What is the easiest and most efficient way to pay back student loans?
I want to eventually earn my PhD in neuroscience. While this is a very prestigious goal, it comes with a heavy price tag. Knowing how to get out of student loan debt before I even have it will greatly benefit me.
Charles M Hurd
Charles M’s Answer
The way to pay off your debt is to make a commitment to pay it off and then stick with your commitment. I suggest you research Dave Ramsey and his publications. He is the king when it comes to teaching people how to pay off loans of any kind. (https://www.daveramsey.com/). The basic idea is that you establish an emergency fund that you can use to help prevent you from having to incur additional debt when an emergency happens. Then you budget your money every month, and establish how much will go towards paying off the loan. (hint: Those lending the money do not want you to pay it off, because they love the interest you are paying them. but you want to pay off the loan as fast as you can, so you can start using the payments you are making including the interest, to do your own investing.) Dave Ramsey has a lot of money-saving ideas, so you can devote a lot more money into paying off the loan faster. He says things like, "eat rice and beans and beans and rice", "don't see the inside of a restaurant unless you are working there", "Pay cash for things including cars." His main saying is, "Live like no one else so that later, you can live like no one else. In other words, be really cheap while getting out of debt and saving as much as you can, so that later, when your investments have matured, you have enough money to live richly, like no one else because you have earned, saved and invested the money and compound interest has worked for you, not against you, and they are still paying off their loans.
Another idea is encapsulated in the words, the intern principle. When you are an intern, you don't get paid very much, and you are forced to live very cheaply. Once you are a doctor (or whatever profession you have), if you continue to live like an intern (very cheaply) and pay off your loan as fast as possible, then you will get rich a lot faster.
I took Dave Ramsey's Financial Peace University 11 years ago. I kick myself frequently, regretting that my wife and I did not make the commitment to pay off our debts, and we are still in debt. We lost our house just over two years ago because we didn't have enough emergency savings when I lost my job. I am convinced that had we made the commitment and exercised gazelle-like intensity, (as intense of an effort as a gazelle makes when running for its life away from a hungry lion) we could have paid off our debts and had a lot more savings that would have lasted a lot longer and perhaps we could have kept the house.
Why do I think this? Every day on his radio show, Dave Ramsey has people call in and announce they are debt free. It is always the same story. When they start out, are mountains in debt and they are making a very little money. Then they make the commitment to pay off their debt, and stick to the program for years. Somewhere along the line, a miracle happens and they end up getting much better paying jobs or come into a lot of money, and are then able to pay off huge amounts of debt in less than 7 years. The miracle happens only when you make the commitment and stick to it.
The last idea is to get financial software. I use YNAB. Not only can you access it with your computer, but, it has an app for your phone. I really like it because it approaches money management from the point of view of getting out of debt, developing an emergency fund and making every dollar you have, have a job to do. (https://www.youneedabudget.com/)
Charles M recommends the following next steps:
Mazen T.’s Answer
Robert Carthum, PMP
Charles gives good advice. Regardless of what strategy you use it will come down to sacrifice. Do you buy that shirt or not? Do you go to the movies or not? Do you eat out or not? Loans require a minimum, usually monthly, payment. If you want to pay the loan off faster then you must pay more money each month. How to come up with the extra money is the hard part.
When I was a grad student I was a teaching assistant for a professor which earned me a tuition waiver and a paycheck each month. Scholarships also help with tuition.
Most importantly, live within your means. Only purchase what you can pay for and don't use a credit card unless you can pay it off at least once a month.