How I Paid Off $60,000 of Student Loans (And Bought Two Houses)

This is a guest post by Financial Wolves, a blog about making money with side hustles to help you achieve financial freedom. It’s the story of how they paid off student loans while also investing in real estate.

Paying off student loans is a long journey that can feel like a roller coaster ride. Some days you feel like you are making massive progress. Other days feel like you have too far to go, so what’s the point?

But the point is obvious: Flexibility and freedom. Student loans cripple your ability on a monthly basis to do the things you actually want to do.

I’m starting to believe the government loves student loans because it forces people to work. You become enslaved to working because you need to, not because you want to. Student loans limit people from doing what they love to do work wise.

For example, what happens if you get burned out working in your job? Well, if you have student loans you have few options to simply take time off or switch careers.

For me, that was the ah-ha moment that sparked a massive urgency to payoff my $60,000 of student loans as fast as possible.

But There Were a Few Things to Think About

I wanted to repay my student loans, but I’m generally not the frugal type. I’m more focused on making money rather than cutting it. (You can cut your expenses, but only so far. You can never cut your expenses to $0. But with increasing your income, your options are endless.)

And I did not want to miss out on investing and building a foundation of making my money work for me.

I wanted to invest and repay my student loans.

I love real estate as an asset class. It’s a simple type of investment that is easy to understand, and people are always going to need somewhere to live.

So going into my student loan repayment plan, I knew my goal was to pair the flexibility of being student loan debt free with real estate investing.

Here’s how I did it.

3 Tips to Payoff Student Loans While Investing in Real Estate

Here are some of the tips that worked for me to payoff student loans while also buying real estate.

1. Focus on the Cost of Borrowing

I’m someone that likes to optimize. I like to let the numbers speak for themselves. So, I did the same with my student loans.

I like to decide on the order of prepayment vs investing based on likely return. It’s pretty simple.

Here’s how I looked at it:

• For student loans that are greater than 5%, prepay them before others.
• The stock market and real estate market have average long term annual rates of return of about 7% and 9%, each. Conservatively, that is about an after-tax return of 4.55% and 5.85%, each. After-tax rates just account for the taxes you’d have to pay on your returns. At some point when you sell, you’ll have to pay taxes on your gains. I used a 35% tax rate. So for student loan interest rates below the after-tax rates of return, focus on investing or saving for real estate (depending on your goals). Focus on retirement plans that reduce that tax burden first. Then, move to after-tax accounts.
• For student loans with interest rates lower than the above rates, focus on prepaying them after hitting some of the investing goals for the year.

Always be optimizing your personal cost of capital. Your money should be going in the right places to build wealth. If not, you are simply putting yourself in a less than ideal position.

The way I followed the above plan is:

• I took all extra income from my day job to prepay highest rate student loans first (ones above 5%).
• Once those were gone, I used day job income and freelance income to save for real estate down payments while still contributing to my retirement accounts.
• Once I hit my downpayment target, I switched to paying off the lower interest student loans until they were gone.
• Finally, I switched back to saving for a downpayment on my second home. It’s a bit of a challenge to mentally save for another house while you still have debt. For me, it was all about the long-term picture of building wealth. Real estate is a simple way to build wealth. If I could invest in real estate that would increase my income, paying off the last of my student loans would be easy.

I wanted to buy real estate because it would help in spreading out my pool of assets.

I’ve worked hard to contribute to retirement at the max amounts each year as well as to add to after-tax accounts.

But, with real estate, you are in control of your holdings. You can make decisions to improve the property, sell or cash flow the property. This is a huge advantage.

Plus, while it sounds a bit contrary to common sense, I wanted to use low-cost debt tied to an asset that should grow in value to build wealth. The repayment of a mortgage plus cash flow using other people’s money can be an efficient way to build wealth. Why?

• Real estate can help increase your income by using the cash flow from the property.
• You can build equity through an amortizing mortgage.
• You open the door to further price appreciation over time.
• Real estate is an inflation protected asset class. Debt is not. Debt becomes less valuable over time.

Fast forward to today, it paid off big time.

The real estate investment I made grew ~25% in value while I also amortized a low-interest mortgage.

After paying off student loans, I can now focus solely on building a rental property business.

2. Your Current Income is Not Enough

I alluded to this a bit earlier. Income is king. From the ESI Millionaire series, most millionaires have grown their income over time and have more than one income source.

When you are bootstrapping yourself with student loans, your current income will not cut it. You need to have a sense of urgency to increase your income to repay debt or invest at a fast rate.

The good news is making extra income has gotten a whole lot easier over the past few years. With technology advancements, industries are being created overnight. In the past, people would have to focus on part-time jobs to earn extra income, like tending bar, bagging groceries, etc.

Things like gig economy jobs or freelancing, have opened the doors to income opportunities overnight.

For me, it was freelancing. Again, go back to the thought of optimizing your money. My college degree was in finance. I knew I had a ton of transferable skills that could be used to make money. I started by charging $60/hour for freelance financial modeling or pitch deck building.

As I people got to know my work and find value in it, I upped my hourly rate to $100/hour. If I was able to reach 1,000 billable hours a year, that would have been an extra $100,000 a year!

So, focus on your high value skills and find ways to make money from them.

The only problem with freelancing is that you trade your time for money.It’s not all that different from a day job, but it is not as scalable as some passive income sources like real estate investing or building an online business.

3. Small Wins Help (A Lot)

I’m a big fan of doing the small things to help you improve your personal financial picture. I use cashback apps or get bank account sign up bonuses to earn small chunks of change that go straight to my student loans or real estate investments.

What I did that helped:

• Use cashback credit cards to earn an upfront bonus. Then, use these cards to earn cash that can keep going to student loans.
• Link my bank accounts with apps like Drop, Dosh, Ibotta, etc to get routine cashback at grocery stores or online shopping.
• Sign up for checking accounts that pay an upfront bonus to join. You might not need to use it as a main account, but if they give you $100-$500 to sign up, why not?
• Finally, the most important of them all… I refinanced my student loans whenever possible.

The first few points might not seem like a big deal, but these are easy things to pair with other tactics like using side hustle income. They build on each other.

Finally, refinancing your student loans can be a low-time intensity, high impact way to improve your loan picture overnight.

I was able to take a whopping 6-7% interest loan and refinance it to below 4.5%. This saved me thousands of dollars over time. Pair this with a steady stream of prepayment, you’ll be crushing your debt in no time.

For me, this freed up more capital to keep saving for real estate.

Paying off your student loans is the gift that will keep giving.

Live within your means and establish some hustle to increase your income.

Once you repay all your student loans, every month that you no longer have the student loan payment will open your eyes to extra choices, which include being able to build your own business, invest faster, make a career change, take some time off, etc. The options are endless.

Now as a sign to show your motivation to get out of student loan debt, go put an extra $50 to your loans. You can tackle your student debt!

Stay persistent and always be optimizing.

Financial Wolves is a blog focused on helping you make more money to achieve financial freedom. After repaying student loans, I’ve shifted my focus to make more money from side hustles, real estate, freelancing, and the online economy. Follow us on Pinterest, YouTube, Twitter, and Facebook.