How I paid off a $22k student loan in six months
In 2016, the average student debt in Canada reached an average of $25,000.
When I graduated last June, finding out that I owed the National Student Loan Centre (NSLC) a whopping $22,000, I was oddly relieved to be just under the average payback amount.
But I was still horrified.
And that only grew when I learned that my payback time estimate was a whole nine years away. That really put things into perspective for me. I instantly thought of the hold it would put on reaching important milestones in my life—home ownership, marriage, children, travel, peace of mind and much, much more.
I spent hours on end thinking of how I could eliminate this massive financial burden from my life until I finally came up with a master plan that would have me debt free just one year after graduating. But once I got the ball rolling, I cut that time in half and was paid in full just six months after shimmying across the stage (literally, I danced off the stage at Convocation Hall the day I graduated).
Here’s how I did it.
Stayed at home
I stayed home for school, despite high school teachers insisting the best education was one obtained by leaving home. By staying in my city, I saved thousands per semester on residence, tuition (if you’re an international student), and everyday costs like laundry, food, gas and parking.
I stayed home on weekends. Sure, I went out once in a while. But I was sure to know in advance whether there was a cover charge, and if I could get in free by a certain time I was in there like swimwear.
And despite wanting to own a home like most people out there, I stayed at home after graduating. Most millennials can’t wait to leave the nest. But moving out before student loans are cleared can have a devastating impact on your finances and make it extra hard to get ahead. Unfortunately, some people have no choice. Depending on where your family lives, what your relationship with them is, or a long list of other factors, living at home is just not an option.
If you have the option of living at home, take advantage of it for as long as you possibly can. With rent and mortgages across Canada increasing at a record pace, put the money that you would’ve been paying towards your rent or your mortgage to your loan.
Withdrew money from my savings account
While in school, I was earning an (almost) full-time paycheque every two weeks. About two and a half years before finishing school, I set up automatic savings deposits of $100, and that money grew quickly. In addition, I deposited my tax returns directly into my tax-free savings account (TFSA). Once I graduated, I withdrew nearly everything to make the biggest dent in my debt possible. And it worked!
If you can get ahead while you’re in school and start saving, putting that money toward your student loan when you finish school is a great way to get a head start on repayment. It’s a strange feeling emptying your savings account to put towards a loan that will likely still not be paid in full, but you end up saving a ton of money on interest by using money that wouldn’t earn you half as much in interest anyway.
Worked two jobs
I scored a well-paying job in my field as a freelance digital content editor a few weeks before graduation. And remember that job I had throughout school and did 32 hours a week at? I kept that one too.
This meant that many of my workdays kept me out of the house from seven in the morning to midnight. I was often tired, cranky and just exhausted. But in my eyes, grinding it out for a few months was worth the financial freedom it ultimately brought.
In total, I was funneling (my term for making massive monthly payments) about $2,000 per month to the NSLC. For most people, this is their monthly net income. I knew that if I did this for just a few months, I would be able to free up that extra cash to replenish the savings that I cleared out to pay down my loan in the first place.
Stuck with my old car
I have a love-hate relationship with my 2006 Honda Civic, Benji. I love that he’s paid in full. I love that when I turn him on, he starts and gets me from point A to point B safely.
But Benji takes really long to heat up. He doesn’t have seat heaters. And there’s no place for me to charge my phone while I drive.
These things pale in comparison to what it might cost me to have these luxuries.
If you have a car that does it’s primary job of getting you from place to place, stick with it. And until you absolutely must get a new car, stick with what you’ve got. Monthly payments and the administrative fees of getting a car on the road can add up quickly, taking away from money you could be putting towards paying off your loan.
Low-interest balance transfer
When one of my credit card companies that I hadn’t used in a while called me up and offered me a special promotion, I instantly turned it down. But after crunching some numbers, I saw a golden opportunity.
MBNA Mastercard offered me a 0.99 per cent balance transfer rate of up to $7,500, while the NSLC was charging me a 5.2 per cent floating interest rate on just under the same amount.
I called them back a few days later to let them know I was interested and redirected the money that I would’ve been paying five times more for. Then, I paid off the credit card just as aggressively as I had been paying off the NSLC.
Cancelled a bucket list vacation
I got impulsive just after graduation and decided my partner and I were going to Trinidad for carnival. I found a great deal on flights and a day after booking, did some number crunching. Needless to say, we were not going to Trinidad for carnival.
This was a deeply personal sacrifice for me. It had been number one on my bucket list since the age of 14. But Trinidad would always be there. Was that what I wanted for my debt?
The point is, traveling is nice, but everything comes at a cost, beyond the cost of the vacation itself.
In sum, it took a lot out of me. But six months of long days, fatigue and changing my lifestyle entirely to relieve such a large amount of student debt so soon after graduating was entirely worth it. And if it’s not for you, that’s okay!
Part of making a debt repayment plan is knowing yourself, really understanding your finances, your discipline, what you’re capable of and what you’re not. So have a conversation with yourself, be open and honest. Then, you decide your action plan and pursue it.