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How to pay off $30,000 of student debt in 3 years

Want to obliterate your debt? Take this crash course.

By Money Staff May 5, 2014 12:28PM

This post comes from Hal Bundrick at partner site U.S. News & World Report.

U.S. News & World Report on MSN MoneyIf you are tired of having student loans hanging over your head, welcome to the crash course for debt elimination. Our syllabus is simple, the course objective has been plainly stated and grading will be based on a pass/fail basis. Let’s begin.

Mortarboard , diploma and money © Comstock, Getty ImagesWhat’s the rush?

You may be wondering why we have defined such a short period of time to pay off a substantial debt. After all, The Institute for College Access & Success says the average student loan balance was $29,400, which is based on the latest data available for the class of 2012. With a supersized debt of that magnitude, you need a lot of time, right? Yes, but a lack of urgency can encourage complacency, and with time the debt will grow even larger.

This may light a fire: Calculate the amount of interest you will pay by only making minimum payments on your student loans. If you can’t put your hands on the statements for your loans, check the National Student Loan Data System to retrieve your loan information.

It’s quite likely you’ll be surprised by the big number you discover.  You might even find you’ll be paying as much interest on your loans as the original principal amount.

Putting a short fuse on the debt bomb will inspire a significant financial turnaround. Once you retire the student loans, imagine the boost to your cash flow. You might even feel affluent for a change. With those monthly payments gone, you can focus on buying a home, saving for retirement, paying for a wedding and all the other good things in life. No student loan debt means you can kiss Sallie Mae goodbye. You’ll feel like a different person, with less stress and real financial freedom.

Debt limits options
While the task may seem insurmountable, consider the Harvard University alum who paid off $90,000 in graduate school debt – in seven months. Joe Mihalic is a supply chain manager in Austin, Texas now, but three years ago he was deep in debt and desperate to get out.

“I simply felt an overwhelming feeling of being trapped,” Mihalic, author of “Destroy Student Debt: A Combat Guide to Freedom,” wrote in an email. “I felt that the debt was severely limiting my options, and I realized I would never be truly free unless I became debt-free.”

By committing to a frugal lifestyle and squeezing every bit out of his annual salary, which was less than the balance on the loans, Mihalic accomplished his goal of rapid debt reduction.

“I didn't start feeling weighed down by my debt until my self-esteem finally reached a level where I didn't need to constantly spend money to feel good about myself,” he writes. “At that point, the negative feelings associated with my debt were greater than the positive feelings associated with consumption. Only then did I seek out a life of frugality and living below my means.”

A cash budget is key
And consider Jackie Ritz, a Paleo diet aficionado from North Carolina who blogs at She and her husband paid off $50,000 worth of debt in 10 months.

“We sat down one night and wrote down all of our debt, including our student loan debt, which was the most baggage,” she wrote in an email. “My husband had carried his student loan debt the past 15 years, and we wondered how long we were going to let that debt keep following along with us. So in order to have financial freedom we knew we were going to have to be more aggressive in paying the student loans down and turn our minimum payments into the maximum amount we could manage in our budget.”

Ritz adds that sticking to a cash budget was the key.

“During this time, we made a budget for all our expenses and used the ‘envelope system’,” she explains. “You place the week’s worth of money in your envelopes and when the cash is out, it's out! This was probably the hardest part of it all since we were so used to swiping our debit or credit card without even thinking about a budget.”

A prerequisite

There is a prerequisite to this course. It is Paying Off Your Credit Card Debt 101. As much as you would like to rid yourself of the burden of college debt once and for all, if you have substantial credit card balances, they must be attended to first. The interest rate you pay on credit card debt is likely to be twice as much – if not substantially more – than what you pay on student loans.

When you do tackle the student loans, pay off those with the highest interest rates first. That will save you money and allow each payment to reduce more principal. And before sending in a substantial payment to a lender, call first. Ensure the payment will be applied to the loan's principal – not to interest.

Extreme debt reduction
In order to abolish $30,000 of student loans within three years, the payments will total $923.57, based on a 6.8 percent interest rate for 36 payments. You can nerd the numbers for your own debt situation. The strategy will be a combination of increasing your monthly income while reducing your monthly expenses to come up with the extra cash.

The most common tactics used by extreme debt reducers include:

  • Reduce housing expenses by downsizing, moving back in with the parents or finding roommates. Housing is commonly the biggest monthly expense and the cutback that can provide the biggest boost to cash flow.
  • Create a strict budget, and stick to it. Cut out any unnecessary expenses, and look for ways to save money anywhere you can. Quit the gym and work out at home, stop buying bottled water, eat out less, etc.
  • Get a side job or two. Consider getting an off-the-books job for extra cash: deliver pizzas, bartend, waitress, etc.
  • Milk the miles from your existing car instead of buying new. Or if you’re part of a two-car household, sell one and consider becoming one-car commuters.
  • Reduce recurring expenses. The Ritz’s canceled their cellphone plans and signed up for prepaid phones, which lowered their $160 cellphone payment down to $60 per month.
  • Sell stuff you don't need for cash. A few ideas include cars, furniture, dishes, toys and more. You can host a garage sale or sell your items online on Craigslist or eBay.

Debt reduction is more a matter of commitment than circumstance. The timeline you choose depends on the strength of your determination.

More from U.S. News & World Report

May 5, 2014 2:03PM

They recommend getting an "off the books job".


So, in other words become a tax evader.


Nice MSN, nice.

May 5, 2014 2:23PM
Harvard Alum - your before tax annual salary was LESS than your $90,000 student debt, yet you paid off your loan in 10 months.  Math 101 - you had substantial other assets that you tapped to pay off your debt.  You are sorely lacking character to admit that frugality alone was the key - 99% of others couldn't do what you did!  Guess where the silver spoon is.
May 5, 2014 2:54PM
None of this is rocket science despite the voodoo economics quoted for that Harvard graduate.  You pay down debt quickly by simply paying more than the minimum payment every month.  How long you want to drag out that debt is based on how much extra you want to pay or can pay towards your debt.  I paid my $85,000 30 year home mortgage off in 8 years.   I bought one new car during the past 35 years.  That was back in 1978.   I still have it.  I still live in the same home I bought back in 1992 a couple years after completing college.  But, most of all, I enjoyed being debt free for the past 13 years!   What did my  frugality get me?  Early retirement!
May 5, 2014 4:48PM
First get an extra job, eat beans and rice until the debt is paid in full...... You will be glad when it is paid off and so will your friends if you still have any left!
May 5, 2014 7:20PM
hahaha. This article is too funny! I like how their telling YOU how you should get out of debt. Instead of telling us how the government keeps us in debt. I love paying $4.24 gallon of gas, I love being taxed 20% of my income. I love being taxed 30% on my bonus. I love how every year the cost of living goes up 4%. I love how the medical industry charges high costs even if you have insurance. I love how everything goes up in price and your income stays the same. Like to see this Harvard Grad do the same thing living in southern California. I doubt he could do it. I would like to see what he was paying for rent in Texas? $400 a month? probably. Not everyone becomes a Manager out of school. This guy is a douche for writing a book about it. 
May 5, 2014 2:27PM
Student Loans...just another way the Fed Govt is "Helping You"....( Sarcasm )
May 7, 2014 10:59AM

this site just reguritates the same info and suggestions for paying off debt.


to cut expenses I:


-unplug anthing not in use

-sleep 7-8 hours a night to get a good nights sleep, this keeps me healthy, less likely to miss work or make a money mistake, I mostly drink water.

-I switched to less expensive shampoo, mainly $1 shampoo and conditioner, my hair is better than ever, the old stuff was $60 a bottle.  I like VO5 Clarifying (green bottle) or the Strawberry one.

-my new favorite store is Dollar Tree, I search and find made in US products and ONLY buy what I really need.

-when the weather premits I line dry clothes, quilts, sheets etc. (not towels, they turn into sandpaper)

-I make my own cleaning supplies.

-I stay out of department stores and avoid shopping as much as possible.

-I keep my clothes classic ands simple, I avoid "trends", I no longer buy fashion magazines!  I buy good quality tennie shoes (gym/walking) since that is what I wear the most.

-I will wear a pair of jeans for two weeks before washing them if they don't look dirty, when I get home from work I change out of my work clothes and hang them and switch into "house clothes" usually yoga pants and a tee, I wear slippers instead of socks around the house, that wears out socks faster.

-I am usually given a lot of chocolate around the holidays, I double bag it and freeze it.  Good when you want it and good for cutting up to bake with.

-I shop at the local bread outlet, two days a week it's half off.  I freeze bread or buns for later.  They have multi-grain bread a pita too.

-get rid of cable, your local library has DVDs for movies and TV shows, almost all public libraries belong to a library network, they can order anything for you to check out, larger communities have an online system to put stuff on a wish list, when it comes in you will get notified it is held for you to check out.  Buying books full price is stupid, check it out for free, or buy it at a huge mark down at library book sales, used book stores, thrift shops or garage sales.

-I pick up pennies and all other coins I find.


May 9, 2014 10:49AM

Ok... none of this is helpful.  Moving in with your parents?  What if your parents don't want you moving in?   Selling your stuff for cash?  Who says anyone else wants it.  Garage sales for the seller are huge wastes of time.  You will rot your weekends while people sift through your stuff, sniff at it and waltz off...usually making a snide comment in the passing.

Suze Orman shows she's out of touch.  These are Marie Antoinette-Let them eat cake-esque obtuse "How To" points.

Want to pay your bills down?  Forget out the hipster bars and fun on the weekend with your friends.  Get over your shoe habit.  Get a second job and use that money exclusively for paying down your debt.  That's it.  Living with your parents is not the answer but living in a cheaper apartment is.  You don't need a brand new car and if you live in an area that has superb public transportation like Portland, Seattle or the Bay Area, then you don't even need a car and you don't need to be paying astronomical downtown parking fees

Get over yourself and your wardrobe and purchase classic pieces that can be worn year to year and wear them.  Forget about today's trends.  You don't need uber tight pants, slutty shoes and huge designer handbags.  If you do, then start trolling Ebay and Craigslist and stop thinking you're too good for second hand.  Get over your Starbucks habit.

Is any of this fun?  No, in fact is kind of sucks.  But you're the one in debt and you're the one who has to pay it off...not your twentysomething friends at the cool, hip nightspot.

May 11, 2014 12:14PM
These numbers are incorrect. The only reason students on average are coming out 30k in debt, is because they DO NOT take into consideration what parents cosigned on as well. This is just the stafford loans that were taken out, and most students are graduating in 5 years and not 4.  I am 90k in debt, just recently payed off an 8k loan, about to pay off an 11k loan. And than it leaves me with 8 and 63.  So yes I was roughly 30k in debt with 8, 8, and 11, but what about the rest my mom signed on. I pay those, not her........and yet these figures are not even considered into the math.  Even at a local school, ROWAN U, the average student will come out 80k in debt. GET IT TOGETHER MSN. Get the FACTS.  My parents signed, but it is only their responsibility if i become irresponsible. Yet the chairman of most of these schools are making RIDICULOUS salaries, FOR WHAT?  So that the price of school continues to go through the roof, and be unattainable to the middle class, while the lower class and foreigners get educations for free, or off the back of the taxpayers.........the middle class.......and the rich can afford it anyway.
May 11, 2014 12:15PM
and if I pay these loans with an OFF the BOOKS job........won't UNCLE SAM come chasing after me when the IRS finds out I have payed off loans with money made that had no taxes payed on? Great advice MSN.
May 5, 2014 4:06PM
May 11, 2014 11:17AM
All Education should be free,to those that meet certain standards we waste enough money on wars (we can't win)pork barrel, Forigh aid to our so called friends. Why burden someone with a high interest loan farm out by the Goverment.These people are our future ,we are leaving them with enough of trouble.Sad case On the bright side Happy Mothers Day  to all Repulican,and Democrat Mothers(remember God is a Women ) Good  Day
May 11, 2014 2:21PM
Get a 2nd job? Why didn't I think of that?!? Great advice, I just LOVE these informative articles with ideas I never thought of on my own.
May 5, 2014 3:51PM
They did not have student loans in my day. Guess I was Lucky. I did not have a credit card until the company I worked for got me an American Express Card for travel. I liked my old paid for cars & boats. If you were real smart you got a scholarship award in my day. These college grads worked for me and thought they should be in charge. One said "What do you expect from a High School Grad." Another said " Your education & experience is worth more than any degree." I did have certification certificates on just about every peace of equipment & licenses. Student loans can be a great asset for the right degree in a field than has big demands in business or a huge debt for a degree in a field not in demand. $30,000 is a 3 night stay in a hospital today. Wake up Call.
May 11, 2014 11:56AM
  Get rid of that student loan as quick as you can by what ever means necessary cause the only college friend that will keep in touch after you graduate is Fannie May. 
May 11, 2014 12:33PM
When I went to college. People did not all these fancy equipment. When a person graduates. They do not need text or internet on their phones. A few hundred minutes a month is more than enough. Drive your old car if possible. If not buy the cheapest car for your needs. The only extras you need are air and heat. No CD just radio. If you eat out stay out of fancy restaurants and coffee shops
May 11, 2014 10:03AM

Off and On the Books Jobs...

Gotta Love It...Who knew paying off a student loan

could be so easy.  I recommend add another job to

the on and off the books job in between...just saying.

May 11, 2014 5:30PM
This seems like such an "easy" solution...until it is time to get a job and try to pay them back! When I went to school, I wanted to become a my state teaching was paying very I thought, no big deal, I will pay these off as soon as I am out of school with a "real job". Well, that real job never came. I could not find one of these higher paying teaching jobs and quickly the interest has added up! Now, 7 years later, I owe 175,000.00 for loans that were originally 100,000.00 and I am earning around $24,000.00 a year as a charter school teacher (after medical and taxes). It is impossible for me to pay these things back and the interest and late fees continue to grow. There is no relief in sight and I wish I would have never even went to school. Honestly, if you cannot afford college...just don't go. I know it sounds like bad advice...but it will keep you debt free. 
But, But, But that would mean you would actually have to pay on the debt. Who do they think they are saying some one should pay off a debt!!
May 5, 2014 5:41PM
What  most people are so naive about is that the majority of unpaid loans are to the thousands of 'welfare moms' who each year attend overpriced vocational schools for careers that end up paying such low wages (i.e. Medical Receptionist) that they end up defaulting and continue to remain on public assistance anyhow. Enough already. Get a job. Get two jobs. Pay for your kids. I'm sick and tired of doing it!
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