My student loan mistakes and a terrible scam cost me thousands. How I dug myself out

Graduating from college can be an exciting new chapter. In a perfect world, you get a well-paying job to start building your savings. But six months later, it’s time to start paying off any student loans you took out. This change can be jarring. Especially when you have tens of thousands of dollars in debt.

I made a lot of mistakes when I started paying off my student loans. From avoiding monthly payments to committing fraud, my plan to pay off my loans wasn’t ideal.

Ultimately, I was able to pay off the $15,000 balance of my student loans, but it cost me an additional $4,500 in interest and fees from a scam. Here’s how I paid it all back despite the costly mistakes and how you can avoid them too.

Read more: Student loan payment pause for SAVE borrowers extended for another 6 months

The 4 Biggest Mistakes I Made With My Student Loans

I learned this the hard way when I was paying off my student loans. Here’s what I did wrong:

🚫 I didn’t prioritize my student loan payments

In 2011, I graduated with a bachelor’s degree in computer science and $15,000 in student loans. Even though it was much less than the average amount most borrowers put up ($37,797, according to Experian), it was still a large amount that I didn’t really want to pay back.

So I did what most of us do: I made the minimum payment for years and didn’t really think about it. Then, after my first year of payments, I experienced multiple job changes, layoffs, and surprise expenses. I put my student loans on hold. I didn’t consider it a priority compared to everything else that was happening. And this perspective led to several other errors.

🚫 I didn’t know how student loans worked

I have to admit that when I applied for my student loan, I didn’t really know how it worked. I just knew what I had been told: They would help me pay for the degree I needed to make a living.

I didn’t fully understand how interest worked and didn’t realize how quickly it could grow my loan balance, regardless of whether I made on-time payments or not.

🚫 I am putting my loans into deferment and deferment

If you are experiencing financial hardship, forbearance and deferment are two options for temporarily pausing your student loan payments. For some people, relief from monthly payments can help them get back on track. But they come with some compromises. If I had understood how they work beforehand, I probably wouldn’t have chosen either option.

After I was fired from my job, a student loan debt collector suggested forgiving some of my loans and deferring others. I jumped at the opportunity, even though I wasn’t really sure what I was comfortable with.

If you put your student loans into forbearance, you can temporarily stop making payments on them – but I didn’t know that interest would continue to accrue and increase my balance.

For certain types of loans, deferring your student loans may be a better option because interest doesn’t always accrue. However, if you are like me and have direct, unsubsidized student loans, interest will still accrue and capitalize. Because of this, I had an additional $2,500 in capitalized interest on top of my existing debt.

🚫 I fell for a loan consolidation scam

My last big mistake was a sucker punch. One day I received a call from a company called 1file.org to discuss the status of my student loans and offer me a consolidation option. The company claimed to be part of the Department of Education and promised simplified payments, lower monthly payments, and access to new repayment options if I consolidate.

So I did it.

This consolidated my debt into a direct consolidation loan with the Department of Education and Nelnet as the lender. I paid $2,000 in fees to 1file.org, not knowing that I could have consolidated my federal student loans myself for free.

I quickly suspected I was being scammed after reading posts from other borrowers in an online forum. Thanks to the FTC, I later found out I was right. 1file.org ran a student debt relief program that stole millions of dollars from consumers, including their data. (The FTC filed a lawsuit against 1file.org in 2019 over fraudulent student loan programs.)

I didn’t get my money back but it was an eye opener. I knew I needed a new approach if I ever had any hope of paying off my debt.

How I got my student loan debt under control

After making a series of mistakes, I finally put a plan in place to get my debt under control once and for all. So within eight years I paid off my balance of almost $20,000.

📉 I have set a repayment goal for myself

Figuring out how long it will take to pay off your student loans will help you prioritize the right savings strategy. I used a debt payoff calculator to figure out how much I needed to pay off each month to reach my goal. You can use Fedstleral Student Aid’s loan simulator to set a similar goal.

📅 I signed up for automatic payments

This may sound obvious, but it’s easy to miss a payment here and there and end up in a bad situation. To avoid unnecessary interest charges, sign up for automatic payments with your lender to make on-time payments. Most lenders even offer a 0.25% discount for signing up for autopay.

💰 I paid more than the minimum payment

I participated in an income-based plan and my monthly payment was $111. In order to pay off my debt faster, I decided to increase my payment to $350 per month. Sometimes I paid extra, sometimes not. When I earned extra money from side hustles and work bonuses, I always tried to put some of it towards my student loans.

If you’re in a tough financial situation and aren’t sure you can pay a lot more each month, start by taking a look at your monthly budget. See if there are expenses you can cut or minimize, either permanently or temporarily, to put more money toward paying off your debt.

🏦 I increased my income

If you have an aggressive debt payoff goal, you’ll likely need to make drastic cuts to your budget. However, cost savings can only get you so far. By increasing my income, I was able to reduce my debt even further.

I worked a full-time job and took on several part-time jobs, including freelance web development and writing. I also resold items and made money from my blog through sponsorships and income from ads and affiliates. Resale didn’t take up too much free time, but it was difficult to manage multiple part-time jobs with my time after work and on the weekends.

I found a way to scale my schedule. I took one day a week off from my job and side hustles. I also made time for work and exercise and regularly discussed my schedule with my wife to maintain work-life balance.

📚 I learned more about managing my money

The best cure for my financial fears was to educate myself. The more I learned about how loans work, their interest rates, and the different terminology and relief options, the better I felt about my repayment decisions.

Don’t know where to start? Here are a few personal finance books that I enjoyed:

Don’t make the same debt mistakes I did

Trust me: you don’t want to fall into the common debt traps that can cost you more in the long run. If you’re struggling with student debt and feeling overwhelmed, these tips will help you get back on track.

If you’re feeling overwhelmed or are experiencing a financial setback like I was, check the Federal Student Aid website for guidance on reducing or suspending payments. There are also certain situations in which student loans will be forgiven or canceled if you meet certain requirements. You can also switch to a different repayment plan that best suits your financial situation and may provide additional debt relief benefits.