What is the Best Way to Pay Off Student Loan Debt?

The Debt Guy contacted me with this problem:

I have currently taken some steps to attacking my debt situation. I have accrued $120,000 in student loans and my own personal finances are indebted. I have recently overdrafted my account severely, and I have about $440 on my credit card. I still owe $2,500 on my car. I also owe my personal student account about $400 otherwise I wont have enough for rent in a few months. I am taking some steps to fix this such as eating out less often and keeping better track of my finances. In order to hold myself accountable I started a blog where I am keeping anyone who is interested updated on everything I am doing. I am hoping that your insight will give me some help and help my readers as well.

Patrick said:

Hi Debt Guy,

It’s good to hear you are making some changes in your life, otherwise you may find yourself in serious financial trouble. I cannot claim to be a financial expert, but I can direct your toward one. About a year ago, the M-Network profiled “Dave Ramsey’s 7 Baby Steps.” The first step is recognizing that you need to make changes in your life, and often that is the most difficult step to take. I’m happy to see you have done that.
But the work is just beginning. Once you make the decision to get out of debt, you need to get current on all your bills, and that may mean you have to make some drastic changes in your lifestyle. Try trimming expenses to the bare minimum – brown bagging lunches, walking or riding your bike instead of driving short distances, carpooling, shopping at thrift stores, finding cheaper rent, etc. You should direct the money you save toward getting current on your bills and even paying extra if possible.

In addition to trimming expenses, you can also try increasing your income by working a part time job, consulting, tutoring, or other forms of alternative income.
On paper, Dave Ramsey’s process is easy, but that does not mean it is simple. It will require hard work and sacrifices on your part. But the reward is the freedom that comes from having an emergency fund in the bank and not living paycheck to paycheck. Good luck on your journey to debt freedom!

Pinyo adds:

The good news is that you seems to be well aware of your financial situation. And aside from the student loans, your debt is not too bad. The bad news is that your total student loans debt is huge — that about the size of my current mortgage. I think what’s important here is to set some realistic financial goals; particularly how much you can pay down your student loans.

There’s no need to sacrifice everything to pay your student loans down as fast as you can, but you should have a realistic goal of paying this down. For example, if you want to pay this down in 15 years you will probably have to pay back about $1,300-$1,500 a month (depending on the interest rates). Once you have this number figured out, you can see how much is left over for other things. As long as you do not spend more than what you have remaining, you should be okay. As your earning grows with time, you should consider paying down your student loans faster or start saving for retirement.

Although your student loan debt is big, I am sure you got a good education out of it and positive that your earning power will eventually make up for all that you’ve invested in your education. Good luck!

My own take:

I think Patrick and Pinyo have given you some very good advice. I also commend you for starting a blog to hold yourself accountable. I have found that being accountable to my readers impacts the decisions I make about how to spend my money. You just need to make a commitment to be honest when you make mistakes. Those “I messed up” posts are hard to write, but they’re the best thing to get you back on track.

You also might want to think about making a realistic budget. This will help you make sure that your expenses don’t exceed your income. You’ll have to define your needs versus your wants and trim the expenses for your wants until you come up with a realistic plan for spending your money that includes debt repayment. Without a plan, it’s easy to accidentally overspend and wind up deeper in debt.

Best wishes to you! If you make a serious commitment to get out of debt, I know you will succeed!

Do you have any advice for The Debt Guy?


By , on Feb 5, 2009
Lynnae McCoy I'm Lynnae, wife of one and stay-at-home mom of two. I'm committed to getting out of debt by being frugal with my choices in life.


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  1. Ben Malley:

    I recently consolidated all of my student loans, and it’s helped my budgeting considerably. My monthly payments went down, too. I’d really recommend it. This article was helpful for getting me started:


    Just be sure to get a bunch of quotes first. Some of the places I went to first were ridiculous!

  2. Bill Muhlenfeld:

    Here is something I haven’t run into before–starting a blog for accountability. Bravo! All the good tips and advice in the world will not help money management without some sort of discipline and self-checking. I like this idea.

  3. I just wanted to thank everyone for the comments and advice given here. It’s a lot of information to sift through and I have been trying to consume it all in increments.

    Since posting this question, I have been digging deeper into realizing the actual picture of my student debt, and it’s actually slightly smaller than I had initially estimated, which is a good thing.

    Once again, thank you all for the advice and support!

  4. Yikes. And I thought graduating with 30k+ of student debt was oppressive.

    The only thing I would add to what has been said is that many people take years and years to pay off their student loans because of the low interest rate. While that may be a better decision from a purely financial perspective (if you know you can get better return interest rates than your loan), there are other considerations that make me and my wife want to pay our student loan off as quickly as possible.

    It all comes down to the fact that we just don’t want to have debt, period. And we’re not in the business of leveraging other people’s money for our profit (our risk tolerance is low, and leveraging to invest (which is what not paying off debt as quickly as possible really is) can be pretty risky, as lots of people found out this past year). Our plan is to find an inexpensive apartment when we move, and to limit all expenditures to what we just won’t live without. Everything extra goes to short-term savings and then to debt.

    Good luck to The Debt Guy!

  5. Student loan debt is “good” debt. It is for adding marketable skills (an income increaser)and is usually cheap (interest) compared to other debt.

    That said, attack the other high interest debt first– it is more expensive and it sounds like it is smaller principal amounts. The nice thing about the smaller amounts is you will get satisfaction when you knock a loan balance off . . . this is a real motivator.

    Good luck.

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