Paid In Full!

Hello again friends and followers!

In my first blog post What is your get-out-of-debt plan?, I shared some basic financial principles to deal with debt. Today, I am sharing the specific strategy I followed to attack and downright demolish my student loan debt

student-loan-debt111I attended (and graduated from) a private, Christian university in northeast Kansas. I choose this school for variety of reasons, but it was most definitely not my cheapest option for post-secondary education. I used every penny available through academic scholarships and federal grants, and I worked 3 (at times 4) jobs at a time to cover my living expenses throughout my four years there. Despite all that, I graduated with $25,000 in student loan debt. Yikes!

As intimidating as this was, I felt strongly that it was my responsibility to repay these loans, and I was determined to fulfill my responsibility as soon as possible. At the end of my 6-month grace period, I was fully prepared to make the minimum payment on each of my six student loans. And I did! I made on-time payments each and every month.

This was all well and good, but I was discouraged to find out how long it would take me to be free from this debt with this current pay schedule… 30 years?! Double Yikes!! There was no way that I wanted this hanging over my head for that long. So, I went looking for help…

I discovered the “debt snowball”. This strategy accelerates your debt payoff by using the “rollover” method and is considered (by some) to be the most cost effective, fastest, and emotionally satisfying way to get out of debt.snowball

It goes like this:

  1. List all of your debts: Write down the minimum monthly payment required, the interest rate, and the current total balance for each debt owed.
  2. Prioritize your debts: You can organize them by smallest balance to largest balance, highest interest rate to lowest interest rate, or a combination. If you need to see quick results, the smallest to largest balance version will be the most encouraging.  
  3. Attack your list from the top: Find any excess funds available and throw every penny possible towards the #1 loan on your list (on top of the minimum payment). Even if it is only an extra $20 a month, it will help. I promise! For all other loans, make only the minimum payment required each month. Continue this pay schedule until your #1 loan is paid off.   
  4. Build your “snowball”: Take the amount you were paying each month towards loan #1 and add it to the minimum payment for loan #2 on your list while continuing to make the minimum payments on all other loans. Once loan #2 is paid off, roll that freed-up payment to loan #3 and so on and so forth until all debts are paid off. 

I followed this plan and decreased my 30-year timeline into a 10-year timeline. It did take some time to get the first loan paid off, but it felt so good to accomplish. That feeling of accomplishment turned into satisfaction with my second loan payoff and increased into motivation with my third and fourth loan payoffs. I was so encouraged and excited that I found a way to payoff of my final loans a year early. Yes, I paid off over $25,000 in student loan debt in 9 years! Triple Yay!!!  

paidinfullIf I can do this, I know you can too! Whether you are working on student loans, car loans, credit cards, or a combination of debts, the “snowball” strategy can move you towards and into debt-free living. Create your plan and stick to it. Celebrate the small successes and keep the end goal in mind. Don’t give up until you see those absolutely thrilling three words, PAID IN FULL!   

Until next time, keep calm and keep up with the CASH blog!  

Alicia Marsh

Alicia Marsh

Homeownership Coordinator

aliciam@ihs-housing.org 

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