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How to Pay Off Debt

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How to Pay Off Debt

The Debt Snowball vs. Debt Avalanche photo

You + Overspending = Debt. This is why we need to budget! Just because budgeting is simple does not mean it's easy. Sometimes we fall into debt because we didn't make a plan and frequently overspend. Starting an emergency fund or savings account will help us prepare for emergencies like job loss or car accident. But sometimes it's too late because we're already in knee deep. The most common reasons for overspending are - mental mistakes, social pressure, and emotional spending. 

If you have questions about paying off debt, Ask Your MoneyCoach!

Why We Overspend

Mental Mistakes

Ever wonder why department stores always seem to have a sale going on? Retailers often set prices higher than normal then advertise at 40% off so customers feel like they got a great deal. You didn't actually get a deal! This is an example of a mental mistake that causes us to overspend.

What you can do:

  1. Delay your purchase. Give yourself time to sober up from the excitement of the sale so you can make a smart financial decision.
  2. Talk it over with a friend. Be sure your friend is financially savvy themselves! Sometimes having someone else vet your purchase can help you think logically about what you can afford.

Social Pressure

For college students, this might be eating out with friends even though you have a meal plan or food at home. It might be spending money to maintain an image and dress a certain way. No matter the scenario, learning to balance your finances with your social life/goals is critical.

What you can do:

  1. Take the initiative. Plan a hangout with your friends that doesn’t involve spending a lot of money. 
  2. Bring cash. Studies show paying with cash is more psychologically painful than using a card. Having to spend cash for your purchases might cause you to think twice before buying.
  3. Be honest with your friends. Chances are good they may feel the same about saving money when going out too.

Emotional Spending

This is when we spend money to cope with negative emotions or to achieve a positive emotion. If you have ever gone on an online shopping spree after a bad day or shopped because you were bored, you have experienced emotional spending.

What you can do:

  1. Limit your exposure to ads. Unsubscribe from online retailers. Impulse shopping often starts with advertisements. 
  2. Find cheap ways to relax after a bad day. There is no one-size-fits-all solution. Find something that works for you.

How to Payoff Debt

  1. Research. Repayment process and options can vary based upon the type of loan. Contact your lender or visit their website to understand their payment system.
  2. Create a plan. The heart of any good repayment plan is budgeting. From there, you can utilize a debt repayment method that could allow you to pay off your loans early. Learn How to Budget here.
  3. Repay Responsibly. Responsible student loan repayment can impact and improve other areas of your life. For example, your credit score can increase or decrease depending on the consistency of your payments. This can help you when purchasing a home or new car.

Want to discuss paying off debt with your MoneyCoach?

Meet with my MoneyCoach

Debt Repayment Strategies

Debt Strategies

Use strategies like the Debt Snowball and Debt Avalanche to payoff your debt!

The Debt Snowball method is basically a motivation hack. You focus your money on smallest debt first then work your way to the others. A small win helps you build personal momentum and see real progress towards your debt free goal!

How to Debt Snowball

  1. Start with your smallest debt and put all your "extra" money towards it.
  2. Keep paying until it's gone. Remember to pay the minimum on other debts!
  3. Use all money from first debt on your second one. Hence, the "snowball"
Interest Rate17%15.75%18.25%22%-
Min. Payment$15$30$55$100$200
Month 1$115
Month 2$115
Month 3Paid
Month 4 $145$55$100$300
Month 5 $145$55$100$300
Month 6 $145$55$100$300
Month 7 Paid$200$100$300
Month 8  $200$100$300
Month 9  Paid$300
Month 10   $300
Month 11   $300$300
Month 12   Paid$0


The Debt Avalanche method is similar to Snowball except you start with the highest interest debt. This saves you money in interest. Small wins help you build personal momentum and see real progress towards your debt free goal!

How to Debt Avalanche

  1. Start with your highest interest debt and put all your "extra" money towards it.
  2. Keep paying until it's gone. Remember to pay the minimum on other debts!
  3. Use all money from first debt on your second one. Hence, the "avalanche"
**Interest Rate22%
Min. Payment$100
Month 1$200
Month 2$200$55$15$30$300
Month 3$200$55$15$30$300
Month 4$200$55$15$30$300
Month 5$200$55$15$30$300
Month 6$200$55$15$30$300
Month 7$200$55$15$30$300
Month 8$200$55$15$30$300
Month 9Paid
Month 10 Paid
Month 11  Paid
Month 12   Paid

Repayment Options

There are several types of federal repayment plans: Standard, Graduated, Extended, Pay as You Earn, and Income Based. Click for more info.

Repayment Calculator

The official FAFSA loan simulator can help you estimate your payments. Click for more info.

Student Loan Forgiveness

Depending on your major or career field, you may be eligible for Student Loan Forgiveness. These programs typically require a 10yr service agreement. Click for more info.

Where do I find my loan balance?

  • You can check your loan balances by logging into with your FSA ID and password. There you can see any federal loans you might have oustanding.

When does repayment start?

  • It depends on the loan. Ask your MoneyCoach to be sure. Federal Direct Loans will offer a six (6) month grace period. PLUS Loans will not offer a grace period and may ask for immediate payment. You must opt-in for deferment of a PLUS Loan during the application process. Once you graduate your loan servicer will send you an email and paper notification letting you know payment is coming due. 

Where do I find my monthly payment?

Who do I make payments to?

  • Federal student loans are not paid back directly to the federal government. Instead, they are paid back to one of several loan service providers. You can find more information about loan servicers here. You can find out who your loan service provider is for each of your loans by going to and logging in with your FSA ID and password.

What are my payment plan options?

  • Federal student loans have several repayment plans available to borrowers. The standard repayment plan will make certain your loan is paid off in 10 years. A comprehensive list of repayment plans for federal direct loans is available here. It is important to remember there are pros and cons to each repayment plan. For instance, with several plans any amount of your loan that is forgiven would be considered taxable income. If you are considering utilizing a repayment plan other than the standard plan, make an appointment with your MoneyCoach.

What if I am struggling to make my minimum payments?

  • If you are unable to make your minimum payments for your student loans, contact your loan servicer immediately.