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How to Pay Off Student Loans Fast
By Cassidy Horton MONEY RESEARCH COLLECTIVE
Let’s face it: debt is stressful. By paying off your student loans faster, you’ll reduce your financial stress and have one less thing to worry about each month.
If you want to get rid of your student loans ASAP, there are a few things you can do to make it happen. Explore the strategies below, pick one or two you can implement today, and you’ll be on your way to debt-free living.
Table of contents
- 9 ways to pay off student loan debt
- How do I check my student loan balance?
- Should you pay off your student loans early?
- Paying off student loans fast: Summary
9 ways to pay off student loan debt
1. Make more than your minimum payment
The first and most obvious way to pay off your student loan debt fast is by making more than the minimum payment. Even an extra $50 per month can make a big difference in how quickly you pay off your debt. And as an added bonus, you’ll save on interest charges too.
This chart shows how much faster you could pay off your student loans with an extra $50, $100, or $200 a month.
| How much can you save with additional payments? Example: $35,000 loan, 10-year loan term, 5% interest rate, $370 monthly payment |
||||
| No extra payments | $50 extra per month | $100 extra per month | $200 extra per month | |
| Pay-off time | 10.1 years | 8.7 years | 7.6 years | 6 years |
| Total payments | $44,591.68 | $43,082.79 | $41,989.82 | $40,509.99 |
| Total interest paid | $9,591.68 | $8,082.79 *You save $1,508.89 |
$6,989.82 *You save $2,601.86 |
$5,509.99 *You save $4,081.69 |
Source: calculator.net
If you plan on making extra payments, here are two tips to keep in mind:
- Request that your lender put your additional payments toward your loan principal balance. Otherwise, they may just apply it to your interest charges first, which won’t be as helpful.
- If you have multiple student loans with different interest rates, focus on paying off the loans with the highest interest rates first. This will save you the most money in the long run and help you get rid of your debt faster.
2. Use your tax refund to your advantage
Nothing shouts “financial windfall” quite like a tax refund (even if it’s not actually “free” cash). While it may be tempting to splurge on a new car or a trip to Europe, there’s no better way to use that money than to pay down your student loans.
Your tax refund can give you a big boost in paying off your student debt, and it’s money you were probably going to spend anyway. So why not put that extra cash to good use and get rid of your student loans that much faster? (The same idea applies if you have a side hustle or any other extra cash flowing in.)
3. Check out student loan forgiveness programs
Depending on your occupation, you might be able to have your student loans forgiven. For example, there are programs for teachers, nurses, doctors, lawyers, and military personnel who owe money on student loans. Two popular ones are Teacher Student Loan Forgiveness and Public Service Loan Forgiveness (PSLF).
Requirements for these student loan forgiveness programs vary, but they typically involve working full-time in a certain field or area for a certain number of years. If you think you may be eligible for loan forgiveness, it’s definitely worth investigating.
Many are also hoping President Joe Biden will fulfill his campaign promise of widespread student loan relief. But until then, you can study how to get student loan forgiveness (with or without the president’s help).
4. Look for interest rate discounts
Another great way to pay off student loans fast is to look for interest rate discounts. Many federal and private lenders offer discounts for setting up autopay from a linked bank account because doing so reduces the chance you’ll miss a payment.
While student loan interest rate discounts may seem small — most are around 0.25% to 0.5% — they can add up over time. On a $35,000 loan with a 5% APR and 10-year loan term, an interest rate reduction of 0.25% would save you more than $500.
5. Consider repayment plans
Another way to pay off your student debt faster is by switching to a repayment program that better suits your needs.
There are many different repayment assistance plans available:
- The Standard Repayment Plan offers fixed monthly payments for up to 10 years. This plan is best for borrowers who can afford higher monthly payments and who want to pay off their loans as quickly as possible.
- The Graduated Repayment Plan starts with lower monthly payments that gradually increase over a period of time. This plan is best for borrowers who need a lower initial payment but who expect their income to rise.
- The Income-Driven Repayment Plan is best if you’re having trouble making your monthly payments. It bases your monthly payment on your income and family size and comes with potential student loan forgiveness after 20 or 25 years of repayment.
If you’re not sure which repayment option is right for you, use the Department of Education’s loan simulator tool to find out.
NOTE: Federal student loan repayment is on pause until August 31, 2022, as part of the federal government’s COVID-19 relief efforts. Unfortunately, this pause doesn’t apply to private student loans.
6. Pay off capitalized interest
Even the best student loans will accrue something called “capitalized interest.” This is the interest your loans collect while you’re in school and during any grace periods, forbearance, or deferment periods. It’s added to your loan balance and can increase the total amount you have to pay back.
However, you can make payments on your capitalized interest while you’re in school, which can help keep your loan amount from growing too large. Additionally, you can pay the interest off in one lump sum before your repayment period kicks in.
7. Create a budget
One of the best ways to get a handle on your finances and start paying off your student loans faster is to create a budget. When you know where your money is going, it’s easier to make informed decisions about how to spend it.
The good news is that there are plenty of budgeting apps and tools out there to help you get started. Some popular ones for paying off debt include:
- You Need a Budget: This app is great for helping you keep track of your spending and creating a plan to pay off debt.
- Mint: Mint is a popular budgeting app that gives you an overview of your finances and helps you find ways to save money.
- Personal Capital: Personal Capital is another helpful tool that not only tracks your spending but also helps you invest for the future.
8. Make biweekly payments
If you get paid every other week, you might want to consider making biweekly student loan payments instead of monthly payments. This may not sound like a big deal, but it can actually help you save a lot of money and pay off your loans faster. You can also choose this approach if you’re paid once or twice a month, provided that you have enough of a cash cushion to avoid running your bank balance into the red.
How does it work? When you make biweekly payments, you’re essentially making one extra payment per year. And over the life of your loan, it can really add up.
To illustrate, let’s say you have a $35,000 student loan with a 5% interest rate and a 10-year repayment term. If you make monthly payments of $370, you’ll pay off your loan in 10 years and owe a total of $44,591.68
But if you make biweekly payments of $185 you’ll pay off your loan one year earlier—and save more than $1,000 in interest charges.
And the benefits don’t just stop there.
Biweekly payments can also help you stay on track with your budget. Because when you know you have a payment coming up every other week, you’re more mindful of your spending in between.
TIP: To make biweekly payments, simply divide your monthly payment in half and make a payment every other week. Better yet, set up automatic payments with your student loan servicer so you never miss a beat.
9. Refinance your student loans
Student loan refinancing or loan consolidation can save you a lot of money over time. When you refinance, you’re essentially taking out a new loan to replace your existing ones.
The idea is that if you find a loan with a lower interest rate, you can save on interest charges and pay off your loans more quickly. You can refinance both private student loans and federal student loans.
You’ll qualify for the best student loan refinancing if:
- You have a good credit score — usually around 620 or higher.
- You have a steady income.
- Your debt-to-income ratio is below 50%.
If you don’t meet these eligibility requirements, you may still qualify if you have a cosigner.
Just be sure to read all the loan terms and disclaimers to ensure it’s the right personal finance move for you. And if you need help, read up on how to refinance your student loans so you have all the information you need to get started.
How do I check my student loan balance?
You can check your federal student loan balance by logging into your account on the StudentLoans.gov website. Once you’re logged in, you’ll be able to see all of your federal student loan information in one place.
You can check your private student loan balance by contacting your student loan servicers. Your servicers are the companies that handle the billing and payment processing for your loan.
Should you pay off your student loans early?
There’s a lot of debate as to whether you should pay off student loans early. Truthfully, it depends on your circumstances and financial goals.
Paying off your student loans early may make sense if:
- You want to become debt-free as quickly as possible.
- You hate being saddled with debt payments every month.
- You have enough extra money in your budget to pay more while still covering all your other expenses.
Paying off your student loans early may not make sense if:
- You’re already struggling to make your monthly payments.
- You have other debts with higher interest rates that you want to focus on paying off first (such as credit cards).
- You’re trying to save for a major purchase, like a down payment on a house.
- Your student loans have low interest rates, so you’d rather take that money and invest it in the stock market or use it to start a business.
Only you can decide whether paying off your student loans early makes sense for you. If you’re not sure, consider talking to a financial advisor. They can help you create a budget and come up with a plan to pay off your debt.
Paying off student loans fast: Summary
The most obvious way to pay off your student loans fast is to make more than your minimum payment amounts. But if you don’t have extra wiggle room in your budget, that’s okay too. You can also pay your student loans off faster using these tips:
- Use your tax refund to your advantage
- Check out student loan forgiveness programs
- Look for interest rate discounts
- Consider student loan repayment programs
- Pay off capitalized loan interest
- Create a budget
- Make biweekly payments
- Refinance your student loans
Paying off student loans is a big challenge, but it’s not impossible. If you’re willing to put in the work, you can get rid of your debt for good. Follow the tips above and you’ll be on your way to becoming debt-free.
Cassidy Horton is a finance writer based in Seattle, Washington. With an MBA and a bachelor's in public relations, her work has been published over a thousand times by The Balance, Finder.com, Money Under 30, Clever Girl Finance, and many more. Cassidy is a self-confessed money nerd who’s passionate about helping people find financial freedom. Oh, and she really loves cats.