaid her college debt and has made much better financial choices… but oh boy, what a difficult lesson she had to learn to live a better financial future. 

student debt money

How to Pay off Student Loans

First and foremost, let me reiterate that to successfully pay off your student debt, you need to be COMMITTED. 

You CANNOT miss a single payment. Why?

Because if you miss 1 payment, then you have a MUCH higher likelihood to miss another. And another, and so on. 

It’s like dieting. 

If you miss 1 day of work-out or 1 day of eating healthy from your regular diet or exercise routine, well there is a much higher likelihood that you’ll slip up again. And again. 

And again until your diet and workout routine is no longer what it used to be and you are back to your old ways.

That’s why you HAVE to be committed. Never miss a payment. 

Step #1: Emergency Fund


You might be scratching your head at this point. 

Why an emergency fund when this blog article is all about eliminating – no, annihilating – student loan debt?

Simple, because before we start attacking your student loan debt, we need to make sure that if a small emergency pops up (such as a flat tire, a cracked phone screen, etc.) you won’t need to resort to debt financing – or picking up your credit card and going into even further debt. 

We want to make sure that you have at least a small emergency fund set aside IN CASE you have any emergencies pop up. Again, the keyword is emergency. 

You should not touch this emergency savings fund unless it is? You guessed it, an emergency.

How much should you have saved in your emergency savings fund?

 For this article, let’s just aim to have about $1,000, cash, in your emergency savings fund. 

However, to find out more about how much you should save in an emergency savings fund, click here.

Step #2: Order your Outstanding Debts


Now that you have built your emergency savings fund, let’s start analyzing your debt. 

That includes your car loan, your credit card debt, and your student debt. 

If you have any other debt, throw it into the analysis. 

What are you looking for?

First, you’re looking for the balance (what you owe). 

Second (and most important), you’re looking for the interest rate that is charged on top of what you owe. 

Interest rates can vary from 3% (likely a car loan) to 25% (likely credit card debt) or higher. 

Make sure you read carefully which type of interest rate you are charged per debt that is owed by you.

Now that you have analyzed the interest rates, it’s time to order the interest rates from the highest interest rate to the lowest interest rate. 

Write that information on a piece of paper. 

Don’t lose that paper.

Step #3: Develop Momentum


Look at the minimum payments per debt owed. 

You want to make minimum payments for each debt owed… EXCEPT for the debt with the highest interest rate. 

Pay off that high interest yielding debt ASAP. 

Put every extra penny toward that outstanding balance. 

Pay it all off. And make it happen fast.

Let’s say you accomplished that goal. 

You just paid off your highest interest rated debt (let’s assume it was a credit card). Good for you!

Next, use what you normally would have paid toward that high interest yielding debt and combine that with the minimum payment of the second-highest interest yielding debt. 

Guess what? You’re paying off the second-highest interest yielding debt at a MUCH faster rate because you’re combining payments.

Third, once you’ve paid off your second highest yielding interest debt, combine the payments originally intended for the highest and the second interest yielding debt and pay those toward the third highest interest yielding debt – and so on.

To illustrate: Assume your list shows the following:

Debt Interest Minimum Monthly Payment
American Express Credit Card
Discover Credit Card
Student Debt
Car Loan

My recommendation in this scenario would be to pay the minimum monthly payments toward the car loan, the student debt and the discover credit card and throw every last cent I have to pay off the American Express credit card. 

Once that debt is repaid, I would combine the $300 monthly minimum payment I originally made toward American Express and add that $300 to my already existing $260 minimum monthly payment for the Discover credit card. 

Once the Discover credit card is paid off, the next step would be to combine the $300 AmEx minimum payment PLUS the $260 Discover minimum monthly payment and combine those with the $800 minimum monthly payment for your student debt. 

So now, instead of paying just $800 per month toward your student debt, you would be paying $1,360… plus any other bonus checks, side hustle money, etc. that you can afford to throw at your student debt – all while paying the minimum car loan monthly payment. 

THAT’S how you make a big and lasting dent in your student debt.

For our detailed guide on how to pay off credit card debt, click here.

Step #4: Use any Extra Cash to Eliminate that Student Loan Debt


This step is self-explanatory. 

Don’t buy that Gucci jacket. Don’t go on vacation. Don’t buy a luxury car. 

You read through this blog post this far because you came here to save. 

So SAVE and pay that money toward that ugly student debt.

Your bank accounts will thank me later.

Step #5: Repeat


Any questions?

Closing Thoughts

Guys and gals, student debt is NOT something to take lightly.

Student debt has slowed down the Millennial generation in accomplishing those major life milestones… having kids, buying a house, saving for retirement – just to name a few.

Don’t be a statistic. 

If you visited this blog post with the very purpose of paying down that nasty, ugly student debt – then get started and stay committed.

My advice: NEVER miss a payment. 

Don’t slack. Don’t even think about slacking. Keep at your goals and maintain a long-term mindset. In time, you’ll pay that student debt down.

In the meantime, I suggest you consider following my advice: listing your highest interest yielding debt first, and paying that off. 

Once that is paid off, applying those payments toward your second highest interest yielding debt – and paying a chunk of money toward your student loan principal (the original amount of money you owe).

Keep up the hard work – good things typically never come easy. 

Your bank accounts will thank me later. 

What’s your experience in paying off student loans?

Fiona Smith
Fiona Smith
Fiona Smith is the founder of The Millennial Money Woman. She holds her Master of Science Degree in Personal Financial Planning, has advised decamillionaires for 6 years in the corporate wealth management sector and has co-founded a local non-profit community teaching financial literacy. She is the author of the personal finance book How to Get Rich from Nothing and her work is featured on Forbes and FinCon.

Leave a Comment

Your email address will not be published. Required fields are marked *

Want to make

more money?

Sign up for free access to Fiona’s latest financial tips, wealth-building strategies, investing guides, millionaire planning, and much more.

fiona smith the millennial money woman

Want to make more money?

Get free access to Fiona’s latest financial tips, wealth-building strategies, investing guides, millionaire planning, and much more.