I used an expert-recommended strategy to pay off $40,000 of student loans, and 6 apps can help anyone do the same
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- American households hold a total of more than $13.5 trillion in debt, including $1.5 trillion in student loans.
- Eric Rosenberg used the debt avalanche payoff method and several of the tools below to pay off $40,000 in student loans two years and six days after graduating.
- Most debt payoff tools are free, but some charge a small fee to help you save even more.
Whether you are dealing with student loans, credit cards, or any other form of debt, an early payoff is great for many reasons - and a worthwhile goal to strive for.
Federal Reserve data says that about 44 million Americans hold $1.5 trillion in student loan debt, and US households owe a total of $870 billion in credit card debt. In total, we owe $13.5 trillion. Those staggering numbers show just how pervasive debt is in America today.
I personally picked up $40,000 in student loans during grad school and worked hard to pay them off two years after graduation using some of the strategies outlined here. If you want a little extra help prioritizing and automating your debt payoff, head to the websites below to make sure you get the best bang for your buck.
Take a full inventory of your debt
Before you can make a debt payoff plan, you need to know how much you owe, who you owe, your interest rates, and your minimum monthly payments. There are a few great tools that connect to all of your financial accounts and help you manage your debt payoff. Here are a few to consider to get started:
Mint - Mint is the most popular free online money management tool. Connect it to every bank, credit card, loan, and investment account you have to view all of your balances on one dashboard. It downloads your transaction details into one place and has a feature to set payoff goals for each debt account.
Credit Karma - If you have a lot of different credit cards or student loans, you might forget something when connecting your accounts to Mint. Credit Karma gives you access to your TransUnion and Equifax credit reports with a full list of your current debts and balances, as well as a free look at your credit score.
AnnualCreditReport.com - The three big credit bureaus are required by law to give you a free copy of your credit report each year. This website is the home of the government-mandated program. I visit and grab one credit report every four months so I never have to go a full year without checking in, allowing me to keep tabs on my debts.
Prioritize your payments
There are different philosophies on the order you should pay off your debts. Some people say you should pay them off in order from the smallest to the biggest balance (debt snowball). As someone with two finance degrees, I'm a fan of paying them off in order from highest interest rate to lowest (debt avalanche). This is mathematically the fastest way to pay off your debts and saves you the most money.
In either case, you should make at least the minimum payment on every outstanding debt each month. Put the maximum possible payment into one debt until it is paid off, and then move to the next debt. These tools can help you set priorities:
Unbury.me or Unbury.us - These free loan calculators are popular in the Reddit community and other online personal finance hubs. Whether you want a debt snowball, debt avalanche, or have a different payoff preference, this breaks down the dollars and cents of each strategy.
You can also use Mint and Credit Karma to view some of the debt and account details, which is why they are important in step one.
Put it on autopilot
Now that you know which debts you want to pay in what order, it's time to turn it all on to pay itself. You can do this for free using your credit card, student loan, or bank online bill pay feature. There are some other tools that can help you out if you are willing to pay a modest fee each month.
Tally - Tally is a debt management app that also gives you a line of credit to save money on interest in some cases. It has a built-in advisor that does the math of a debt avalanche or debt snowball payoff, and it helps you pay all your debts with one payment each month, among other features. There are no fees for the Tally app, but there are some costs for the line of credit and you need a credit score of around 660 or better to qualify.
ChangEd - ChangEd rounds up your purchases with a linked credit or debit card to pay off your loans. This app is targeted to student loan debt and charges $1 per month.
You don't have to live with debt forever
Debt can feel crushing, and millions of people are delaying buying homes, having children, and other major life events thanks to large monthly payments. Whatever kind of debt you have, these tools are sure to help you pay them off.
Thinking of refinancing your loans? Consider one of these options from our partners:
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