We've all heard the numbers lately. College costs are skyrocketing to the tune of $1.3 trillion dollars. Young professionals are more indebted than ever with an average student loan balance of over $30,000. Entry-level salaries don't allow recent graduates to live the lifestyle they imagined for themselves after college.
But for psychology professionals, the reality of their student loans can seem even more daunting.
An average debt balance that often reaches well into six digits, combined with salaries that aren't always comparable to other related professions, is leaving a lot of new psychology graduates concerned about their future. If you are someone that is looking for solutions to handling your debt, you need to understand this:
Paying off debt quickly is possible, but it takes the right mindset
As a person with an audience of nearly 100,000 readers per month, I've seen almost every financial situation possible when it comes to student loans. What I've learned in my time writing about personal finance is that every situation is different, but more importantly, every person's tolerance for paying off debt is different.
For me, I wanted to get rid of my $40,000 of student loans as quickly as I could. I understood that holding student loan debt gave me fewer career options and less flexibility in my life. I paid off that debt on a teacher's salary in less than two years.
I truly believe that psychology professionals can get past their debt early on like I did, but it takes the ability to ignore the culture we're all surrounded with on a daily basis.
Here are a few suggestions for aggressively paying down your debt:
Keep your living expenses as low as possible
Live with your parents. Rent a room with friends. If you own a home, rent out your rooms to help cover the costs of a mortgage. Living costs are one of the largest expenses you'll face after college, and often times newly graduated professionals are in too much of a rush to live in the nicest place they can afford!
My wife and I rented a room from her parents after college, which is easily one of the main reasons I was able to pay off my debt faster than most people. At the time, it honestly seemed miserable and embarrassing. However, looking back I've realized that it was easily one of the best financial (and life) decisions I ever made. I absolutely wouldn't hesitate to go back and do it again.
Don't worry—uncomfortable living situations are just temporary. Understanding that reality is a powerful tool when it comes to getting rid of student loan debt quickly.
Completely avoid new cars
One of the biggest financial traps for any new professional is financing a new car. Period. Low payments and attractive warranties are designed to make borrowers feel like they are making a great decision with their money, when in reality it's one of the worst for paying off debt.
You have to keep in mind that car companies spend massive amounts of advertising dollars every year to convince consumers to attach emotions to cars. Avoiding a car payment by driving an older vehicle (I drive a 2004 GMC Yukon that I purchased for $6,000) or even opting for a slightly used vehicle instead of a brand new one allows you to apply more of your hard-earned money towards student loans.
Make the biggest loan payments possible
Rather than trying to seek out income-based payments or keep your monthly payment low, you need to max out the amount that you can pay towards student loan debt. One of the easiest strategies that I recommend to readers is making their payment the first thing that they do with their paycheck.
When you put your student loan payment as the top line item in your budget, it forces you to live on less. Making the decision to avoid going out with friends or buying things you may not need is much easier when the money has already been applied to your loan balance.
Consider refinancing your loans (but keeping the payment high)
With interest rates as low as they have been in years, it may be a good option to consider refinancing multiple student loans into one easy, organized payment. There are plenty of great student loan rate comparison tools available online right now, and many of the private lenders are offering creative options like unemployment protection and networking events to compete with federal loan benefits.
Remember—the goal to aggressively paying down debt is not to keep the payment low. Even if you refinance into a better interest rate, continue making the largest payments you can.
Let your peers pass you up
Out of everything mentioned in this article, the most powerful advice I can give is to be OK with your friends and peers having nicer things or a higher quality of life in the beginning of your career. The vast majority of the new cars, fancy vacations, and nice houses they buy will be financed at a level that they can't really afford.
Personally, living well below my means for even a few years has set me on track to fly past my peers in the coming years. Life is long, and once you realize that and start strategizing for the long term instead of the short term, you'll have a much clearer path towards being financially successful.
It's important to remember that the less student loan debt you have, the more flexibility you'll have throughout your career. Rather than only being able to take a salaried position, the option of creating your own business or changing professional specializations as desired becomes much easier and less risky later down the road with less debt.
In my next post, I take a look at a more moderate approach to paying down debt.
-- Bobby Hoyt is a former high school teacher who paid off $40,000 of student loan debt in a year and a half. He now runs the personal finance site MillennialMoneyMan.com full-time, and has been seen on CNBC, Forbes, Business Insider, Reuters, Marketwatch, and many other major publications.