This report was originally published Nov. 19, 2016.
In March 2010, I completed my Master of Business Administration degree at the University of Denver and received my academic hood. Earning an MBA from a private university can be an expensive undertaking, and when I started my studies, the estimated cost for the entire program was nearly $92,000. Tuition alone was $67,000.
Even so, a little over two years after I graduated — 736 days to be exact — I made my final student loan payment. Here’s how I made it happen and how you, too, can pay off your student loans in just a few years.
Before my $90,000 student loan debt
I come from a very academically focused family. I always knew I wanted to follow in my grandfather’s footsteps and get an MBA at an early age. My grandpa managed to graduate from Georgia Tech with an undergraduate degree at 19 and got his MBA a few years later, so I had some tough shoes to fill.
I completed my undergraduate program at the University of Colorado debt-free, thanks to a full scholarship from the Boy Scouts. I then went on to begin my career in banking a couple of months later.
Like many millennials looking to save money after graduation, I moved back in with my parents and started putting aside thousands of dollars each month. After all, my only expenses at that point were my car, a new grown-up wardrobe, and nights out on the town with friends.
It didn’t take long to realize that I was not in the right job, so I left the company after about six months to work on something new. At that point, I had saved the majority of my salary for half a year, which left me with the biggest bank balance of my life.
Working during school
When I left the bank, I started looking for finance jobs in different industries. I also decided it was time to start working on that MBA.
I studied hard and rocked the GMAT, gathered my transcripts and started applying for MBA programs while applying for jobs. I also worked as a restaurant waiter for a few months to keep the cash coming in while I looked for something new.
I decided at that point that I was going to work full-time while getting my MBA full-time. Crazy? Maybe. Hard work ahead? Definitely.
Shortly after getting accepted by my top-choice MBA program, I got a call back from a big telecommunications company I had applied to. A week later, I had a job offer as a financial analyst.
I made it very clear during my interview that I was going to get the MBA and wanted to figure out a way to study and work full-time. There were no surprises when I showed up on day one with an MBA start date just six months away.
I worked out a deal with my boss that I would get all of my work done — putting in time from home on evenings and weekends if necessary — and in exchange I could leave early when needed for my evening classes.
When I started working on my MBA that September, it hit me how hard this was really going to be. However, I knew I could do it if I put my mind to it. I started the journey and made my first MBA tuition payment from a combination of student loans, savings and income from my day job.
Making student loan payments during school
I received a combination of subsidized and unsubsidized Stafford loans to help pay for my MBA program, which added up to a total of about $40,000. The subsidized loans didn’t accrue any interest while I was still in school, but the unsubsidized portion started piling up interest right away. I did not want to see those loan balances grow while I was still in school.
I moved into off-campus housing a month before school started, but knew I had a huge expense in my near future. I found a place with a roommate for $400 per month and kept myself on a strict budget while in school, using an expense tracker to help keep me focused.
I started making student loan payments the month my first loan was issued. Even though no payments were due for over a year and a half, I started making payments of around $250 per month to chip away at the loan balances.
Laser focus on debt repayment
When I graduated with my MBA, I had a big student loan number in front of me, and the subsidy period was ending for the subsidized portion of my loans. With a 6.8% fixed interest rate, I wanted to get my loans paid off as quickly as I could, in order to save thousands of dollars in interest.
I stayed in an inexpensive apartment, with rent of just under $700 per month, and kept other expenses as low as I could. I increased my loan payments as well. Rather than making the minimum payment each month, each payday I paid double the minimum.
In addition, every time I had a cash windfall, such as a tax refund or a bonus at work, I put 100% of that amount into my loans. In my case, that led to an extra $5,000 to $10,000 per year in student loan payments.
With a payoff strategy like that, I was destined to be debt-free in under five years. But that wasn’t good enough for me. Did I mention I hate paying interest?
While keeping my budget low, I watched my checking account balance slowly climb each month. After putting away a modest emergency fund, I started plowing anything left over each month into the student loans as an extra payment. Even after rent, utilities, car expenses and bar tabs, I had at least a few hundred dollars left over each month, which all went into the loans.
The final payoff
Two years later, I found my balance was sitting around $3,700. If I dipped a little bit into my emergency fund (maybe not the best idea in hindsight) and put all of my next paycheck to my loans, I could pay it all off on my next payday.
So I did.
There is one big downside to this story: If my payday had been a week earlier, I could have called this article “How I Paid Off My Student Loans in Less Than Two Years.” However, two years and six days is what it took.
Wherever you are on your student loan journey, do not look at it as something “I can’t do.” Yes, I do have a couple of fancy finance degrees, but there is no reason you can’t do the same thing I did.
Work on growing your income, managing your budget and, as much as you can, putting every cent into extra student loans payments. If you do that, you may just find yourself looking at a balance that you can pay off on your next payday.
Every dollar counts, and paying off your loans all starts with the next dollar. Don’t believe me? Enter your information into our Student Loan Prepayment Calculator to see how soon you can be debt-free.
Peter Fleming contributed to this report.
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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of October 1, 2020.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of September 9, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.49% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.34% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of October 26, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 10/26/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 11/13/2020 student loan refinancing rates range from 1.97% to 8.54% Variable APR with AutoPay and 2.95% to 8.77% Fixed APR with AutoPay.