When my wife and I were first getting started, we had $107,000 in student loans to pay off. Together, we made a spreadsheet that compared various payoff options. Our loan was supposed to last 10 years and we wanted to see how much we could save in interest by paying off the loan more quickly.
Our spreadsheet looked a lot like the calculator below. This is important...our spreadsheet told us that if we could afford to pay $3,100 each and every month, our loan would be gone in three years. The numbers can feel ambiguous, but I hope our story can provide some inspiration that this really works. If you can consistently pay extra toward the principal of your loan each month, it will – without question – get paid off more quickly.
Instead of paying off the loan in 10 years, we were able to pay it off in three by consistently paying extra. As a result, we saved a bunch of money in interest and we now get to live seven years without worrying about a student loan payment. Not everyone will be able to pay off loans that quickly, just like not everyone has that much debt. But regardless of how much or how little debt you have, you can definitely speed up the payoff process.
There's one key question to answer when you are trying to figure out how fast you can pay down your loan: “how much money you can consistently commit to paying on the loan each month?”
Loan payoff calculator
The calculator below shows three options for different payoff lengths. Adjust the number of months to get a sense of how the monthly payment goes up and down, and see how much interest you could be saving.
| Option 1 | Option 2 | Option 3 | Default | |
|---|---|---|---|---|
| Duration (months) | ||||
| Monthly Payment | $2,700 | $2,108 | $1,521 | $1,231 |
| Principal | $107,000 | $107,000 | $107,000 | $107,000 |
| Total Interest | $14,523 | $19,519 | $29,891 | $40,763 |
| Total Paid | $121,523 | $126,519 | $136,891 | $147,763 |
| Savings | $26,240 | $21,244 | $10,872 | $0 |
How to interpret the chart
As you can see above, if you were to pay off your loan in 45 months, you would save $26,240 in interest for the life of the loan, compared to paying it off in 120 months.
Even better, you would have 6.25 years with NO loan payments to make.
Now, can you afford to make a $2,700 monthly payment each month? If the answer is no, no worries! Just adjust the number of months until you feel comfortable making that payment.
In any case, the math says that if you have a loan of $107,000 and make monthly payments of $2,700 for 45 months, the loan will be paid off in December, 2026!
Our money saving plan
Getting your loans paid off fast isn’t easy, but it isn't complicated either. While we were focused on paying off student loans, we made some significant lifestyle decisions:
- We lived in a house that was smaller than our income could afford by a LOT.
- We drove older cars which were paid off.
- We worked extra side jobs on the weekends.
- We kept a careful budget to avoid accidentally spending more than we had.
- We kept our vacations relatively modest.
Looking at this list makes some people think that paying off loans faster isn’t worth the sacrifice. Maybe you feel that way, too, and there is nothing wrong with driving a nicer car or using the weekend to relax instead of being solely focused on paying off loans. But trust me, it was worth it for us. If you are willing to get creative, get focused, and get going, I know you can do it, too.
