10 steps to take charge of your student debt

With all the noise in the internet and the overabundance of information, it can be hard to know where to even start and what to do to begin making a dent on your student debt. I did a simple Google search on “pay off student loans” and came up with 107 million results in less than a second.

But if you’re overwhelmed with a big number and exhausted with even looking at all the different sources, what can you do that’s manageable yet effective as a first step? Once you begin, how can you keep up momentum and build on your progress?

The goal is achievable if you’re smart about what you can reasonably stick with, and keep doing small things consistently, while gearing up to take actions on one or two big moves that will really have a big impact on your loan balance.

Based on how the brain works, and taking into account the complexity of the student loan space, I put together 10 simple steps to help you get started wherever you are, even if you don’t feel confident dealing with finances or are unsure what to do. The main trick?

Start small and take action.

1 – Take charge and decide to take control – you are bigger than your debt

Okay, so you have a big number and a sinking feeling in the pit of your stomach. The problem may feel too big to be solved. Nevertheless, make a commitment that you will be the one riding the tiger, and not the reverse, no matter how wild the ride, and how little training you’ve had in riding tigers.

Trusting that you have what it takes, not necessarily to solve the problem right now, but to figure out how to solve it, is the key. All you need to know is the next small step to take. As long as you can figure that out, the rest will follow.

How do you make this goal magnetic and inspiring?

Photo by Sebastien Gabriel

Attach an emotionally meaningful element to your goal.

For example, if you care deeply about family, you can infuse life and energy into your commitment by committing to paying off the loan without compromising your family’s well-being. That will make it a lot more likely that you’ll stick with it and find ways to make it happen, rather than the bland “I’ll pay off my student loans”.

2 – Set up your instrument panel

There is power in measurement. Harness it to your benefit. Find the one metric and add it to your regular notebook or journal so you can track by hand regularly.

Why this matters is that when you write things by hand, you engage multiple senses and etch the content and the significance much more deeply into your mind and consciousness. With this in place, it’s likely you’ll start “finding” more and more opportunities to meet your goal faster that you’d have simply missed. You don’t need anything fancy. A simple one pager that shows the date, balance and change since last period is plenty.

In managing my finances, I have tried many apps, methods, and online tools that made it very easy for me to manage my money. Yet, nothing stuck as well as simply tracking my balances once a week or month in my trusty journal. There is some magic in it that I can’t explain, except to say it works.

3 – Get the right yardstick to measure by

Once you have the number tracked, you will be raring to find ways and means to bring it down. How will you evaluate the multiple options? You need a simple yardstick to measure by.

The most important measure that matters in paying off your loans is this:

What is the cost to you, in today’s dollars, of paying off the entire loan obligation over the period it takes to pay it off?

Said differently, this is the net cost to you in today’s dollars (or the “NPV” – net present value of the loan). The option that is likely to minimize this number is the option that will leave you best off, at least financially speaking.

Here is what NOT to select: anything that doesn’t favorably and directly impact the net amount going out of pocket for you in today’s dollars is not a good candidate – for example, size of the monthly payment, APR or even the interest rate are not as important.

Remember that you may have no choice but to pick an affordable payment due to income pressures or other challenges. That is fine, but even within those constraints, you should seek the option that minimizes the total amount you pay out of pocket in today’s dollars

Photo by Markus Spiske

4 – Focus the hunt on elephants but bag many rabbits along the way

Your goal throughout the process is to look for the big wins, or the elephants. These are the moves that reduce the net cost of your loan by the greatest amounts, relative to the amount of work you put in to get them. But these are generally harder to come by. So in the meanwhile, you also bag as many “rabbits” as possible along the way to ensure you continue to make progress.

What are the elephants?

The big ones are loan forgiveness programs, any options that reduce the years over which you pay back the loan (because this lowers the interest you will end up paying on the loan), and of course, reductions in the interest rate, such as may happen when you refinance the loan.

Keep in mind that reducing the rate but extending the loan over a longer period is self-defeating. You want to reduce rate, for example, but keep the term of the loan as is. Also, many forgiveness programs will incur a tax liability (the Public Service Loan Forgiveness Program is an exception), so keep in mind the tax bill from any forgiveness.

Rabbits are smaller wins that still make a dent, especially if they apply to a longer period of time. Good examples are auto-pay discounts and employer programs that make payments towards your student loans as an employee benefit.

5 – Start with small, quick wins

Because student loans tend to be pretty sizable, you are gearing here for a war, not a skirmish. So setting yourself up for long-term success is key. The best way to do this is to build momentum early by setting up an easy, almost laughable goal, and getting it done quickly and successfully. The rush of dopamine this sets up is a huge force if you harness it in your favor – simply set the next easy goal and repeat the performance.

Very soon you will be well on your way to setting and successfully accomplishing much larger goals and it won’t feel as much of a drudge as you might otherwise expect.

What are good examples of quick wins?

  • Find out about auto-pay discounts with your servicer. Sign up for them and get the discounts
  • Put loans on automatic payment so you never have to pay a late fee again
  • Review a monthly statement and understand what goes into your balance and amounts owed
  • Select a small balance loan to prioritize for pay off
  • Create a full picture of all your student loans by lender, amount, interest rate, monthly payment, and type (federal or private)

6 – Set up behavioral “guardrails” to make goal achievement a habit

Big actions are made of small steps, and even small steps are hard to begin. Want proof? – look back at the last diet you tried. The simplest tool to reinforce the creation of a habit is to use a tracker or small journal, that you physically write in.

What will you track? At a minimum I recommend these:

  • Your ultimate goal and inspiration (see step 1 )
  • Next small goal or project (See step 5)
  • Table to track the progress of metric from step 1
  • Page of tasks, reminders and ideas for later (e.g., ” Check out loan forgiveness program”)
  • Page for each small project with tasks and a checkbox
  • A way to mark completion of every project and to specify a reward
  • A habits tracker page (see next step)
Photo by Nick Tiemeyer

7 – Set up one small daily habit to make tiny progress towards the bigger goal

Each day resolve to do one small thing (5 minutes or less) towards the bigger goal. Most importantly, track it in your tracker by putting a check mark for each day that you complete this successfully. Examples are:

  • Researching one item relating to your loan (e.g. get servicer information)
  • Exploring one optimization option (e.g. refinance)
  • Finding out terms of one refinance option
  • Learning one new thing about student loans (e.g., what repayment plan options mean)
  • Understanding one thing about my student loans I didn’t know before

The specifics don’t really matter that much. That’s because you now have more than 300 opportunities a year to explore and learn from mistakes. But the most important thing is that it will train your mind to get fluent with this topic, reduce resistance, and make it easy to tackle tasks – this is more than half the battle won

8 – Identify one elephant to hunt and set it up as a new, larger project

  1. Select one reasonable option that you think might give you some benefit.
  2. Set it up as a separate project in your notebook.
  3. Create a task list along with a checkbox to mark completed steps and a space by each task to jot down any notes.
  4. Start tackling the tasks one at a time – you can use these as your daily tasks from step 7 above.

What are good candidates to pick? Refinance options, forgiveness options, revisiting repayment choices, and exploring faster loan pay-offs are all good projects. The way you pick the exact one doesn’t matter all that much: use your intuition, pick one that feels doable, or easy, and start there. The big this is that you start and take tiny steps consistently towards the goal every single day.

Create a new project page in your tracker and list all the individual steps you can think of. For example, if you picked refinance, your list may look like this:

  • Compile list of all outstanding student loans
  • Review list to select loans most suitable for refinance
  • Read up on internet to understand how to refinance intelligently
  • List documents required
  • Collect documents required
  • Review credit score to understand current credit situation
  • Visit lender sites and pre-qualify for a rate quote
  • Get rate quotes
  • Calculate or find out monthly payment and savings
  • Calculate or find out today’s cost of new option
  • Make decision
  • Apply

If it feels daunting, don’t sweat it: merely by putting it on paper in one place you have taken the biggest step needed to tame the problem. All that’s needed now is to use this as the guide as you tackle one small step at a time

Next, scan the step that looks like the most critical step (likely also the hardest) and take that as your next daily step (or sub-project). Tackle it one step at a time until done.

But if you’re the kind of person who likes to eat dessert before broccoli to ease yourself into healthy eating, by all means start with an easy step.

Photo by Kal Visuals

9 – Start a new long-term relationship in your life – WITH NUMBERS!

I know, I know – you HATE MATH!!!! And you’re NO GOOD AT IT!!!

But stick with me here. It will be easier than you think – and the rewards will be worth it – more cash for your life, your priorities and what matters to you – plus, the high from overcoming a tough challenge!

The key to getting cosy with numbers is to start really small, and to keep it simple. Here is a starter plan:

  1. Financial numbers are like banyan trees – they look scary from the outside but the entire family can be traced down to one or two thick and deep roots. Your financial numbers are the same way – they look big, scary and voluminous but they can all be traced to one or two “root” numbers. Your job is to find those one or two numbers that give rise to everything else. So first, find those couple of numbers. For example, in the case of your loans it could be: outstanding balance, interest charged, and other fees. That’s it. If you control these numbers, most others will resolve themselves.
  2. Find your Rosetta Stone for translation. Most human beings cannot easily comprehend differences between big numbers. Everything starts to blend together and then you get a headache. But if you find meaningful anchors and yardsticks, then the numbers become very real. For example, if the savings from an option are $5,000 and the savings from another option are $7,500 – it may look fairly insignificant. But if that’s the difference between a 3-day road trip and a 7-day vacation, then you’ll end up making much smarter decisions because those differences are real and very visceral.
  3. Find the tool that works best for you. For example, you may have a friend, sibling or family member who’s a whiz at Excel and can whip up numbers in a way that makes sense to you. You can engage your accountant, use a good online calculator, or even play with building Excel spreadsheets yourself – I guarantee you you are capable of it. Just make sure the tool is good, and that you can ask questions of the tool, whether a human or not.
  4. Start practicing with small numbers, to get familiar. For example, you could just try tracking expenses daily just to get familiar with the feel of numbers and how they move. I resisted tracking expenses for the longest time because it felt tedious, boring and a waste of my life. Recently, I started doing it out of necessity and all of a sudden, I started to get an intuitive feel of what any intended purchase would do to my budget. It was totally unexpected and gave me quite a high!

Imagine every single number you see in terms of cash exchanging hands – whether to you or from you. If, for example, there is a $250 decrease in a monthly payment, imagine how it would feel to hand over $250 less each month – did you feel your pulse quickening already? In effect all these numbers represent actual cash flows, so why not treat them that way and get the full benefit?

10 – Celebrate. Set next goal. Achieve!

Make your goals small, achievable and manageable. The trick to solving your student loan problem is through momentum, consistent action. Progress is not linear. It will look puny and small at the outset, but if you focus on keeping up the momentum and completing actions each day, you will stumble into insights and opportunities that are simply not visible at the outset, or without consistent effort. The key is to accumulate as many victory loops as possible so your brain begins to associate this area of your life with consistent wins and the rewards of success.

That’s it! Start small. Start specific. Start succeeding.

Tool to get started: Simple, clean dot grid journal to track student loan activity. I use this to track all my activity.

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