I have two theoretically competing goals right now: paying off giant student loans and traveling around the world to experience the best in beauty, in person. Those goals don’t have to be in conflict. I’m about to wordvomit every tip and trick I’ve picked up along the way for creatively paying off student loans and snatching cash, points, and miles while doing it. I’m doing to my student loans what Accutane did to my acne. And lower back.
There are plenty of sites that can give you the student loan payoff 101 — I’m not here to cover that well-trod ground. Instead, I want you to just walk away from this post more engaged with your money in some way. I also want to encourage readers with student loans to think creatively about how their loan payoff strategy can pay off in ways that make life bigger.
Disclaimer: I’m not a certified financial anything. I’m just a Renaissance historian who hates debt and loves free, fancy travel.
My husband and I met while working on our PhDs. The loan principal plus the interest we accrued is $190,000.
(By the way, I was only able to calculate that once I got deep into the loan payoff process because grappling with the reality of almost $200,000 in loans wasn’t going to happen six figures ago; I couldn’t do math with the internal screaming cranked to 11.)
As I’m writing this, the total is down to $68,385 and I have a livable plan for paying everything off before I turn 40 (less than two years from now). (Update: as of December 2021, we’re down to $43,442.66 and gained a value of $3,595 from paying student loans creatively in 2021, which is roughly a 9.6% rebate on our payments for the year.)
I want a massage in an overwater villa in the Maldives (just as open to Bora Bora!), and I want to get there flat on my back in business class or first while drinking champagne. I don’t know how that’s going to work given that the champagne will probably spill, but you get the point: stupendous luxury travel is a goal.
Do you know how Renaissance bankers like the early Medici made their money in the time Italian banks were prohibited from charging interest due to usury laws? They made money by exchanging one currency for another. You’d deposit 30,000 florins in Florence and then sail to London and pick up the equivalent amount in pounds, but the exchange rate would be advantageous to the bank. If you’ve ever used an airport currency exchange booth, you can imagine quite well how a company could amass a fortune by changing currencies.
These banks ground out Renaissance fortunes due to percentages, putting in time at the books, and creative use of math.
Lorenzo de’ Medici staring down some fucking student loans.
The big problem with student loan payoff advice
There are plenty of people, especially these days, who can’t make a minimum payment on their student loans debt due to job loss or disability — these are very serious problems that I’m not equipped to give advice on, and special help may be available. Professional advisors like The Institute of Student Loan Advisors (TISLA) can coach on how to navigate this. Please also be aware that scams are rife in the student loan sphere, and you should fact check everything — especially companies or individuals promising student loan forgiveness, the scam du jour.
Student loan debt has a magical ability to freeze people in the emotional equivalent of The Scream. You’ve finished a degree or three, you’re starting your career (and probably being compensated accordingly!), and you have a giant fucking number that’s impossible to face head on. Most of the energy and time you have to give to loans ends up being spent freaking the fuck out and spinning around aimlessly in panic. Or just selecting the lowest payment option, flipping on autopay, and never looking at the mess again (even if your income changes). The loan problem becomes associated with feelings of powerlessness, and there’s no incentive to open the loan website or files periodically to come up with a livable strategy that changes as your life changes.
Then there’s advice on student loans. I don’t want to read another article about how someone fresh out of college paid off their $30K by living with their parents. If your triumphal loan payoff story includes an inheritance or large family gift: that’s lovely, I wish you the best, and consider not hitting publish. I think we’re all well aware that windfalls and not paying rent are helpful for one’s budget, thank you, can I have my time back. On the other end of the spectrum are the articles about people who trimmed their spending money so drastically that they now only enjoy an annual meal out at McDonald’s.
In all likelihood, if you’re reading student loan payoff advice from a Renaissance historian best known for incorporating dick jokes into skincare reviews, nobody is coming to fix this for you and you’re well on the way to accepting that. Denial about the gravity of The Loan Problem merely delays the moment you get your plan sorted and begin killing the parasite. You can hold both rage at the system and a burning need to end your student loans in your heart at once, ask me how I know.
The way I see it, people who are currently employed, able to make payments, and not eligible for a loan forgiveness option have two modes available. First is to hop on a payment plan that makes sense but feels “doable challenging” — then try not to think about your loans too often. The other mode is to go wild and try to kill your student loans off ASAP while extracting as much money and value for your efforts along the way. I think there’s a time and place for both modes, and most people with a hefty amount of student loan debt will need to do both to minimize the time in debt while also not burning out. I gradually turned up the heat on myself by opting in to higher monthly payments, then adding additional optional payments on top, and then throwing in even more on top of that — now I’m in full chaos mode ready to slay these beasts so I can live debt free (and celebrate my victory on the beach).
Some general student loan tips
Get your archive in order
Download your disbursement and payment history and stick the digital file somewhere, ideally in a cloud-based folder. Each servicer hides this somewhere special, so I won’t go into detail on finding it.
Know you loan type(s) and how forgiveness might (or might not) impact them
The institution ultimately holding your debt matters a whole lot. When the pandemic started, our slew of federal loans suddenly dropped to 0% interest with $0 monthly payments (find the details about which loans qualified here), but some random loans directly from our university remained chugging along at 5% interest with regular monthly payments. People with private loans know exactly what that’s like. I paid off those university loans in a rage just to be done with them and minimize the amount of interest I pay because seriously fuck that.
The type of loan you hold matters a whole lot in terms of the possibility the debt might be forgiven. It looks like President Biden and members of Congress are really only looking to possibly forgive federal student loans held by the U.S. Department of Education, and they might even restrict forgiveness to undergraduate loans. A possible cap of $10,000 has been mentioned by Biden while some members of Congress want $50,000 forgiven. Right now, we just don’t know.
Paying federal student loans right now, while payments are set to $0 and interest is 0%, is a bit like placing a bet, especially if you owe less than $50,000 on your federal loans. Payments made during the COVID relief (scheduled to last until at least September 30, 2021) might be able to be returned to borrowers upon request, but loan servicers usually won’t issue the check unless 60 days have passed since the last payment since they’re worried about fraud or a bad check. Here’s the direct quote: “any payment you made during the suspension of payments (beginning March 13, 2020) can be refunded. Contact your loan servicer to request that your payment be refunded.” (source) I’m taking this and some data points from fellow borrowers on the student loans subreddit to mean that, yes, you’ll get your payments made during COVID forbearance back, but it will take quite a bit of time and be kind of a pain in the ass. What happens if you pay down or pay off your loans: will you miss out on any forgiveness that comes later? Maybe. At this point, it’s all a giant ?????
The least risky strategy for federal loans during COVID forbearance is to stick your usual monthly payment and any extra you want to apply to the loans in a savings account and just let it ferment a little until we have more information about whether forgiveness will happen and how it would be applied, or there’s no forgiveness and payments start again. You can find a list of high-yield savings accounts on Doctor of Credit.
I’m typically not into a ton of risk, but my rage at this debt has inspired me to take an aggressive paydown approach during the COVID forbearance. I want to see my balance shrink every single month, and I’m willing to claw back payments from my loan servicer in the event Biden moves to just wipe the balance sheet for borrowers. As a risk-averse person who doesn’t relish the idea of a final boss battle with Navient, I’m constantly revising my payoff strategy. I always put my undergraduate, low interest rate federal loan last on the priority list because it’s the most likely to be forgiven. The benefits of this more aggressive approach are that I can deploy money to gather benefits like credit card points and student loan refinance bonuses now, before those offers potentially expire and required monthly payments restrict the amount of money I can work with. This strategy is not without risk, but the psychological burden of these things and resentment at foot dragging about forgiveness spurred me into action. I’m willing to accept the risks, for once.
Make sure there aren’t any loans you’ve forgotten about
So, uhh, sometimes borrowers lose track of a loan, but it still exists! One way to do a quick scan of debt accounts is to join Credit Karma, a free credit tracking service. Credit Karma is great for alerts about newly opened fraudulent accounts, too.
Enter each loan in a tracker
Use a spreadsheet or software like undebt.it to record each loan: who took out the debt (if you’re managing loan strategy for two people), the company servicing the debt, whether it’s federal or private or something else, the starting balance, the current balance, interest rate, and monthly payment amount.
You may grumble over the number of loans you need to painstakingly record (we had 30 lil loans when I started tracking in undebt.it!), but dinky federal loans are your friend — resist the urge to throw up your hands and consolidate them into a big single loan, especially if that means losing federal benefits like potential forgiveness or the COVID-related forbearance.
Make a loan payoff strategy
I use undebt.it to plan my strategy for paying amounts over and above the monthly minimum. It’s a free site and the free plan offers most features. Pay the annual Undebt.it+ $12 fee to unlock a bit more like the drag & drop custom debt payoff creator (the one premium feature I’m obsessed with). But just start with free and see if you use it.
You could peel off the loans with the smallest balances first (debt snowball) or attack the ones with the highest interest rate first (debt avalanche — statistically the best method), but what’s most important is that you pick a strategy that keeps you engaged with the payoff and willing to slide your loans some extra money when it appears. Go with the plan that activates your inner student loan killer and keeps you engaged with the process.
Go to experts for advice on current forgiveness programs and repayment plans
The Institute of Student Loan Advisors (TISLA) is an organization that provides free, fair student loan advice. They don’t collect money from student borrowers or force anyone to become members of anything. They work incredibly hard to make student loans and repayment more transparent. Again, I’m just a Renaissance cannibalism scholar who taught the world new ways to use facial acids on body parts.
Follow a student loan community
I like r/StudentLoans. It’s a good way to quickly hear about new developments and see warnings about new student loan scams (they do exist!).
More general financial resources connected with student loan payoff
I’m a fan of You Need a Budget (YNAB) software and philosophy for making sure the money I have does things that actually matter to me. Remember when I spent more than $6,000 in a year on beauty products and felt very ??? at the end? Yeah, YNAB helped me start spending money on things I truly want.
When you pay off student loans, you’re improving your net worth, not just sending money out the door. It took me ages to grasp this, but Personal Capital helps me track our loans and retirement accounts so I can see that all this chaotic payoff work is resulting in actual improvement in our net worth.
Forgiveness, COVID forbearance, and why this is the moment to develop your strategy
Again, if you have federal student loans under $50,000 per borrower, this is a good moment to sit tight and pay your federal loan servicer $0 (confirm that your loan payments are currently paused!).
- Most federal student loans are in COVID forbearance right now. This means no required payments, 0% interest, and borrowers that are working towards Public Service Loan Forgiveness (PSLF) have all of these months count towards their 120 qualifying payments.
- Student loan forgiveness is under discussion. The largest amount anyone seems to be pushing for is $50,000 for federal student loans. I doubt the amount would be that high; I suspect we’ll be lucky to get $10,000. At this point, we just have no idea what’s going to happen, but news websites are harvesting clicks by doing forgiveness Kremlinology. r/StudentLoans is following the developments, but it’s easy to get bogged down in fighting and scraps of information. Expectations low, cash on hand high is my current strategy.
For most federal student loan borrowers, this is the least stressful moment to take stock of the situation and make a plan — even if you discover a real mess, the odds are low that you’re going to have to deal with it immediately.
How I make money, points, and miles paying off student loans
- Use these tricks only when you have money in your checking or savings before making the loan payment or refi.
- If you’re looking to buy a house, refinance a mortgage, or finance a car don’t mess with a new credit card or student loan refinance; the temporary hit to your credit score (leading to a higher interest rate) isn’t worth it.
- If you’re not free of consumer debt like credit cards and payment plan loans (such as Affirm and AfterPay), focus on zeroing out that high interest debt first.
- SERIOUSLY FUCK AFFIRM, AFTERPAY, AND ALL OF THESE INSTALLMENT LOANS URGH.
The good stuff
PayPal Key (PPK)
I’m going to give you my best tip right out front: if your student loan servicer accepts debit cards, you may be able to use PayPal Key to pay your student loans with a credit card — and earn tons of points and miles along the way.
PayPal Key is a virtual debit card that’s linked to one of your (non-American Express) credit cards. What’s amazing is that you can change the debit card number at any time (farewell to fraud!) and you can use it to pay with a credit card at merchants that only accept debit cards. It’s one of the best free personal finance tools, and there’s no way it’s going to last forever lol.
Here’s how to make the most of this amazing tool while it lasts:
- Gather some money for a payment.
- Confirm that your loan servicer accepts debit cards. Mine, Navient, buries the pay-by-debit-card phone number in a FAQ on their website.
- Check your payment settings. Right now, since most federal loans don’t require a monthly payment, any money you toss in will be distributed according to your overpayment settings. I adjust mine based on my current strategy. Since I want to avoid paying down my low-interest undergrad loan, I’m currently chipping away at the loan with the highest interest. This is where undebt.it helps because you can review your plan and then see how changing the settings will get you in target with the loan you want to whittle down.
- Open new Chase credit cards with lucrative signup bonuses and earn thousands in free travel by paying via PPK. At this point, you cannot use AmEx with PayPal Key. I haven’t tried Capital One or Citi cards, but I’ve used PPK with a number of Chase cards and they work at the time of publication. If you’re looking to avoid paying an annual fee and mostly want cash back, the Freedom Unlimited (1.5% cash back on all spending) or Freedom Flex (1% cash back on all spending, 5% rotating category bonuses, 3% on dining and drugstores) are good cards that we use a lot. On a $1,000 student loan payment, the Freedom Unlimited would earn you $15 cash back while the Freedom Flex would earn you $10. That’s cute, but $10 isn’t going to get you to the airport for this mythical beach trip. PPK is valuable because you can use it to hit the minimum spend requirements on a ton of new credit cards with massive sign-up bonuses. For example, if you can sign up for the Chase Sapphire Preferred ($95 Annual Fee, lots of travel benefits) and make a $4,000 loan payment via PPK, you can earn a 80,000 Chase Ultimate Reward point sign up bonus, which is worth roughly $1600 when used for travel. That’s like a 40% rebate on your student loan payment (37.6% if you subtract the annual fee from the return). Most recently, I used the World of Hyatt credit card (offered by Chase) to earn enough points for two free nights in the Maldives plus a free night certificate at a more modest hotel category 1-4, like, oh the Park Hyatt Istanbul nbd. I paid off $15,000 in loans and I’m receiving something like $2,500 in value back — all while improving our net worth. There are whole courses by real experts on how credit cards, points, and miles work, so I won’t ramble further here. Main ideas: Chase, new cards with lucrative signup bonuses. For more on travel hacking, check out 10xTravel — their free course will open doors and explain the million things I’m glossing over right now.
- Call or secure message the bank to set your cash advance limit to $0 or the lowest possible number. At Chase, the minimum is $100.
- Make a test payment that’s more than your cash advance limit, but less than $2,999 (the PayPal Key max). For a test payment, I usually go with $125 if my cash advance limit is $100. For large payments, I usually do $2,500 at a time and space the payments roughly three days apart.
- After a few days, the payment will be applied to your loans. Make sure the payment was applied according to your overpayment directions.
- Pay off your credit card.
Refinance ~$5,001 at a time
SoFi offers student loan refinancing, and new customers can score a refinance bonus by doing a refi of at least $5,000. Receive $10 for checking your rate and $300 for refinancing at least $5,000 in student loans. That’s a ~6% return. Interest begins accruing immediately, so you’ll have a pay a few dollars in interest due to the gap between when you finalize the loan and the moment you’re first able to make a payment, but it still ends up being a net gain of over $300 if you pay the refi off as soon as the site allows. If you move forward with the refi, SoFi will do a hard pull on your credit, so this isn’t something to play with before purchasing a car or house, when a temporary ding to your credit score can result in a less advantageous car loan or mortgage rate.
This is key: you don’t have to refinance all of your student loans at once. I refinanced one loan amounting to $5,013 to get the refi bonus and left alllllll of the other loans as federal student loans with all of the very good protections and forgiveness options. When filling out my SoFi refinance application, I was able to select the loans I wanted to refinance, and I just picked one that was $5,013 in order to qualify for the bonus. Keep in mind that I don’t think you have the option to refinance only half of a loan; this is where a carefully crafted strategy planned in a spreadsheet or undebt.it can pay off — I certainly have some loans I’ve been carefully whittling down to $5,001 in anticipation of a future refinance.
Keep in mind that SoFi does issue 1099 forms to customers who receive $600 or more in bonus income like this in a calendar year (and they have the option to send them for amounts under $600, too). In short, the income is taxable whereas credit card cash back and points are considered rebates, and are therefore not considered taxable income at this time by the US IRS. For this reason and more, refi is not my top pick.
The first student loan refinance should earn you a bonus, but check the terms and conditions carefully before doing another refinance as an existing customer with SoFi or another lender. In some cases, current customers are excluded and in others, they can qualify.
Before moving federal loans to a private lender — especially right now — make sure you have the cash on hand to immediately pay them off and minimize the interest paid.
If you do take advantage of this offer, check out the comment from Oliver on this Doctor of Credit post for info on how to click the right buttons to receive the $300 bonus for refinancing; it’s not automatic, and the $300 is paid to the checking or savings account of your choice (but you need to submit the routing numbers).
Things I’d consider if my favorite options dried up
Paying by phone with no-fee gift cards (Visa)
If every other option goes to shit, I’ll resort to using my Chase Ink Business Cash card to buy no-fee Visa gift cards at office supply stores for 5x in Chase Ultimate Rewards points. Since I already hold the card, I’d earn roughly $100 in Chase Ultimate Reward point value per $1,000 of gift cards I buy (which I could use to pay my loans off by phone after registering the card online with the issuing bank so it works like a debit card). I’m jumpy about gift cards because of the possibility that they could be loaded incorrectly or lost, so I’m not racing to do this, but plenty of people do because it’s super lucrative. Doctor of Credit sounds the alarm when no-fee gift cards are offered at office supply stores. The cards tend to go fast during the no-fee promotions; I would not pay a fee for a gift card unless I was totally out of other options. The 5x offer at office supply stores only works if you have the Chase Ink Cash business card; you can apply as a sole proprietor by using your name as the business name and SSN as the business EIN (it’s even ok to report your business income as $0). If you, say, sell skincare samples on eBay, you have a business, congrats. The 10xTravel course explains all about how this works and how not to screw up your application for a business card.
Things I don’t do
Many points and miles blogs have suggested using a payment processor called Plastiq to pay student loans with a credit card (for a fee). As of May 2021, Plastiq is not longer offering that option for any credit card brand.
Gift of College gift cards
It’s possible to buy Gift of College gift cards, set up an account, and then apply those cards to your student loans (actually getting a payment to the servicer takes a few weeks). The problem is the fees you’re charged each time you buy a card: it’s something like $6.95 per gift card and the vast majority of stores that even carry these cards offer them only up to $200, meaning a fee of over 3.4% per card. Between the fees, my paranoia about improperly activated gift cards, and the vastly better options offered by PPK and selective refinance, I’m skipping this.
Some Money Resources
Financial Products I Use
- PayPal Key (virtual debit card)
- SoFi Student loan refinancing (receive $10 for checking your rate and $300 for refinancing at least $5,000 in student loans. Not available to residents of Vermont. No funding bonus paid to borrowers who reside in Ohio.)
- YNAB (make a budget)
- Personal Capital (track your net worth)
- r/personalfinance flowchart (how to prioritize spending)
Learning about points and miles
- 10xTravel free travel hacking course: free and low-cost travel is possible, even if you’re paying off student loans — but it requires some work and learning. 10xTravel has a free, non-scammy course that covers the basics.
Rebates for shopping and dining
I’m a fan of rebates for shopping.
- Seated: receive gift cards of your choice for patronizing restaurants (in-person/pickup/delivery) in Boston, NYC, Chicago, Philly, or Atlanta and uploading your receipt. Seriously. Receive $15 for signing up and dining once.
- Cashback Monitor: check which shopping portal is offering the best rates
- Rakuten: click a button, check out, earn a rebate. The signup bonus varies; at the time of publication it’s $40 after spending $40 (which is amazing).
- TopCashBack: click a button, check out, earn a rebate. The signup bonus varies; at the time of publication it’s $20 after spending hmm I’m not totally sure lol.
- Dosh: link your credit cards and automatically get cash back. Super easy.
- PEI: link your credit cards and automatically get cash back. Also super easy.
Online micro work sites
When cutting spending isn’t possible, making some extra money might be the answer. I’m testing a few micro work sites and I’ll add any that are legit and actually pay. A few warnings: beware of scams and major privacy breaches, expect to pay taxes if working with a US-based site that collects your SSN (reported on a 1099), and background check all sites using the subreddits listed below before doing significant work.
- dscout: do user testing missions and interviews for super fair pay; pays via PayPal around 10ish days after the close of the mission; income will be reported for tax purposes
- Prolific: do pretty interesting academic surveys for fair pay; requires a scan of your ID; pays twice per week (upon request, must be over £5) via PayPal; no tax reporting
- UserTesting: test websites, make about $1 per minute when you qualify for tests; pays via PayPal 7 days after the job; income will be reported for tax purposes
- r/beermoney: a community devoted to sharing info about micro work websites
- r/usertesting: a community devoted to sharing info about usertesting.com and other online user testing websites
I doubt that my techniques will work for everyone, so my goal with this post is to hopefully give everyone one new thing to try or think about.
Given the complexity of the topic, I’m certain that I’ve moved too quickly over some things or missed others entirely. I think I need to just publish this or it will linger in drafts forever!
Have questions? Ask in the comments below!
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