What if I told you that you can pay off your student loans with pencil and paper? You don’t need a fancy app, online course, or special refinancing plan to pay off a student loan.
If you write things down using pencil and paper, you’ll remember more and focus your brain.
Writing things down on paper forces you to slow down.
Don’t believe me? Two psychological scientists ran a few experiments on using pencil and paper vs. typing into a computer. “Those who took notes in longhand, and were able to study, did significantly better than any of the other students in the experiment—better even than the fleet typists who had basically transcribed the lectures.”
You can use this study to your advantage.
By following our guide to pay off your student loans, you’ll write down everything about your student loans. From total balance, interest rate, minimum payment and more, you’ll keep everything about your student loans at your fingertips.
Since you’ve written all of this down, your brain will keep your student loans in your active memory. If a question about your student loans pops into your head in the future, you’ll have easy access to any answer.
Step #1: Grab 1 sheet of paper for each student loan
On each sheet of paper, write the name of the student loan at the top. Then, record the total balance, interest rate, and minimum payment.
By doing this, you can easily sort the sheets of paper later.
Step #2: Create a cover sheet to summarize all student loans
Review each sheet of paper and add up the minimum payments. This will be your total minimum payment for all of your student loans.
Write “Student Loans” across the top and write your total minimum payment below. You’ll update this page as you pay off each student loan.
For example, when you pay off a student loan with a minimum payment of $50, you’ll subtract $50 from your total minimum payment. Then, you’ll update your student loan cover sheet to reflect the change.
Step #3: Sort your student loans by balance or interest rate
This is where it gets fun. Sort your sheets of paper by lowest total balance or highest interest rate. These are common ways to set a strategy to pay off your student loans.
Once you make your minimum payments each month, your choice of sorting method determines which student loan you make extra payments on.
If you sort by lowest total balance, it’s called a debt snowball. Dave Ramsey is a big advocate of the debt snowball.
The debt snowball works like this. If you pay off a student loan with a minimum payment of $50, it unlocks “$50” to be used elsewhere. Immediately, you would start using that $50 to make extra payments on the next student loan on your list.
To see how this is helpful, imagine you have a $400 total monthly payment across all of your student loans. Once you pay off all but the last student loan, you’ll be paying $400 per month on the last student loan.
You should be able to see why the debt snowball is such a powerful method in paying off student debt.
On the other hand, the debt avalanche sorts your student loans by highest interest rate first. Mathematically, this is the best way to pay off your student loans.
Once you pay off your student loan with the highest interest rate, you’d move on to the second highest. Much like the debt snowball method, you would contribute that $50 to the next loan as an extra monthly payment.Two strategies to pay off student loans: debt snowball and debt avalanche. Click To Tweet
In the long run, the debt avalanche saves you the most money. However, the debt avalanche doesn’t necessarily make the happiest.
For example, imagine you have a student loan of $15,000 and it has the highest interest rate. By following the debt avalanche method, you would be paying off that student loan for quite a long time. It would take quite awhile to get that sigh of relief when you pay off a student loan.
Personally, I recommend the debt snowball method. My wife and I like the feeling we get when we pay off a student loan.
Step #4: Make your student loan payments and update your balances
As you make student loan payments each month, update your balances. This will let you see results each month.
When you update your balances, include the date to track your progress.
If you don’t want to update your balances each month, that’s ok. Paperclip your sheets of paper together as a student loan notebook and put them in a safe place.
Don’t file your student loan notebook away. Instead, pin it on a bulletin board or set it on a bookshelf. Keep it handy. You should pick it up every once in awhile and read through it.
When you pay off a student loan, take the satisfaction and write a 0 or “PAID” at the bottom of the piece of paper. Remember to mark the date you paid it off.
Don’t forget to update your cover sheet. When a loan is paid off, subtract the loan’s minimum payment from your total monthly payment on your cover sheet.
Your total monthly payment is important to keep updated. The total monthly payment keeps track of your monthly obligations for your student loans. If you ever lose your job or an emergency comes up, knowing the exact total monthly payment should help to set your mind at ease.
Step #5: When a student loan is paid off, celebrate
Paying off a student loan is your fist pump moment.
You should enjoy writing “PAID: $0” all over the page. And if you get the urge to throw the sheet away, don’t.
Stick the paid loan at the back of your student loan notebook. You can reference it later as inspiration if you ever run into debt problems in the future.
Like we mentioned in Step 4, make sure to update your cover sheet. Subtract the monthly payment of the paid loan from your total monthly payment.
Furthermore, double check with the company holding your student loan. Be 100% sure the balance is $0 and your account will be closed. I’ve heard horror stories from family and friends about debt with $1 or $2 left on the account.
Your payoff amount is typically different from your current balance. However, it shouldn’t be wildly different. It’s always better to double check with the account before you completely forget about it.
Finally, remember to use the extra money to make extra payments to the next student loan on your list.
- You’re more likely to remember things if you write them down on paper.
- Write down all details about your student loans (balance, minimum payment, and interest rate) on a piece of paper.
- Sort your student loans by balance (debt snowball) or interest rate (debt avalanche).
- As you make payments to your student loans, update your balances.
- When a student loan is paid off, mark it as PAID and celebrate.
Do you have any strategies you can share about paying off student loans? Let us know in the comments below.