Dave Ramsey How To Pay Off Student Loans Fast

Dave Ramsey How To Pay Off Student Loans Fast – One of the best things I did in law school was pay off my student loans as quickly as possible. Doing this gave me a lot of flexibility in what type of money I wanted to make.

After paying off my student loans, I didn’t have to work a job that would make a certain amount of money, all just to get some of it out of the student loan company. And I could rest at night knowing I didn’t have to keep paying for the paper I earned years ago!

Dave Ramsey How To Pay Off Student Loans Fast

Interestingly, even though I knew how much I was paying in student loans, I never looked at what I had.

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I thought it might be an interesting trip down memory lane to find this information, so a few weeks ago I requested my payment history from my student loan servicers and had a look.

Before I dive in, it’s best to look at how I got those student loans in the first place. I went to a law school that gave me a 50 percent scholarship – a pretty smart move in my book since my other options were much more expensive and would have put me in a lot of debt. When I entered law school, my goal was to keep my expenses at a level that I thought was manageable.

Although the scholarship helped reduce my school expenses, it still cost me a lot in both tuition and living expenses for those three years.

As you can see, I had 8 different loans of different sizes. The interest on these $25,000 loans was 7.9%. The rest had an interest rate of 6.8 percent. In total, my law school debt was $86,500.

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I had $552 in student loans from undergrad that I hadn’t paid back. As a result, when I graduated from law school, my total student loans were $87,052.

That’s a reasonable amount of student loan for a 26-year-old starting his first real job. Let’s start paying them!

I graduated from law school in May 2013 and started my first job in September 2013 at a large law firm in the Midwest. Since I just graduated, I was given a 6 month grace period and didn’t have to pay my first student loan until December 2013.

I don’t really remember why I did it, but I made a few extra payments before I officially paid off my debt. My student loan payment for 2013 looked like this:

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Most people forget about student loans that they accrue interest while you are still in school. So when I paid off my first student loan in August 2013, it looked like this:

Ah! The $750 payment did not affect the principal of the loan. I basically threw the money here.

But stupid, I didn’t understand the concept of capital letters. For those of you who don’t know what this is, when student loans are repaid, any unpaid interest accrued during the school years is added to the new loan as long as you pay the interest. before you invest. Remember the $750 I paid off the loan? This is what the loan looked like after investment:

Do you see what just happened? My $12,000 student loan suddenly became a $13,682 student loan! It accrued interest over the three years I was in law school, and when the loan was repaid, the unpaid interest was put back into the principal! It was scary because now I had to pay back the principal and all the new interest it earned. And it wasn’t the only loan placed. I had three more loans that were capitalized and added thousands to my capital.

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I consider 2014 to be the first year I really started trying to pay off my student loans. As a first-grader, I earned an annual salary of $110,000, so I had the income to put a big dent in my debt. I just had to avoid the lawyer lifestyle trap that many of my peers fell into.

Glorious! I knew I was paying off a lot of my debt, but I didn’t realize how much it was until I wrote it all down. Here’s a handy chart showing student loan payments in 2014:

What amazes me is the ridiculously large payment I made in October. I had a pretty big emergency fund at the time, so my best bet is that I decided I didn’t need all that money in cash and put a bunch of it into student loans.

You may also be wondering why my payments jump from month to month and seem to vary so much. A lot of that was because I was randomly dropping extra fees every time I saw my bank account getting too big. I wanted to avoid what I call salary satisfaction, so you see occasional ups and downs throughout the year.

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I got a raise in 2015 and my annual salary was $115,000. Again I had a decent income working here. Here are my payments for 2015:

Looks like 2015 is off to a great start. I took a little more money out of my emergency fund to start the year, which is why you see a really big increase. I’m not exactly sure why I did this, but my best guess is that I was listening to Dave Ramsey and was really motivated to get my debt balance down a bit. Anyway, the money in my emergency fund wasn’t making a ton, while paying off the debt was a guaranteed 6.8% return.

As you can see, my payments continued to increase in 2015. I continued to make additional payments as more money came into my bank account.

Another big thing I did was use three months of my paycheck to really throw a lot of money at my debt. I was paid twice a week (like many people), so twice a year I would see a month with three paychecks. Because I lived well on two paychecks a month, every time three paychecks came, I threw the entire third paycheck into student loans.

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One mistake I made when paying off my student loans was not refinancing them the first year I paid them off. If you’re like me and you’re looking to pay off your student loans faster, there’s really no reason not to wait to refinance your student loans. Refinancing means you lower your interest rate, which means you pay less interest and have more money to work with.

I ended up refinancing my student loans three times while paying them off (what most people don’t realize is that you can refinance your student loans as many times as you want). Below are the three companies I refinanced my student loan with:

If you are unsure which company will refinance your loan, a good option is to use a company that offers you several student refinancing companies at the same time. These companies are basically the icing on the cake when it comes to student loan refinancing. You can search and all the possible prices you find will be shown to you in one place.

My advice is to refinance your student loan with SoFi first – that way you get access to all the free SoFi member events (remember, you can still go to these events after paying off your SoFi loan).

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Refinance your student loan with Credible and choose the company that offers you the cheapest interest rate. If you do, you’ll get all the benefits of refinancing with SoFi once (i.e. attend all SoFi events), and then get the lowest interest rate on your student loans (plus $200 more when you refinance your student loans with Credible).

Or if you’re like me, you can go crazy and basically refinance your loan with every company. That’s what I did, and while it wasn’t necessary, it gave me access to a lot of sign-up bonuses.

If you’re confused about refinancing, check out my post on my student loan refinancing experience where I go over exactly what I did when I refinanced my student loans. You can read the message here: My student loan refinancing experience.

I started 2016 with another raise, this time to $125,000 a year. I had enough income again to pay off this debt quickly, assuming I didn’t fall into the lawyer trap.

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So what happened here? Why did I pay so little for the first 5 months and then suddenly drop.

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