Pay Off Student Loans Early With These Painless Strategies

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Once the college graduation celebrations end and your cap and gown go back in the closet, you might feel like you can leave all your school woes behind. That is, until your first student loan payment is due.

But it is possible to pay off student loans early and free up your budget to cover other expenses and save for your future. Your options include refinancing your loans, making additional payments and using student loan repayment assistance programs. Here are several strategies to pay off student loans early.

How to pay off student loans early: 5 basic tips

Some borrowers take extreme measures to pay off student loans: They sell their homes, forgo all other financial goals or cut expenses drastically. While laser-like focus on a goal can yield results, there are also more practical tips for fast loan payoff that you can work into your daily life. Try these strategies:

1. Refinance to a lower interest rate

Interest makes your loans cost much more than they did the day you received them. It’s the reason you can feel like you’re not making any headway on your balance, regardless of how many payments you make.

That’s why lowering your interest rate as much as possible by refinancing your student loans can help you pay off your education debt faster. The lower your rate, the more money you can apply to that principal balance.

Start by making sure you’re eligible for refinancing, based on your credit and income, and then compare options across multiple lenders. If you qualify, you may receive offers with a variety of interest rates — variable rates, which can change over time, and fixed, which don’t — and a variety of repayment terms.

Let’s say you have $60,000 in student loans at a 7% interest rate and 10 years left to repay. When you’re approved to refinance on a 10-year repayment plan, but at a 4.9% interest rate, you could save more than $60 per month and more than $7,500 overall.

Use our Student Loan Refinancing Calculator to see how much you can save. If you choose a longer repayment term, you can lower your payments even more — but that will keep you in debt longer and reduce your interest savings. If your main goal is to pay off the debt faster, choose the shortest repayment term you can afford.

2. Make biweekly payments

If you use the tactic of making biweekly payments, you would make one extra payment per year and cutting the amount of time it takes to repay loans overall. Here’s how it works:

  • Split your monthly payment in half.
  • Pay that amount every other week.
  • Make sure your first two payments occur before your next due date. That way, you avoid accidentally paying less than the amount due.

When you do this, you’ll end up making the equivalent of one full extra monthly payment per year. And that extra payment could save a lot more than you expected, since you’ll chip away at your balance faster.

Generally, when you pay extra towards your student loan payments, lenders put that payment towards any fees first, then interest and lastly your principal. But your loan servicer may apply your extra payments to future loan bills, known as putting your loans into “paid ahead” status. Speak to your servicer to make sure your extra payment is, in fact, going towards your principal balance, which will have the largest impact, and not covering future payments.

3. Utilize student loan repayment assistance programs, if you qualify

Depending on where you live, what you do for a living and whom you work for, you might be eligible for a Loan Repayment Assistance Program (LRAP).

LRAPs award you money each month that goes toward your loans. They can provide you relief on your payments if you qualify. If you utilize those plans and also put extra toward your loans, you can make significant progress on getting rid of your student debt.

If making your own extra payments interferes with the terms of your LRAP, consider saving that money in a separate bank account. Then, when the LRAP is finished, you can use the savings to make one giant bulk payment on your loans.

4. Use the debt avalanche method if you have more than one loan

If you have a variety of loans and interest rates, you can pay them off faster by employing specific debt payoff methods. There are two popular methods — the debt avalanche and the debt snowball. The debt avalanche method is typically the best option for speedy debt repayment. Here’s how it works:

  • Rank your loans from highest interest rate to lowest.
  • If you have extra money to apply to your loans each month, apply it to the loan with the highest interest rate, while continuing to make your monthly minimum payments on all your loans.
  • Once you pay off one loan, add the amount you were paying on it to the minimum payment on your next highest-rate loan.
  • Keep rolling these payments onto your next loan, never decreasing how much you pay each month on your loans until they’re all gone.

As for debt snowball method, it focuses on paying off your smallest balances first. This is certainly good for motivation, but it won’t always be as useful in paying your debt off faster.

5. Apply bonuses, birthday money and tax refunds to your loans

Another way to win the fight against high interest rates is to make large extra payments that go straight to your principal balance. And what better way to do that than with money that you didn’t realize you’d have in the first place?

If you don’t like the idea of allocating all your bonus money, birthday cash or tax refunds to student loans, split it up. Assign a percentage of the extra money to your student loans, and use the rest elsewhere.

Bonus: Extreme student loan debt repayment methods

There are also more dramatic student loan repayment methods to consider. Used occasionally or in short bursts, they might help you make a lot of progress.

Decrease your expenses as much as possible

Evaluate your expenses and identify ones you’re willing to get rid of. For example, you could save a significant amount by downgrading your home, apartment or car. You could cook more and eat out less. Even a short-term shopping ban can help. Once you’ve decided how to decrease your expenses, apply all the money saved to your student loans.

Apply all pay raises to your loans

When you get a pay raise, instead of using it to upgrade your lifestyle, calculate how much extra you’ll receive in your paycheck and plan to apply it toward your loans each month.

As a bonus, once your student loans are paid off, you’ll feel like you got a raise twice. That’s because you’ll get to use your pay raise for other expenses, and you’ll no longer have monthly loan payments to make.

Sell assets you don’t need

Look around. Do you own assets you could live without, such as a house with a mortgage when you could rent, or a car when you could use a bike? If you sell the assets and apply the money to your student loans, you can knock a ton of time off your repayment term.

But evaluate the long-term consequences — and the potential loss of wealth — to be sure this won’t cost you more money later. Examples of this could include paying more to reenter a suddenly hot real estate market or spending more on taxis than you did on car payments.

A less extreme approach could be to sell items you don’t need, such as clothes or furniture, and use that money to pay off loans. Every little bit counts.

Why you should pay off student loans early

Federal student loan interest rates are currently between 4.53 and 7.08%, depending on the type of loan, according to the Federal Student Aid office. Private student loan interest rates can vary, but they can reach 13.95%, according to FinAid.

That’s why paying off student loans early can be so beneficial. Interest charges can drastically increase your overall debt load by the time you’re finished with your original repayment plan.

Choose the payoff methods that match your lifestyle and that you’re sure you can follow through on, and you’ll be more likely to succeed.

Jacqueline DeMarco contributed to this report.

Interested in refinancing student loans?

Here are the top 8 lenders of 2019!
LenderVariable APREligible Degrees 
Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 3.45% APR (with Auto Pay) to 6.99% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.89% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of November 21, 2019, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 11/21/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at hello@earnest.com, or call 888-601-2801 for more information on our student loan refinance product.

© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


2 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 3.46% APR (with AutoPay) to 7.61% APR (without AutoPay). Variable rates currently from 2.31% APR (with AutoPay) to 7.61% (without AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.31% APR assumes current 1 month LIBOR rate of 2.31% plus 0.75% margin minus 0.25% for AutoPay. If approved for a loan, the fixed or variable interest rate offered will depend on your credit history and the term of the loan and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

3 Important Disclosures for Figure.

Figure Disclosures

Figure’s Student Refinance Loan is a private loan. If you refinance federal loans, you forfeit certain flexible repayment options associated with those loans. If you expect to incur financial hardship that would impact your ability to repay, you should consider federal consolidation alternatives.


4 Important Disclosures for Laurel Road.

Laurel Road Disclosures

Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

ANNUAL PERCENTAGE RATE (“APR”)
This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.

FEE INFORMATION

There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account.

LOAN AMOUNT

For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans.
For eligible Associates degrees in the healthcare field (see Eligibility & Eligible Loans section below), Lender will refinance up to $50,000 in loans for non-ParentPlus refinance loans. Note, parents who are refinancing loans taken out on behalf of a child who has obtained an associates degrees in an eligible healthcare field are not subject to the $50,000 loan maximum, refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for more information about refinancing ParentPlus loans.

ELIGIBILITY & ELIGIBLE LOANS

Borrower, and Co-signer if applicable, must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements).

Graduates may refinance any unsubsidized or subsidized Federal or private student loan that was used exclusively for qualified higher education expenses (as defined in 26 USC Section 221) at an accredited U.S. undergraduate or graduate school. Any federal loans refinanced with Lender are private loans and do not have the same repayment options that federal loan program offers such as Income Based Repayment or Income Contingent Repayment.

All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions.

For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned.

INTEREST RATES

The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency.

DISBURSEMENT OPTIONS

The repayment of any refinanced student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired.

POSTPONING OR REDUCING PAYMENTS

After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship.

We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends.

We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment.

If Lender agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Lender has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments.

KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

This information is current as of November 8, 2019 and is subject to change.


5 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers.


6 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 1.76% effective November 10, 2019.


7 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it  endorse,  any educational institution.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 12/07/2019 student loan refinancing rates range from 1.90% to 8.59% Variable APR with AutoPay and 3.49% to 7.75% Fixed APR with AutoPay.


8 Important Disclosures for College Ave.

College Ave Disclosures

College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

1College Ave Refi Education loans are not currently available to residents of Maine.

2All rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.

3$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.

4This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 12/1/2019. Variable interest rates may increase after consummation.

1.99% – 6.89%1Undergrad
& Graduate

Visit Earnest

2.31% – 7.36%2Undergrad
& Graduate

Visit SoFi

2.21% – 6.21%3Undergrad
& Graduate

Visit Figure

1.99% – 6.65%4Undergrad
& Graduate

Visit Laurel Road

2.43% – 7.60%5Undergrad
& Graduate

Visit Splash

1.85% – 6.13%6Undergrad
& Graduate

Visit CommonBond

1.90% – 8.59%7Undergrad
& Graduate

Visit Lendkey

2.74% – 6.25%8Undergrad
& Graduate

Visit College Ave

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

Published in Big Money Decisions, Student Loan Repayment

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