A childhood friend of mine has been in town these past four days and it’s been wonderful to reconnect as adults. I’ve been in Austin for three years and have a great circle of friends here but this girl has known me since ballet class at age 6. It’s a different kind of relationship when someone has known you for decades.
As we caught up on our lives the talk turned towards money. While discussing salary amounts might still be taboo, people always love to talk about how expensive everything is and what they could do with just a bit more cash. I learned that my friend has a little pile of student loan debt and that she’s getting more and more serious about paying it off. Of course, that’s music to my ears.
I listened to her story- she is a PhD and graduated this past May. After getting through four years of undergrad, a year of Master’s classes and four years as a PhD student, my friend is walking away with a totally reasonable amount of debt. She’s got a load in the 20K range, which is awesome considering just how much school she’s been through.
Still, no one likes debt. I actually hate it. So I was more than happy to share my own debt payoff story, some tips and tricks I used and the one method I found to be the most effective in paying off debt rapidly.
The debt avalanche method is effing amazing. For the unfamiliar, the debt avalanche method is a method of payoff that states you should focus all extra payments on one debt in particular, rather than spread the extra money out across multiple debts. Additionally it says that you should make that loan of focus your highest interest debt.
By paying down your highest interest debt first you’ll save money in the long term. This is because you’ll pay less in interest over time, meaning more money stays in your pocket.
I had five student loans in total, held by two different companies. I followed the debt avalanche method in paying those down and it was the best advice I could have taken.
Not only did following the debt avalanche method jumpstart my payoff efforts, it gave me a plan to follow. It simplified the entire process. No longer did I have to think about which loan to apply my extra cash to- it automatically went to the highest interest loan. When that loan was done I simply moved onto the next highest interest one.
This method definitely also saved me money. I had to take a six month deferment on my loans in 2014 and during that time, interest just piled up. By taking action on my loans from an interest based point I was able to make some headway on that interest and ensure that there was less of a chance for interest to get too high.
I combined the debt avalanche method with making multiple payments a month. This also gave interest less of a chance to pile up. My interest accrued daily, so if I made a payment on Monday, the interest reset on Tuesday. By making another payment on Friday of that same week when interest had only had Tuesday-Friday to accrue, I was able to pay more off the principle.
Explaining this to my friend and making some recommendations about debt payoff was really fun for me. I love talking about debt and having been through it, I’m always eager to share my own story and what worked for me. So if anyone out there wants to talk, shoot me an email! I’m happy to look at your situation and offer help if I can. Screw debt!
Kara Perez is the original founder of From Frugal To Free. She is a money expert, speaker and founder of Bravely Go, a feminist financial education company. Her work has been featured on NPR, Business Insider, Forbes, and Elite Daily.