5 Steps to Pay Off Student Loans Faster

Student loans can take a significant chunk of your paycheck, making it hard to reach your financial goals. It’s worth learning how to repay student loans faster so you can move on from this debt.

Paying your loans in a shorter time also means less interest overall. In the end, you might find yourself with more funds to purchase a house, a new car or whatever you need in life.

If you’re looking for the best way to pay off student loans quickly, here are five moves that could help, along with some additional tips for becoming debt–free:

1. Make extra payments
2. Consolidate and refinance
3. Avoid capitalized interest
4. Pick the right repayment plan
5. Use a cash windfall
Plus: Additional ways to tackle student loan debt

How to pay off student loans fast

Dealing with student loan debt can be burdensome and stressful. Developing a strategic plan can help you stay on track and get out of debt quicker. Here are some steps to consider taking:

1. Make extra payments

Fortunately, there’s no penalty for paying above the minimum or repaying your student loans early. However, student loan providers will typically apply any extra payments to next month’s bill — not the principal.

As a result, you’ll need to contact your provider and explain how you want extra payments handled. Specifically, you’ll need to request principal-only payments, which ensures the additional funds go directly toward your loan’s outstanding balance.

Most loan servicers allow you to make such changes online. Otherwise, you can try calling them directly.

Even if your budget is tight, every dollar helps. For example, let’s say you owe $20,000 with a 4.99% interest rate on the standard 10-year plan. If you include an extra $75 per month, you’ll finish paying the loan three years earlier and save $1,788 in interest.

Experiment with our student loan payoff calculator to see what difference extra payments can make.

Benefit of biweekly payments
Another option is to switch to biweekly student loan payments. This splits your monthly bill in half, so you’ll still pay around the same amount each month as you were before. However, you will make the equivalent of one extra payment each year. You can try this method on its own, or you can supercharge it with additional extra payments.

2. Consolidate and refinance

If you have a solid income, a credit score in the high 600s and a debt-to-income ratio below 50%, you might want to consider a student loan refinance. Refinancing can decrease your interest rate, allowing more of each month’s payment to go to the loan balance.

Besides hopefully trimming your interest rate, refinancing could also allow you a small monthly payment, if you extend the length of your loan. You also have the option to combine all your loans (and their individual monthly payments) into a single bill — though you can also refinance just one student loan at a time if that works best for your situation.

Keep in mind the main advantage to refinancing is to secure a lower interest rate — if you can’t find any attractive rates or loan terms, it’s best to postpone a refinance. Try using our student loan refinance calculator to ensure you’re getting a good deal.

Example: Student loan refinance
Current loan Refinanced loan
Loan amount $20,000 $20,000
Term length 10 years 8 years
Interest rate 7.5% 3.5%
Monthly payment $237 $239
Total interest $8,488 $2,959
Total payment $28,488 $22,959

As you can see in the above example, dropping from 7.5% interest to 3.5% could save you $5,529 in interest while maintaining a similar monthly payment, allowing you to repay the debt approximately two years earlier.

Student loan refinancing rates can fall below 3.00%, making refinance an excellent choice for getting ahead of your debt. For current rates, check out our student loan refinancing rates.

Beware of refinancing federal student loans!
Refinancing federal student loans is generally not advised since you’ll lose access to certain government-funded benefits, such as income-driven repayment plans and student loan forgiveness. However, if you’re not eligible for those programs, then refinancing your federal loans might be worth it — but only if you can find a lower interest rate than you’re currently paying.

3. Avoid capitalized interest

Apart from Subsidized Federal Student Loans, your loan will accrue interest while you’re attending school. (Subsidized Loans also accrue interest but the government pays it while you’re in school). Once you hit repayment, all of that interest capitalizes — meaning it’s added to your student loan balance. In essence, you’ll be paying interest on top of interest.

You can avoid capitalized interest by making monthly interest-only payments while in school and during the six-month grace period after graduation.

And if you pause repayment with deferment or forbearance, you can still opt to at least send in the interest amount and stop your balance from growing. Alternatively, you can make a lump payment right before your payments resume.

4. Pick the right repayment plan

Federal loans automatically come with a 10-year standard repayment plan. Private loans also typically come with a 10-year plan, although some lenders offer 20- to 25-year repayment plans.

If you can’t afford extra monthly payments, sticking to the standard plan is the fastest way to pay off your student debt.

While the federal government offers assistance to those in need, such as income-driven repayment plans, be aware that these plans can extend your payoff deadline to 20 or 25 years. Furthermore, a student loan consolidation can potentially lengthen your plan to 30 years.

But despite this, if you struggle to make your minimum payment, it might be worth changing your repayment plan. (Note that you might be unable to change your repayment plan if you have a private student loan).

However, if your ultimate goal is to pay your debt at record speed and you can afford the monthly payments, then the 10-year standard plan is a solid choice.

Automate your savings with autopay
Many lenders and student loan servicers offer a 0.25-percentage-point rate deduction when you enroll your student loans in autopay. Although this discount might not seem like much, it adds up over time. Furthermore, the “set-and-forget” method ensures you’ll never accidentally miss a payment. Reach out to your provider to see if they offer an autopay discount.

5. Use a cash windfall

Cash windfalls can include any unexpected or bonus earnings, such as an inheritance, lottery winnings, a settlement from a lawsuit or insurance claim, work bonuses, a hefty tax refund and more.

If you suddenly get a chunk of money, you might feel tempted to spend it on fun stuff. However, you can make a serious dent in your student loan debt by applying some (or all) of it toward your loan balance.

Plan ahead by deciding how much “windfall” cash to devote to student loans. You’ll want to cover essentials and set aside some emergency funds if you can, but after that, you could funnel the rest into your student loan account.

Additional ways to tackle student loan debt

Successfully paying off your student loan debt takes a lot of persistence and dedication. And money, of course. Here are some more ideas to explore when considering the best way to pay off student loans.

Find a job that offers student loan forgiveness

Certain jobs may offer forgiveness for part or all of your student loans. See our Public Service Loan Forgiveness and teacher student loan forgiveness guides for more details. Keep in mind that you’ll need to meet very specific requirements and complete the entire term of work to receive any type of forgiveness.

Additionally, some employers offer student loan repayment assistance. Check with your HR department to see if your company has such a perk.

Apply your raises

Hopefully, you work at a job where yearly raises are part of the compensation. You could use your raise to buy more stuff — a bigger TV, a better car or more exotic vacations. But, just as with a one-time windfall, why not put a chunk of it toward student loan repayment?

Focus on your budget

Improving your budget is an option if you want more money but can’t quickly increase your income. You can move to a cheaper apartment, skip meals out, buy second-hand clothes and try other money-saving strategies.

Earn extra with a side gig

If you’re still looking for extra cash, you could try supplementing your income with a side gig. Not only will your extra income help you pay off student loans faster, but you might also learn some new skills and have fun along the way.

Be strategic about your debt

When tackling debt, you have two common methods to consider: debt snowball vs. debt avalanche. You have to decide if you want to…

  • … pay the smallest loan first (snowball), which gives you a sense of momentum to continue paying off more debt
  • … tackle the highest interest loan (avalanche), which saves you more money in the long run.

Whatever the method, try to be intentional about it. With enough focus and commitment, you’ll hopefully eradicate those loans in a short span of time.

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