Running down student loan debt while on a budget

Meghan Loftus

When Meghan Loftus graduated from Syracuse University, she made a series of life choices that helped her to reach a big financial goal long before she turned 30.

She paid off all of her student loans in four and a half years instead of the original 10-year loan term.

Loftus, 26, is a senior multimedia editor for Runners World magazine. In 2008, she graduated with a dual degree in English and textual studies — and about $12,000 in student loan debt.

"I didn't want them hanging over my head forever," said Loftus of the loans. "Someday, I want to get married and have kids and a nice house and all that jazz, and I didn't want to do any of that still in debt."

A month after graduating, she snagged a paid internship at Bicycling magazine, whose publishing company is based in Emmaus, Pa. That October, she got her first full-time job within the company.

It was her first smart move: Instead of taking a job in an expensive location (i.e., New York City, where many potential magazine jobs are based), she chose a position in rural Pennsylvania where the cost of living is significantly lower.

She continued to live like she was in college by renting apartments with roommates for three years. She's also frugal, she says, and small moves added up to big savings — savings that freed up money to pay down her loans.

She had two loans with the federal government, both set at 6% interest.

State of Student Debt

$966 billion Total loan debt
70% Increase in the average balance per person since 2004
40% Percentage of borrowers with balances less than $10,000
30% Percentage of borrowers with balances of $10,000-$25,000
33% Percentage of debt owed by people under 30
33% Percentage of debt owed by people 30-39
Source: Federal Reserve Bank of New York

The minimum payment on each was about $75 a month. Instead, Loftus paid $200 on each loan, retiring the smaller of the two loans after just a couple of years.

"I just built those higher payments into my budget and knew that money would not be available to spend," she said.

She made her final payment on the second loan in December 2012, five and a half years ahead of schedule.

Her first post-loan move was to change how much money is automatically taken out of her paycheck and sent into savings, "so I don't realize how much more money I have (available) to spend," she said.

She now directs 10% of each check into that account with plans to build her emergency savings.

Loftus also just moved, so after she reworks her budget, she plans to track her spending for a bit and then see a financial planner. She has a 401(k) through her job but wants advice on where she should allocate her money from now on.

There's also room for a little fun, including trips to Orlando and Las Vegas, "because I have more wiggle room for traveling now," she said.

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Here's Loftus' tips on how to pay down student loan debt early: