By Allana Akhtar
September 24, 2018

Elementary school teachers use simple paper chains to decorate their classrooms. But law school graduate Joshua Holt used them to pay off $202,000 worth of debt.

Upon graduating with $192,000 in student loans and an additional $10,000 salary advance he needed to pay back, the New York-based lawyer and blogger says he used behavioral psychology and games to tackle his debt. One clever trick was to hang a long paper chain from his staircase, with each link representing $1,000 in debt. Every time he paid off $1,000, he ripped up a link and watched the chain get smaller.

“I really wanted to visualize how much I had left,” Holt told MONEY. “Seeing that every day was hugely motivating because it just reminded me the student loan debt was still in my life.”

Courtesy of Joshua Holt

Other tricks included adjusting his tax withholding to receive one large refund during tax season instead of more money in his paycheck each month; paying himself a salary first and putting the rest into a Vanguard account; and timing his last loan payment to Christmas Day.

“I was playing these games because I realized behavioral economics was just as important as anything else,” he said. “It’s not about making the right choices 1,000 times over the course of a year. It’s about making one right decision.”

The behavioral psychology hacks worked wonders. Holt managed to pay off his six-figure debt in just seven years — and even saved money in the process.

Holt revealed the details behind his major debt payoff, plus his advice for other grads struggling with student loans. (This Q&A has been lightly edited for clarity.)

How big was your debt?

I had $191,981.91 in student loans and interest, plus a $10,000 salary advance.

Did you anticipate you’d leave law school with that much debt?

I did know I was going to be taking on six figures of student loan debt. I took a calculated risk because I thought that having the law degree would result in lifetime earnings that would be significantly higher if I didn’t have the law degree.

But I didn’t appreciate how the interest would compound. I probably only borrowed $170,000 worth of student loans, but because the interest rate is anywhere between 6 to 8 percent, you’re accruing that interest all throughout law school.

What was your initial plan to pay it off?

I knew if I wanted to pay it off quickly I was going to make a lifestyle change. I realized I owed $191K, I had a starting salary of $160K, and after paying taxes, it was going to take years and years to pay off the loan if I was just paying a couple thousand dollars a month. To make that change, I decided to live with a roommate. I split a two-bedroom two-bathroom apartment in Brooklyn.

I also didn’t allow myself to have any kind of lifestyle inflation. I was a law student in Boston before working in New York. I was accustomed to $1 beers and not having any money. I knew I couldn’t treat myself any differently; effectively, I was still the same law student who needed to be paying $1 for beer and not spend a lot of money.

What other steps did you take?

I basically paid myself a salary. For instance, you could say, “I’m going to give myself $4,000 a month to live off of.” I had that amount from my paycheck deposited into my checking account, and I had everything above that amount deposited into a Vanguard account. That excess amount got bigger and bigger over the years as I got raises, stopped having to pay social security taxes, or got an extra paycheck.

You will spend as much money as you have, but by limiting and making those choices in advance, I took those decisions out of my hands.

Are there any other big automated decisions someone can make?

Here’s another strategy I used: Most people try to not have a tax refund at the end of the year. The typical [reason] most people use is, “Why would you want to give the government interest-free loans?” Well, I’ve always had my withholding set at the lowest possible level, which means they are taking out as much money as possible. Every year for the last 9 years, I’ve had multiple thousand dollar tax refunds.

The reason for that, and I think behavioral economics backs it up, is it’s much easier to make a good decision one time than it is to make a good decision 26 times over a much smaller amount. If you’re getting $100 extra in your paycheck, you have to decide 26 times [a year] to save that $100 and make sure that $100 makes it to your student loans.

Where did the paper chain idea come from?

It’s kind of hard to motivate yourself to pay off student loans at a certain point. You feel like you’re throwing money in a black hole, so I created paper chains and hung them up from my staircase. Seeing that every day was hugely motivating because it just reminded me the student loan debt was still in my life. That year we had $77,000 worth of debt, and we paid everything off by December 25.

The debt chain made it a game for me. Having a goal in mind, knowing I was going to pay off my debt on Christmas Day, meant that every month I had to think, ‘Well if I don’t make this payment, I’m not going to make my goal.’

Did you only realize you were using these games in retrospect?

I don’t think I knew that at first, but by the end, it was definitely something I was conscious of doing. I was playing these games because I realized behavioral economics was just as important as anything else. Keeping yourself motivated every day is kind of relying on willpower. Willpower is a fleeting strength. If you rely on willpower to lose weight, for example, it won’t work, but if you don’t bring unhealthy food into your house, then you won’t eat as much.

I did the same thing with money. I didn’t want to rely on willpower to make my decisions on saving money. I wanted to set up systems so that it would automatically happen.

Did you have to make any other sacrifices?

I didn’t feel I was sacrificing anything compared to my peers, but of course I was. They were certainly traveling and going out more than I was. But I was still taking trips, I definitely was eating out, I was dating. It was nothing like living a Spartan lifestyle. I don’t think that’s sustainable.

I caution young lawyers who tell me their plan is to rent an apartment with four other people in Queens and all they’re going to do is go home and play video games, and they are going to pay off their debt in 2 years. That sounds great in theory, but when you actually have to live those two years, that’s not sustainable. You should find a better plan.

It’s impossible to do nothing but pay off the debt. I think you need to give yourself some money for fun.

What was the biggest lesson you learned?

Debt sucks. The race is long. The challenge isn’t necessarily coming up with a plan to pay it off — it’s implementing the plan.

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