Paying Back Student Loans is Like Firefighting

Perhaps you are looking down the barrel of a student loan. You did what you needed to do for your college education, but now you have a debt of $10k, $50k, $100k, or even $200k or more. These are one of the only types of loans that can’t get cleared in a bankruptcy, so this is often a millstone around your neck for life. Especially in this current job market, you may be making just $20k out of school, and that $100k loan looks literally impossible to pay off.

First things first, although this debt is stressful, know first that many other people are in your same situation. Also, paying off any amount of student loan is not impossible, but sometimes you can’t fight it directly.

I like to think of paying off a student loan as similar to a firefighter fighting a 5 alarm blaze. When they get there it looks impossible, 3 floors of a building burning at thousands of degrees, and all you have is a hose with some water. Staring down a huge student loan can feel very similar, it seems like there is nothing you can do and the debt will take you down with it.

First things first, you must contain the fire and not allow it to grow. This means doing everything you can to avoid penalties, interest jumps, and anything else that could increase the total debt burden. Because of the nature of student loans, there are many options to help. You can try to get a deferment, you can negotiate the payment plan, etc. Most creditors would rather you pay them then not, so they can work with you to make the payments manageable. Make sure you never are late or miss a payment! Do whatever you can to make those minimum payments every month, as some loans can stack fees or change the interest rate if you don’t.

Now if you are just paying the minimums, it seems like that debt is going nowhere, just like a fireman starting out, the first sprays of water don’t do much more then contain them. So how can you get ahead?

Well first, one big factor is your friend: Inflation. The USA typically has inflation around 3%, so a dollar today is only worth 97 cents next year. As long as inflation continues, your debt burden will get “smaller” even if the amount stays the same. In the same vein, you’ll be making more money, so at a certain point you should start seeing more progress until it hits a point where you are paying more principal to the loan then to interest.

Finally, there is almost always extra money from somewhere, a christmas bonus, a tax refund, a surprisingly good day of tips. When these things happen, use the extra money to pay down your loan faster. Suddenly the fire that is the student loan debt starts losing, and now it seems easy to put out, when you get that student loan paid off, congratulate yourself for a job well done.