Paying Off Student Loans Before Turning 40

I applied and was approved for a new Sofi 5-year student loan. I got a 68bps (0.68%) interest rate reduction over my previous rate and the monthly minimum payment has decreased by $120 per month. The only problem is, 5 years from now I will 41 years old. I refuse to be a 40+ year old man carrying student loan debt. So let me think through my options.

Continue Making The Same (Old) Monthly Payment

The new loan decreases the required minimum payment by $120. If I continue making the same monthly payment that I am accustomed to, the loan calculator says my loan will be paid off by mid 2023. My 40th birthday will be earlier in the year so this falls just outside of my target. 

Making Additional Payments

Playing around with a loan calculator, I determined that if I adjust the monthly payment up by an additional $180/mo (which is really just $60 more than my previous loan), my loan will be projected to be paid off by early 2023. Jackpot! Now, how do I come up with an additional $180/mo?

Decrease my 401k contributions

If I decrease my contribution by 3%, my paycheck will increase by enough to cover this additional payment. Im hesitant implement this because we desperate need the tax shelter that the 401k provides.

Reducing expenses

Most of my spending takes place via our household budget. This budget is adjusted every 6 months and I’d rather not wait that long to take action. By then my calculations will be completely different.

Get a side hustle

The possibilities are endless. Some quick ideas that come to mind are:

  • Start a blog (wink)
  • Ride sharing (Uber / Lyft / Via)
  • Second job

Prepay The Loan

Going back to the loan calculator, I determined that if I pay $8k upfront and the continue to make the minimum monthly payment, my loans will be paid off by early 2023. If I had $8k laying around doing nothing I would opt for this option. It would give me the immediate satisfaction of seeing my balance decrease and it keeps my monthly cash outflow at a comfortable level.

The Plan

I am going to commit to paying an additional $180/mo above my new monthly payment for the remainder of 2018. In December, I will whip out the loan calculator again and determine the best course of action moving forward. Additionally, I will use the next 5-6 months to figure out how I can come up with a large payment to prepay the loan. Stay tuned.

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