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How to Pay Off 100k in Student Loans FAST

One of the major things that stops a lot of us from enjoying financial freedom is the burden of student loans. Having to lose a huge chunk of change every month can take a huge toll on your bottom line and your standard of living, so paying off your loan as soon as possible is key.

With interest accruing every month, the longer it takes for you to pay off your student loan, the more money you’re going to have to spend. It sucks, but that’s how the current student loan system works. 

So, how did I pay off 100k in student loans fast, while building a business and moving overseas? You know that I’m not going to gatekeep that kind of info!

The average time to pay off student loans in the US is around 20 years to pay off but many people can take as long as 45 years to get rid of their loans. With that amount of additional interest, it’s no wonder that it snowballs out of control. 

Although standard loan terms tend to be 10 years for a 100k student loan amount, paying around $300 a month, it’s rare that people can pay that much consistently fresh out of college. So, how long does it take to pay off 100k in student loans in my case? I paid off 100k of loans plus the interest in just SIX YEARS. And this is how I did it. 

1. Make a List of All the Student Loans You Have

First things first, you can’t pay off what you don’t know about. Knowledge is key. It’s time to get organized.

You need to make a list of all the student loans you have. You’ll want to detail your interest rates, contract, and repayment terms, and have them all in one place. This includes the kind of loans that you have. They might be

  • Federal subsidized, 
  • Federal unsubsidized, or 
  • Private student loans.

I’ve created a budget dashboard for beginners to help you track these amounts and see how much you can afford to repay each month. While you might want to get rid of all your loans within a couple of years, if your income isn’t growing, and your expenses are spiraling, those extra loan payments are going to fall by the wayside. 

Once you have all your loans outlined with the different companies, lenders, and rates, you can start building a plan of attack. 

2. Organize Those Loans by Interest Rate

If you have multiple student loans either from different providers or if you have an undergraduate and postgraduate loan, you’ll need to organize them to make them easier to handle. 

a laptop and a cellphone on a table

You can consolidate your loans into one package so that you only have one payment date, interest rate, and one big loan to tick away at. This can have its benefits, but it all comes down to whether you can get a beneficial interest rate.

This also only really works if they’re the same kind of student loan. Subsidized federal loans and private student loans are unlikely to go together. 

If you do have multiple loans, you can organize your loans by interest rate. This is important because you want to pay off the loans with the highest interest rate first. It’s the interest that’s the killer so you want to get rid of those high interest rates quickly.

3. Choose a Payment Method: Avalanche vs Snowball

Basically, I was able to pay off my student loans by first choosing between Avalanche and Snowball debt repayment strategies. These are pretty simple concepts to get a handle on and I’ve actually created a debt repayment calculator to help you work out which strategy is right for you. 

Avalanche repayment strategies work by clearing the high-interest-rate loans off first. This can often cost more in the short term but stops costly interest accruing over time.

Snowball repayment strategies work by ticking off the smaller low-interest loans out of the way. The benefit of this strategy is that you can completely clear some of your loans out of the way quickly. This leaves you with one larger or higher-interest loan to focus on at the end. 

Honestly, both strategies have their merits and different strategies work for different people. Snowball strategies seem more accessible because, with the same repayment, you’ll see the actual loan value going down rather than picking away at the interest.

However, it’s always good to get rid of the high-interest loans as you’ll end up having to pay a lot more overall if you let them go on for too long. 

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4. Find Loopholes That Allow You to Pay According to Your Income

I used the income-driven repayment loophole to manage how much I owed every month. As I live and work in Germany, and was in the UK before that, I was able to use the foreign-earned income exclusion and the income-driven repayments plan to basically owe nothing to the Federal loan provider. 

a person holding paper bills

The foreign earned income exclusion is a policy that prevents US citizens living and working abroad from being taxed twice by the IRS. Essentially, throughout the year, I automatically pay income tax in Germany because it comes out of my monthly paycheck.

So, when the US IRS tax season comes around, if they tax me on my foreign income, I’d be taxed twice. Not good at all. So, if you can be eligible for the foreign-earned income exclusion, you essentially don’t have to pay IRS tax on your foreign-earned income. 

If you combine this with the income-driven repayment loophole, you end up not having to pay your federal loan provider anything. After 20-25 years the loan gets wiped.

With the income-driven repayment program, the repayment amount uses your IRS-reported income (which is now much less due to the foreign-earned income exclusion) to estimate your monthly repayments. This can be $0. 

Of course, the less you pay on your loan, the longer it’ll run for and the more interest will accrue. However, it means that you can either focus on other student loans that you have through the Avalanche or Snowball method, or you can save money privately in high-interest earning accounts and pay off larger lump sums. 

It’s worth noting that every student loan is eligible for income-driven repayment (IDR) schemes, so you’ll want to check out studentaid.gov to see if you can use this loophole. Of course, having the combination of foreign-earned income exclusion and the IDR scheme is pretty unique, but if you’re a US expat, it’s well worth looking into. 

5. Move to a Place with a Lower Cost of Living

When I started paying back my student loans in 2017, I couldn’t afford to spend a lot each month. I was paying around $200 a month and that barely covered the interest! Realistically, when you’re fresh out of college, you’re taking the first job that comes your way and they’re often in expensive cities with high costs of living. 

a flag and a building

It wasn’t until 2020 that I started paying off huge amounts and putting in lump sums thanks to the lower cost of living in Germany. Of course, I also wasn’t spending half as much as usual due to the lockdown, and I was fortunate to be able to work remotely and safely during the pandemic. 

Honestly, if I was still paying the astronomical rent rates in the US or in London, this would be pretty much impossible. You need to lower your cost of living so that you have more disposable income to pay off your student loans. The easiest and biggest way to do that is by moving somewhere cheaper.

If you can also maintain a high-paying remote job or a corporate position from overseas and get that higher rate while paying a lower cost of living, this is the beautiful sweet spot.  

6. Take Advantage of 0% Interest Rate Aid

One of the most useful things that I took advantage of was the 0% Interest Rate Aid. I was able to take advantage of 0% interest rate aid during the pandemic, which really helped speed up my repayment schedule.

As I was still working from home and not spending money on going out or traveling, I used that extra disposable income to pay off huge chunks of my student loan.

So, I was able to pay off my student loans and it wasn’t growing during this time due to the interest freeze. This made it a lot more manageable to pay off, and you can see my payment outline below.

Payment Option

7. Make More Money & Increase Your Payments

On a basic level, if you don’t have more disposable income, you’re not going to be able to increase your payments or knock lump sums off your student loan debt. It’s a pretty basic principle, but it’s worth emphasizing.

Of course, repayment loopholes around tax and interest rate freezes during the pandemic helped a lot. Moving to Germany, which is a lot cheaper than when I was living in London or the US, also helped me save a lot of money. However, savings only go so far, you also need to increase the money coming into your accounts. 

Across all my different student loans, my goal was to try and pay at least $1500 a month if not more when my budget allowed. This might sound like an insane number, but I did this by making more money in my full-time career. 

This honestly was not easy. In order to minimize my outgoings and tax burdens, I created a business to cover all of my tech and travel expenses. What this meant is that my actual salary working for a corporate international business was entirely my own and I could contribute a lot more to my loan repayments. 

In terms of my salary, I doubled my income in three years to 100,000 Euros by jumping around two different positions at the company and getting performance-based bonuses. I’d strongly suggest making this a priority as it’s the main way that you’re going to be in a position to pay off your student loans fast. 

Negotiating Pay Rises

So, if you don’t want to use your free time to build a business or push a side hustle like I did, you’ll need to work at negotiating pay rises. One of the best ways to do this is to take an audit of your skills and work out what they’re worth. 

This way you’ll either find upskilling gaps that’ll take you to the next level, or you can apply elsewhere and use the job offer to leverage a higher wage at your existing position. Knowing your worth and especially your worth to the company if they’d have to pay for recruitment and training costs is crucial. 

You can also move to different departments within your company. Most companies would much rather hire internally to save costs and hassle, so keep an eye on the internal job boards and project-based opportunities. 

You’ll also want to keep a running tracker of your successes, new skills, and big wins. When the time rolls around for annual reviews and sit-downs with your manager, you can use these to negotiate pay increases or at least outline a performance-based bonus system for upcoming projects. 

Building Businesses

If you want to build a business or make money off your side hustle, this is a great way to generate more income. The other big benefit, depending on how you set up your business, is that you can take advantage of some tax benefits that mean you’ll be paying less for certain items, trips, or services overall. This extra budget can ultimately go towards paying off your student loans. 

Of course, building and maintaining a business of any kind demands a lot of your time and energy. Make sure you’re prepared. If you don’t put the time and effort in, you’re probably not going to see the returns that you need to pay off your student loans.

This is what I mean when I say that making money was my full-time job. I’d come home from my 9-5 and put in hours on my tech and travel business. It was a lot and it was definitely stressful, but it’s ultimately worth it to get that financial freedom and independence now that my student loans are in the rearview mirror! 

Passive Income

Another way of building wealth and increasing your monthly payments is by utilizing passive income. It’s worth noting straight away that passive income and investments are not eligible for the foreign-earned income exclusion policy, so you will have to pay IRS tax as well as any local tax systems that are eligible.

So, for me, passive income is all about creating content, courses, and downloadables that work for me in the background. These items can be actively promoted, but if they’re on the right platform, customers are going to find them and use them.

My blog and my YouTube channel are also monetized which means I make ad income from both of these sites each month. Of course, this took a lot of time to build up, but now, it’s largely passive income.

You need a good amount of content and a relatively good reputation to attract bigger monetization programs like Mediavine, so it’s not a quick fix, but it can be built up within a few years.

Similarly, you can use affiliate marketing to make money off your content. This means that you add sponsored links to your content that’s relevant to your brand or that you support and they’ll pay you a commission per purchase.

This wasn’t the case for me, but if you have a property or room, you can also become a landlord and earn passive income that way. Of course, you can’t really be in your house if this is the case, so it only works if you have a second property or if you’re moving overseas. 

Investments

Again, this is a taxable form of semi-passive income, but it can be a big moneymaker. There’s no point making more money if it’s not working harder for you. High-interest savings accounts and normal taxable accounts can help you earn a lot of money just by sitting there over time.

A S&P 500 index fund or ETF is a great way to generate passive dividends or interest at an average of 4 -10% per year. So if you start adding money into a normal taxable brokerage, you can use whatever interest or dividends your paid to pay down your loans as well.

If you hold off from selling for longer than a year, you can significantly reduce your tax thanks to long-term capital gains tax.

Savings accounts that pay monthly interest over annual interest are well worth checking out. This means you can easily track your interest amounts and if you need to pull out money to repay your loans before the year is up, you won’t lose a ton of interest. 

Please be advised that you may have to pay income tax on this income.

Of course, investments come with risk, so talk to a financial advisor if you’re unsure about the tax implications, or stick with easy-access savings accounts that often have fewer fees and are more simple to deal with. 

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What Is the Average Time to Pay Off Student Loans?

So, the average repayment length of a student loan is 20 years at this point. Some people take up to 45 years to fully repay all of their student loans. However, if you’re eligible for an income-driven repayment plan, the loan amount does get wiped between 20-25 years after you complete college. 

By comparison, I managed to pay off 100k in student loans in just six years. It wasn’t easy and it took a lot of focus and sacrifice. But it is possible. Even if you split the difference between my timeline and the average, you can pay off your student loans in around 13 years, which is still fast!

Of course, this timeline depends on the loan amount that you’ve taken out, the interest rate, and your financial situation. If you can get a handle on the interest, you’re going to be well on your way to getting rid of your student loans and getting to keep all of your hard-earned cash for yourself!

How Much Interest Do You Pay on 100k?

So, this largely depends on your style of loan, the provider, and your education level. For an undergraduate student loan, the average interest rate is 5.5%. That increases for postgraduate which has an average of 7.05% and a doctorate has an average of 8.05%.

In total, I paid about $130,000 for my loans when the interest was included, and that’s taking into account the short time frame. $30,000 of extra repayment in just six years is a lot of money. So, the longer it takes you to get your student loan repayment game plan up and running the more money you’re going to have to pay overall.

Remember, this is compounded interest, and that’s how the total amount spirals out of control over time. So, to make the maths easy, say the interest rate is 6%. On a $100,000 loan, you’ll have a total of $106,000 to repay after year one. This rises to $112,360 in the second year, and $119,101.60 in the third year. 

With this in mind, even if you pay $6,000 to your loan repayment in the first year ($500 per month), you’re not touching the loan itself, just the accrued interest. Depending on the time of year, you might knock a little bit off your total, but you need to outpace the interest by quite a lot to cut down your total loan amount. 

That’s why I recommend a combination of lump sum payments and regular payments. You can keep your regular payments low or at the minimum, which is around $200 on average, and then use the money you’re saving to pay bigger lump sums to cover interest spikes. 

So, have you taken steps to pay off your student loan debt in full? What’s been your favorite tip in this guide? Let me know in the comments below! 

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