How Much do Student Loans Actually Cost?

how does student loan interest work?
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How Much do Student Loans Actually Cost?

How Student Loan Interest Motivated us to Pay off $33,000 in 12 months!

Student loan interest

I spent several years as a teacher and one thing I learned is that knowledge truly is power. The number one reason my husband and I were able to pay off $30,000 in one year is because we armed ourselves with enough knowledge to actually make ourselves want to change. Read about the 10 steps we took to pay off $30,000 in under a year.

So how did we get so motivated to pay off debt?

We did the math.

Then we got super depressed.

We were paying almost $500.00 a month in interest alone. (Insert gag reflex sound)

If you can relate at all to this feeling you are not alone! We found a way out and so can you! When dealing with student loans most focus only on the minimum monthly payment. Most millenials resign to the fact that they will be paying on them “forever”. But this doesn’t have to be the case!  I am absolutely certain if you understood interest you would get fired up to pay back your loans in as little time as possible.

how does student loan interest work?How our Journey Began

One night my husband ordered some pizza and decided to get real with our debt. We wrote out all of our student loans out in order, the interest rate on each loan, and how long it would take to pay them back. Many do this and there is often little change in habits apart from a mini depression. (Trust me I had a little pity party of my own)

However, we went a step more and ran the math to figure out how much we would have to pay the bank back for barrowing this money in the first place. Honestly, what we found shocked us. Between the both of us we had just under $150,000 in student loans (most of which was law school for my hubby). If we made the standard payment where they take what you owe and let you pay it back over ten long years we would be paying back the bank $199,836.90. I am not sure if you caught that… We would be paying the bank $50,000 for lending us the money in the first place. I wanted to throw up my pizza right then and there but it is delicious and that would waste more money.

At that time I made less than 40,000 a year and I figured I would have to work for about a year and half straight (after taxes) just to cover the interest.

 

Want to get motivated? Look below…

 

Now I have to warn you looking at the chart is not for the faint of heart. Look below only if you really want to get motivated to make some big changes. Our financial reality check came at a crucial time in our marriage. My husband and I were going to buy a town house that would have eliminated most of our discretionary income. We would have been able to pay our bills but have very little extra to pay towards loans. Even worse, we were even considering going on an income based repayment plan which would have only increased both the length and amount we would have had to pay back in the end. This gave us the motivation to choose a simply our life and cut back on everything we could.

student loan interest calculator

student loan interest calculator

student loan interest calculator

Feeling a little Nauseous?

 

I certainly did! So where do you go from here?

 

Learn from the mistakes of others. Don’t believe the lies.

10 Lies you are Believing about Financial Aid, FAFSA, & Student Loans

Give yourself grace, I had to!

Forgive yourself or anyone else that helped you make foolish mistakes. This might seem silly but forgiving yourself allows you to move forward and not hold onto yesterday’s mistakes. I deferred my loans for many years so I could travel and save the world. And I would not change a thing. However, I did add several thousand onto my total loan amount.

Decide to change and set realistic goals!

Once you decide to change it is amazing how life starts ordering around your convictions and your budgets. We wrote out our goals and revisited them every paycheck so we could determine if we had a realistic budget and see if we were moving towards our goal.

Need to set a budget? These are the 7 steps I followed to pay off $33,000 in just 12 months!

How to Create a Budget that Actually Sticks – The 3 Steps you are Missing

Tackle your loans one at a time

Make your favorite dinner, pour yourself a glass of wine, maybe even pull our some dark chocolate. Whatever, you need to do to motivate yourself to get real with your debt. List all of your debts, student loans, charge cards, etc, in order from least to greatest. Next, after completing your budget determine what you can “throw” at your debt each month. This is your snow ball. Just like a snow ball the more you add to it the bigger your snow ball and thus the bigger the impact! In this case I was able to pay $475.00 a month extra to debt.

In this example I was able to pay off the first debt in one month. Next, I add my previous minimum payment to my snow ball payment. $475.00 + $25.00 = $500.00 My new snow ball payment is $500.00 a month.

After, about 4 more months I will be able to pay off the second loan. Once that loan is paid off I will then be able to pay $565.00 towards debt each month. In just over 5 short moths I will be able to increase the amount sending towards loans each month by $90.00! Even better I have two debts that are completely forgiven! (insert link to more info about debt snowball)

Debt snowball

Increase your Income

After getting real with our budget my husband and I realized we needed to do anything within our power to increase our income. Although we both had professional jobs, we had to increase our side hustle game. My husband banquet bartended on the weekend and drove for Lyft to increase our income.

Once you have your budget or spending plan in order then it is time to increase your income as much as possible. This is the last pillar on purpose. If you seek to increase your income before truly learning to live on a budget and manage emergencies, trust me you will find new ways to spend that hard earned cash and not get any closer to paying off debt. When our income doubled we did not change our lifestyle one bit. Since we were already used to living frugal we simply increased the amount we sent to debt each month.

Over the past year we were able to more than double our income since we first got married. We did this by taking on second jobs and learning how to side hustle to earn extra income on the side.

Side Hustles Worth your Time

 

 SIDE HUSTLE WITH LYFT

My husband although a busy lawyer decided to drive for Lyft on the side. He drove in his free time and got to chit chat with some great people. Click here to access the latest incentives and make up to $35/hr for driving your own car. Driving for Lyft added an additional $500 – $1,000 a month!!! This really helped us pay off our debt fast! The extra income went straight to our lowest student loan and we paid it off in two months!  If you are new to lyft click on this and get $50.00 in Lyft credit towards your first ride!

MAKE MONEY WITH A SMALL BLOG!

Why not make passive income writing about something you love! I started a blog because I was passionate about saving money and paying off debt. But hey! Why not make money writing about your passion?!? Many stay at home mom’s and millenials are making thousands each month through advertisements and affiliate marketing links (these are links where you get a commission for the sale without adding any cost to the customer). Carolina made over $1,000/month from Amazon while her blog was under 10K page views and has increased her affiliate income as her blog has grown. 

If you are passionate about fashion, homeschooling, DIY projects, or saving money you can become like so many others and make thousands each month through a small blog. Suzi with Start a Mom blog went from making $0.00 to $17,000 a month in just one year. Can you imagine how much debt you could pay off, if you earned $17,000 a month?!? She has a great course that is way under priced, that teaches you exactly how to start a blog (Most blogging courses are over $300). She taught me everything I know and has helped me add a little extra income to pay off debt fast!

IF WE CAN DO IT, SO CAN YOU!

 

Download your Free Debt Snowball Printable!

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Step 1: Download the debt snowball instructions and free printable.

Step 2: Organize your debt 🙁

Step 2 1/2: Eat some chocolate and got to your happy place 🙂

Step 3: Destroy debt!

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22 thoughts on “How Much do Student Loans Actually Cost?

  1. Wow this is super helpful. Almost everyone I know has student loans (including me) and they seem so overwhelming. I love how you explained tips here (like giving yourself grace) as well as what side hustles to pick up. Uber and lyft is looking pretty attractive (: haha! But great advice … I learned a lot!

  2. OMG this is so much money, I’m so glad that we have a different system and it doesn’t cost us that much to go to Uni.
    Lea, xx

  3. So much great information! When you really look at the cost of borrowing, it can be such a shock. Congratulations on paying it off so fast. What an inspiration.

  4. Are you a Dave Ramsey fan? He’s got a lot of good advice. Unfortunately I didn’t read his book until AFTER I took out student loans. Now I’m paying them off and wishing I had searched harder for alternative options. Luckily all of my other debt is paid off, so the student loans are the only debt I have.

    1. Yes I am! He motivated us to get where we are. All our debt is student loans. Primarily law school.

  5. It’s so refreshing to see people dedicated to helping others get out of debt. More people need to know about the issues surrounding student loans and how to get yourself out of debt. Great information!

  6. Interest on loans are insane! It’s very unfair. Good for you and your husband for being so serious about paying your loans of quickly. That’s what I intend to do when I complete my degree this fall. Thanks for all the great information 🙂

  7. Ahh I never entered into the student loan trap as my dad funded my education completely, but really saw my hubby getting terrified of the loans.. It was such a good feel to get that debt over.

  8. Ugh, I appreciate this post but I cannot seem to make any extra income to pay off my student loans. Already I have paid $20k and still have 5 years to eternity left! Right now the fact that I am living paycheck to paycheck is stopping me from paying these off and not giving the banks/schools even more money.

  9. Knowing exactly how much your debt costs is huge! That’s exactly what motivated me to pay off my law school loans quickly as well. Like you, my student loans were costing me over $500 every month! That was nuts to me. It was $17 or so every single day in interest I was paying!

    Love the side hustling too. I’m also a busy lawyer and yet, I do tons of fun side hustles. I’m real big on doing food deliveries on my bike with apps like Postmates. It helps me get out of the office and basically get paid to bike.

  10. Wow this is great insight and really useful for those who never payed attention or calcutated what it will eventually cost. So depressing thinking about. Need to do the same!

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