025 | The Fastest Way to Pay Off Those Law School Loans

Are you struggling with student loans from your law degree? Do you want to know the fastest way to pay them off?

In this episode, I take you through the exact method my husband and I used to pay off over $400,000 of debt and why it works.

Lightly edited transcript appears after the show notes.

Topics Discussed

• the importance of mindset when paying off debt
• some things to have in place before starting your journey to pay off debt
• the fastest way to pay off debt
• an example of how this method works from my husband’s and my debt journey

Listen to the Episode

Resources mentioned

Lifestyle Freedom Starter Guide: https://www.rhothomas.com/start

Wealthyesque, Episode 22: https://www.rhothomas.com/why-youre-struggling-to-pay-off-debt

Wealthyesque, Episode 7:  https://www.rhothomas.com/budgeting-for-lifestyle-freedom-and-financial-independence/ 

Wealthyesque, Episode 17: https://www.rhothomas.com/how-to-budget-using-the-zero-based-budgeting-method-for-lawyers/

Budget template: https://www.rhothomas.com/budget

Debt tracker: https://www.rhothomas.com/debttracker 

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The Wealthyesque Community: https://www.rhothomas.com/community

Social media: @iamrhothomas on Instagram, Facebook, Twitter, LinkedIn

Email: hello@rhothomas.com

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Lightly Edited Transcript

Hey friend. Happy Friday! Welcome back to the show.

How is everything going? I am in my house alone because my husband took the kids to pick up dinner. And I have a moment to myself, and so I said let me go ahead and record this episode for you. So here we are.

Before we get into the show, I want to remind you to leave a review for the show if you haven’t done so already. As I mentioned before those reviews really help the show to get seen.

They help the platforms to show it to other people, and people will be more likely to want to listen, if they see that there are reviews for the show. It’s not just two reviews, right? So take a second and hit pause and go ahead and leave a review, I would greatly appreciate it, and I read every one.

So today we’re going to talk about how to pay off debt fast, and it’s not any sort of gimmick, or you know magic bullet or anything like that, but paying off debt takes discipline and intentionality, and if you’ve been following our journey at all then you know that we are paying off over $670,000 of debt, and really it’s, it’s like $725,000 because we also took out a $25,000 car loan last year, and my husband’s student loan accrued like $30,000 in interest, while he was in residency and we were focused on paying my loans off.

But we’ve been going for the last four years, and it’s been tough at times for sure like it’s, it’s tough trying to crawl out of so much debt, but we’ve paid off over $400,000, and so I just want to encourage you that you can do this, but it starts with you.

You get to decide that you want to make a change, and you can decide to view your debt differently. You can decide to believe that you can do this, that you’re not just stuck, that debt doesn’t just last forever, right. You can pay this off.

We’ve talked before about how the way you think about your debt is the number one thing stopping your progress. Head back to Episode 22, if you don’t know what I’m talking about.

But your mindset is the key to change. You have to believe you can turn things around before you’ll actually be able to do it.

Henry Ford once said, “Whether you think you can or think you can’t, you’re right.” And that’s so true. It’s one of my favorite quotes. I say all the time that just the thoughts that you have can really influence the way that you’re able to go about achieving goals that you have because if you believe it’s impossible, then you’re not going to be able to take action to reach the goal. So just decide that this is doable for you. And once you do that then you’ll be able to come up with a plan to really take action.

A few other key things that I think you want to have in place before you start paying off your debt, I’d say include a budget. So you want to make sure that you’re able to direct your money toward your financial goals, in this case debt repayment.

And if you need help with creating your budget, you can check out Episode 7 and Episode 17. And then you can also download a free budget template. It’s the exact template that my husband and I use. I just made it look a little prettier and organized it better for you.

But head to rhothomas.com/budget if you’d like a budget template to help you get started with your budget and so you can see where exactly you want your money to go and you can direct it to where you want it to.

Also, I think you should have an emergency fund in place, and the fallout from the pandemic has really highlighted the importance of having a cushion, right. People who were in positions that they never expected to be let go from were let go. People were furloughed. People have received pay cuts. All of that kind of thing.

And so, you just want to make sure that you are protecting yourself in the best way that you can because you just never know what can happen. Obviously, we never saw something like a pandemic coming, but there are all kinds of things that are more common that could also happen, so having an emergency fund in place before you start on a debt repayment journey is very important.

So that’s some of the foundation stuff to get you started. Getting into the actual debt repayment part, there are two main methods that people use. So the one we’re going to focus on is called the debt snowball.

That’s exactly what my husband and I have been doing. And as I mentioned we have paid off over $400,000 over the last four years, and I think the fact that we started with this method is a large part of that.

So with the debt snowball, you list your debts from smallest to largest. And you can download the exact debt tracker that we use at rhothomas.com/debttracker. But you list your debts from smallest to largest, and you pay the minimum on everything but the smallest one.

Then you put every extra dollar that you have each month on that smallest debt until it’s paid off. And you can easily see how much extra you have when you do a budget, which is why I recommend doing a budget before you start paying down debt.

And then, once this smallest one is paid off, then you put all the money that you have been putting towards the smallest one to the next one, while still paying the minimums on everything else. And you keep going like that until all of your debts are paid off.

It’s called the snowball because the amount that you’re able to pay on each successive debt keeps growing because you are putting the money that you were paying on the previous debt toward that next one.

It works because the mindset piece that we talked about earlier, right, like you believe you can pay off your debt as you pay off more and more debt and so that keeps you motivated to keep going.

One of the biggest criticisms of the debt snowball method is that mathematically you could end up paying more if you ignore interest rates the way that the debt snowball method teaches. That’s all good and all, but first personal finance is way more about mindset than math. And second, there are studies that show that people who use the debt snowball method get out of debt faster because of the mindset.

You get these quick wins with the debt snowball; you see progress faster; and so you’re motivated to keep going.

If you look at our situation for example, my husband’s student loan was $340,000 when we started. He consolidated his loans. And so his student loan was $340,000 when we started. It got up to $370,000 with all of the interest that accrued when he was in residency because we were on one of those income based repayment plans, and the minimum payment, based on his resident salary and the amount of the loan, like the minimum wasn’t even touching the interest.

And so the interest rate was 6.625%. And we’ve been paying on the loan for over two years now. We still have $120,000 left on it. But we had eight other loans that had four and five figure balances and the interest rates on those were between 4% and 6.5% interest, plus we had a car loan, plus we had our mortgage and so if we were paying our loans off based on interest rates, then we would have less money to put toward my husband’s loans, because we would still be paying the minimums on those 10 other loans.

Plus we might have given up by now because it’s taking so long to pay off his loans. We wouldn’t have been getting all of those paid in full letters as quickly like we had been doing with paying smallest balance to largest balance.

My husband’s loan is the last one left besides our mortgage. Can you imagine the motivation we have to get it paid off versus “oh we finally finished with this one and now we still have 10 other ones that we have to pay off.”

You don’t have to be super technical, mathematical, like, “oh well this interest rate is costing me more.”

I know for a fact that the way that we paid our loans off, where at one point we were actually paying loans off like one a month or one every two months, like we were getting really quick wins.

Had we been working on this monster, you know, $300-some odd-thousand loan. And, you know, been paying on it for like three years, the same loan and not really seeing progress, I don’t think that we would have made the same progress that we’ve made on our total loan balance if we had been worried about paying it on the interest rate.

That’s why people are paying off debt faster with the debt snowball method, as opposed to looking at interest rates and trying to make sure that you pay the exact least amount of debt.

You don’t have to be super rigid in following the debt snowball. We’ve treated that as a general rule of thumb, but we’ve also tackled loans out of order.

So for instance, there have been times where we got a lump sum of money like a tax refund, and maybe we could knock out a loan that would free up more money than if we had tried to pay off the smaller loans that were actually next on the list.

Right, so maybe there was just, by way of example because I can’t recall exactly what happened, but let’s say that there was like $4,000 and a $6,000 loan, and the minimum payments on those combined were $200, but then there was a $10,000 loan, where the minimum payment was $350.

If we had some sort of lump sum, like $10,000, we would go ahead and knock out that $10,000 loan to free up the $350, as opposed to paying off the next two that were actually supposed to come in order.

So you can do that kind of thing if you want to. Personal finance is personal. You don’t have to do exactly what I’m saying to do. You don’t have to do exactly what anyone else tells you to do, but I’m telling you that this method works.

I think that when you are trying to do something like pay off six-figure student loans like lawyers tend to have, you have to do what works right? The best method is the one that works.

I recommend the debt snowball because seeing those quick wins is motivating. You see your plan is working. You feel encouraged so you keep going.

Like I said, we’ve paid off over $400,000 in the last four years using this method. We can see the end in sight versus four years ago when it just felt like a gut punch and like “oh my gosh we’re drowning in so much debt, how are we ever going to pay this off?”

So if you’re trying to pay off debt, I truly believe this is the fastest way. And if you need help, coming up with a plan to manage your money, pay off your debt, let’s set up a call to see if coaching might be right for you. Head to rhothomas.com/coaching.

Let’s recap.

1. Paying off debt takes discipline and intentionality.

2. Your mindset is everything when you want to make a change in your finances.

3. Create a budget and build an emergency fund before you start paying off debt.

4. Personal finance is more about mindset than math.

5. The debt snowball is the fastest way to pay off debt. It keeps you motivated to keep going because you see quick wins.

Okay, that’s it for this episode. Join me over in the Facebook community, The Wealthyesque Community, and let’s chat about your student loans, about the debt snowball method, what do you think of this method? I am all ears, and you can head to rhothomas.com/community to find it.

As I mentioned at the beginning of the show, please take a second and leave a review. Those reviews help the show to get seen, and just increase the visibility, help us to get this message out.

If you found value in today’s episode, please share it with a friend who you think could also benefit. And if you share on social media or if you just want to connect my handle is @iamrhothomas. I’m most active on Instagram, although you can find me on a few other platforms, as well.

As we close out friend, I pray that you will take a minute and really get a hold of your numbers and see where you stand with your debt.

I pray that you will try out the debt snowball method and really get going and get some momentum behind you in your debt freedom journey.

And as always, I pray that you will continue to take steps to regain control of your time, build wealth, and live the life of freedom and choice you deserve.

Talk to you later.