How I Paid Off $85,000 in 16 Months
On New Year’s Day of 2018, I put into action my biggest goal yet: I wanted to pay off $85,000 of student loan debt by the end of 2019.
I knew right out of the gate that this was a rather ambitious goal, and quite frankly I had no real game plan to achieve it, I just knew that I was capable of doing it.
Sure enough, by mid-April 2019, I was officially free of my student loans! I not only completed my goal, but did so with 8.5 months to spare.
I know I am not alone in having massive, overwhelming student loans (or now, had!). According to StudentLoanHero.com, as of 2019, Americans have $1.56 trillion of student loan debt spread out across 45 million borrowers for an average outstanding balance of $35,000 each.
So how did I even begin the journey to tackling my student loan debt? I’m going to give you all the details I can here in this article.
If you feel like you’re drowning in a seemingly insurmountable amount of debt and are overwhelmed by the idea of facing it head on, I hope you can use some of these strategies to finally lean in.
How I Paid Off My Student Loans Quickly
Before we dive into tactics, let’s look at the strategies we can use. There are two options that most folks employ: the brawn method and the brain method.
The brawn method involves paying down your student loans with brute force. Pinching pennies at all costs, and applying all savings directly to loan debt before considering any other investments. While the brawn requires more discipline and less thought, it ‘s also a labor-intensive process that requires a lot of sacrifice.
The brain method is the one I chose and definitely the one I recommend. Before you go mindlessly throwing all your money at student loans, the brain method involves developing a game plan that could empower you to pay off your student loans much quicker.
As Abe Lincoln once said, “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”
You’ve got to take the time to sharpen your axe!
What assets could you invest in that would yield a much greater return over the 4 to 6 percent interest savings from paying off your student loans? There are plenty of avenues to explore.
Maybe it’s stocks? Bonds? Businesses? Real estate?
Whatever makes the most sense to you, start purchasing those assets. Once you begin to accumulate passive income through those assets, you are then prepared to start making much larger paydowns on your student loans, therefore expediting the process.
Up next, I will explain to you exactly how my thought process went, the tactics I put to use, and how it all played out in the end. The first and hands-down most game changing tactic: house hacking!
Creating Passive Income Through House Hacking
Let’s dive into where my head was at back in early 2018. I was in the middle of my first house hack, I was on a mission to pay off my student loans, AND knew that I wanted to purchase two more properties to house hack in the next two years.
It was obvious that paying down 6 percent interest loan just didn’t make sense when I had experienced firsthand the 100%+ returns from house hacking. Ramping up multiple house hacks while holding off on bigger loan payments would allow me to save exponentially more.
Not only would I make passive income, but I would also be demolishing my biggest expense (rent) while building equity in a market that had been continuously exploding year afteryear.
Naturally my first thought was that it would make the most sense for me to pay down my student loans with these rent savings, but ultimately this wasn’t going to be effective.
I refused to allow my student loans to get in the way of my house hacking journey. The returns from house hacking have been 10 to 20 times better than that of paying down my student loans. Therefore, I continued to make those minimum payments through the first half of the year until I closed on my second house hack in June 2018.
So then I had two properties, both of which were making me $1,000 over the mortgage every month while simultaneously living for free. I took all of the money I made from my properties and put it directly into a savings account dedicated to funding my third house hack purchase.
House hacking is fool proof for anyone looking for financial freedom, especially if you are young, single, and motivated. It is a proven strategy: people consistently achieve returns well into the 100 percent-plus range.
Increasing Your Salary
Next, I looked at how I could optimize the income I was making at my W2 job. This is the second most important strategy. The ideal scenario when working a W2 gig is actually having two components of income: a base pay and commission.
To increase base pay, begin with crafting a proposal to your boss presenting why you are worthy of a raise. Of course, don’t just walk into their office off the cuff. Present your boss with a strong case as to why your work is should be earning more, and be prepared to wait it out if you do not receive an immediate “yes”.
We could write a completely separate article on how and why to ask your boss for a base pay raise. Here’s the short version: the best place to start the process is sluething what the average pay is for someone in your role at other companies and in your geographic location. My favorite source for this is Glassdoor, but there are many others available.
If you are making what could be considered below average, you can likely negotiate with your boss using statistics and make a strong case as to why you deserve a raise. If you are making what is considered average, take a look at your additional accomplishments and credentials to build your case from there..
Now that we have addressed raising base pay, let’s discusscommissions. Commissions are a variable dimension of your W2 income that directly correlates with your work performance.
Real estate agents are a great example. They receive a percentage of every deal they transact. The more deals an agent ixloses, the more they get paid. The downside to being an agent is that there is no “base” component to their income.
If you already have commissions implemented in your pay, fantastic! Work your butt off to make the most of these.
If you don’t currently make commissions, this will involve another trip into your boss’ office. Get curious and creative: ask if there is any way commission pay can be integrated your current position, or if there is another position you may be a good fit for.
A great approach is inquiry: how can you help them increase the company’s profits? Take the time to explain to your boss that if you successfully complete extra value-add projects, you would like to be compensated in the form of either profit share or be awarded a one-time bonus.
If you are thinking that there is no way this could happen in your company, I suggest you at least give it a shot. If you know you can add $100,000 to your company’s bottom line, do you think they will have a problem paying you $3,000 of that? Or, awarding you a $25,000 to $50,000 spot bonus for increasing their revenues??
In the first scenario, they are paying $3 for every $100 they receive. If someone offered me $100 in exchange for $3, I would say YES every time! Your boss didn’t achieve their position by missing the value of great deals like this.
If a perpetual profit share isn’t attractive to you, the same idea goes for a spot bonus. By giving you $25,000 to $50,000 to create $100,000 of value is a return of 200 percent in the first year and infinite thereafter. Again, who wouldn’t jump on this!?
How I Boosted My Salary
In my workplace, I used both: raising my base pay and working commissions. I successfully increased my base salary by 30% over the course of a single year, and also successfully executed two large projects outside the scope of my job description resulting in additional pay. Using these tactics to my advantage was essential to my being able to pay down a massive chunk of student loans in a short period of time.
If it’s clear that there is no wiggle room for negotiation in your current position, I would strongly suggest looking for a new place of employment. That’s what I did. I chose to leave my cushy job in Silicon Valley for a lower initial base pay with a company that would give me room to grow. In my first year, I made less money than I would have had I stayed with my former company. But in my second year, after implementing the aforementioned tactics, I made over 50 percent more than I would have at my previous gig.
How to Generate Even More Income
Taking on Side Hustles
Do not underestimate the power of the side hustle. House hacking is what worked for me. It’s relatively passive and quick once you get it all set up, while increasing your salary and adding commissions increases your dollar per hour income during the typical 40 hour work week.
And perhaps the biggest bonus: house hacking still leaves you time to earn money outside of your full-time job. Enter the side hustle.
In these days of the sharing economy, there are a bajillion side hustles for anyone and everyone. Whether it’s driving for Lyft on a Friday night, walking dogs during your lunch break, or freelancing when you get home at night, there is always another way to bring in some extra cash.
My Side Hustles
So, which side hustles worked best for me? Turo and Airbnb. My favorite mode of transportation has, is, and always will be my bicycle. I rode my bike to work almost every morning, which left my car sitting in the driveway idly most days.
However, I do still enjoy having a car for weekend adventures into the mountains. So rather than selling my vehicle, I realized that I could to rent it out on a site called Turo during the work week. This allowed me to make an additional $400 to $700 per month for about 13 months.
My second side hustle was what is known as Airbnb arbitrage. My friend had a condo in downtown Denver that he couldn’t seem to rent for his ideal amount, so he in turn rented it to me.
I paid him exactly the rent he wanted, and then turned around and offered the place out on Airbnb. I then made over $10,000 over the course of the year with this strategy, and my friend had a great tenant who paid timely rent, all the time. Win-win.
It’s really that simple! Those are the strategies and tactics I employed to pay off $85,000 of student loan debt in 16 months. Everything I have done to date is repeatable: house hacking, increasing W2 pay, and taking on side hustles—all of which are strategies just about anybody can do.
Now I’m not gonna lie—it won’t be easy, and it won’t be quick. It will require sacrifice, discipline, and responsibility. But if your average small-town, middle-class guy can do it, so can you. No excuses!
In the end, I am living proof that it is absolutely worth it.
Remember, “Nothing in life worth having is easy to attain.”