You Don't Miss $20

One of the more unusual ways I found myself able to pay off my student loans was by paying $20 to my loans every time I signed into my online banking.  That was on average probably 3 times a week.  I figured that since I never seems to miss $20 after I had bought a big lunch, I probably wouldn’t miss it if I sent off $20 to the student loan every time I signed in.  Twenty bucks isn’t a lot these days, is it?  It's barely enough for a ramen bowl worth tip.  But let’s look at that number over time.

$20 x 3 (per week) x 52 = $3,120

That’s right.  By depositing $20 measly dollars when I was already signed in to my online banking, over three grand was paid off my student loans within a year.  But that’s not the only benefit.

Interest on your student loans is essentially charged “per day”.  I remember realizing that for every day I had my loans, I was being charged $6 in interest.  EVERY DAY.  I couldn’t believe it.  By paying $20 a day, you are paying off more of the principal of the loan.  So, for the $3,120 extra I deposited to my loan payments, I actually saved (assuming I paid on the last day of the year instead of the first because even though I like savings I don’t like math):

$3,120 x 1.05 = $3,276 ($156 minimum in interest saved!)

But, that’s just for that year.  Imagine if you paid only the minimum on your student loan for the next five years and that $3,120 is the last to be paid.  The savings actually look like this:

$156 x 5 = $780.

So, you have paid off your student loans approximately (if your minimum payments were anything close to my minimum payments) 4 months early. Further, the student loan folks don't penalize you for paying $20 a day.  It is basically FREE MONEY because you won't even notice its gone.  Sick people like me actually enjoy the hassle of knowing the transaction is taking place for so little money.

I am hoping I have gotten your attention on the interest savings alone, but let's look at the payment on the principal.

$20 x 3 x 52 = $3,120

That is a sweet chunk of change in one year.  That alone shaves 15 months off your loans.  But just imagine doing that for five years: $15,600.  I don't care who you are or where you went to school.  You have paid off a significant chunk of your loans by paying $20 to the man every time you signed in to bank.

If your wallet is getting a bit tight, you will find ways to cut back.  You won't buy that new shirt.  You will drink wine at home with your friend for $10 each instead of $25 each plus tip.  You will opt for the soup instead of the prime rib meal at lunch.  Just put the $20 to the student loan every single time you sign in.  You won't miss it (unless you have a family to feed in which case much of my advice can be ignored as you have a real family to budget for). 

The pride you will feel in knowing that for every $20 you are putting in you are saving $1 in the next year should keep you going.  See it as the reverse savings plan and watch that debt chip away.