How to Pay Off Student Loans in 5 Years

 May 27, 2021
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pay off student loans in 5 years

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Note that the government has paused all repayment on federally held student loans through the end of 2022, with no interest to be charged during that period and no loans to be held delinquent or in default.

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If you’re one of millions saddled with student loan debt, you likely want to rid yourself of this financial burden sooner than the 10-year standard repayment plan. This article will walk you through paying off student loans in just half that time.

From consulting a student loan repayment calculator to cutting back on your spending and increasing your income, here’s how to pay off student loans in five years, using these steps:

1. Establish your goals
2. Build a budget
3. Cut expenses
4. Increase your income
5. Look for grants and assistance programs
6. Check with your employer
7. Consider refinancing your loans
8. Treat yourself

How to pay off student loans in 5 years

If you’re really serious about learning how to pay off your student loans quickly, use a student loan prepayment calculator. This will help you figure out how much more you’ll need to pay each month on your loans to pay them off within five years (or another term of your choosing).

Once you at least have a ballpark figure in mind …

1. Establish your goals

To stay motivated, think about your personal and financial goals. If student loan debt is holding you back from starting the business you dreamed of or buying a home, that can be a powerful motivator.

Print out a picture or symbol of your goals and tape them next to your computer or on your credit card to remind you of what you’re trying to achieve.

2. Build a budget

The most important part of your repayment plan is your budget. If you don’t have one, you have no idea how much money is coming in or going out, or how much extra cash you can realistically allocate to your student loans.

Did You Know?
Biweekly Loan Payments Help You Pay Debt Off Faster

Sit down and list all of your set expenses, such as rent, utilities, car payments, student loan payments, groceries, insurance and other recurring costs. Be sure to include everything you spend money on regularly, so you can get a full picture of how much you actually spend each month relative to your income.

If this sounds complicated, choose a budgeting method that does a lot of the work for you.

3. Cut expenses

Once you have a budget in place, identify areas where you can cut back to free up more money for your student loan payments. Bring up your latest bank statements and credit card bills to identify your spending patterns and recurring charges.

Ways to save money are specific to each person, but common areas to cut back on include:

  • Subscriptions: A standard Netflix subscription costs $8.99 per month. That alone probably won’t put a dent in your budget, but combined with other TV subscription services, a gym membership and the online styling service that sends you new clothes on a monthly basis, these expenses can add up fast. Cut subscriptions you don’t use first, then dig deeper to determine whether you truly need the others.
  • Food: Your diet can seriously eat into your budget. Whether you’re dining out for lunch each day or buying a $2 cup of coffee every morning, this is money not going toward paying off your student loans. Take a close look at your daily diet to find ways to curb your spending (without harming your health).
  • Transportation: Driving to work solo is filled with expenses that can add up fast, such as gas, tolls and parking. Ease the burden by carpooling with co-workers, taking public transportation or biking to work. In addition to cutting costs, you’ll also be doing the planet a favor.
  • Clothes: Trendy clothes go out of style quickly, so focus on building a wardrobe filled with classic pieces. Save money by shopping at secondhand stores and focus on quality instead of quantity. Unsubscribe to emails from your favorite stores, so you won’t be tempted to shop online when a deal arrives in your inbox. You might also consider selling clothes online.
  • Entertainment: Going out on the town isn’t the only way to have a fun night with friends or your significant other. Plan movie nights and game nights at home to save money while still spending time with your favorite people. When you need a leisure activity, search for free entertainment, such as a concert in the park, a hike or a visit to a museum that offers free admission during certain days of the week or month.
  • Living arrangements: When figuring out how to pay off student loans in five years, living expenses are a huge factor. If you can live with your parents or relatives, cutting back on your rent payment can seriously help with paying off student loans quickly. Alternatively, getting a roommate also can ease the burden of living expenses, if living with family isn’t an option.

4. Increase your income

While budgeting and cutting costs are smart steps, there are only so many expenses you can eliminate. If you’re wondering how to pay off student loans in five years, boosting your income is an important step. While earning more money might sound impossible, you might be able to get a wage increase either at your full-time job or a new side gig.

5 Reasons to Worry About Your Income, Not Your Budget

If you’re doing good work at your job and are contributing to the company, asking for a raise can be an easy way to boost your salary. Approximately 70% of people who ask for a raise end up getting one, according to a 2018 report from PayScale, so it’s worth speaking up if you don’t feel your compensation is adequate.

If a raise isn’t an option or you want to boost your income even more, a side hustle can help pay down your debt. Some ideas include:

  • Transcribe audio and video recordings: Earn extra cash by transcribing audio and video recordings in your spare time. You’ll likely need to take a transcription test, but if you pass, you’ll be able to pick up projects on your schedule. For example, a service called Rev pays $0.30 to $1.10 per minute for transcribing audio and even more for translations.
  • Become a virtual assistant: If you’re organized and detail-oriented, pick up some extra cash by serving as a virtual assistant. Do note, if you’re balancing this gig with a day job, you’ll need to find clients with flexible hours.
  • Serve as a mystery shopper: Use apps like EasyShift to find mystery shopping gigs in your area. Earnings vary depending on the size of the city you live in and the number of jobs you pick up.
  • Join focus groups and fill out online surveys: Help marketers better understand their audience and get paid for it. Companies like UserTesting and uTest compensate you for testing out products.
  • Housesit: If you’re willing to leave the comforts of home, you can earn extra cash by housesitting and/or pet sitting. For a relatively nominal fee, sites like MindMyHouse and Nomador offer access to thousands of potential house-sitting jobs.
  • Become a driver: If you have a car, there’s no shortage of flexible job opportunities. You can work as a professional driver for Uber or Lyft, deliver food for companies like DoorDash or Postmates or deliver packages through Amazon Flex. Pay varies by gig, but most Amazon Flex drivers earn $18 to $25 per hour.
  • Become an umpire or referee: An ideal job for sports lovers, being an umpire or referee allows you to earn extra cash by becoming an integral part of the game. Little League umpires earn an average of $12 to $28 per hour, according to Glassdoor data.

Another factor to consider is your current job. While you may love your current gig, if the salary is not enough for you to manage your expenses and pay off your student loans quickly, it may be worth transitioning to a new job in a higher-paying industry. It’s a tough decision, but it might pay off in the long run.

5. Look for grants and assistance programs

There are some grants and repayment assistance funds available to help borrowers pay back their student loans. Particularly if you’re a teacher, nurse or medical professional, you might be able to find programs that could eliminate some or all of your debt.

While the federal government and nonprofit organizations may offer student loan aid, also check with your state. Some areas offer programs for professionals in particular fields or simply for living and working in the state. Check out our guide to student loan repayment grants or use our student loan repayment search tool to find a program that can accelerate your debt payoff.

6. Check with your employer

A growing number of employers are establishing student loan repayment assistance programs for their workers. As both a recruitment and retention initiative, helping employees repay their student loans can improve company morale and reduce stress.

When looking for a new job, student loan repayment aid can be a huge benefit. Ask potential employers if they have a program set up or ask your current boss if the company would be willing to look into it. Many startups and small businesses are adding student loan programs to compete for top talent.

7. Consider refinancing your loans

If you are laser-focused on paying off student loan debt in five years, one approach that can help you accomplish your goal is refinancing your loans. If you refinance, you’ll work with a private lender to take out a new loan for the amount of your current federal or private loans.

The new loan will have a different interest rate and repayment term than your old loan. If you have good credit and steady income, you could get a significant interest rate reduction, which can help you save money over the length of your repayment term.

While refinancing can also lower your monthly payment, sticking with your current payment — or adding to it — can help you pay off your student loan debt even faster. However, think carefully about whether or not refinancing is for you. By refinancing your federal loans, you give up certain benefits, such as access to income-driven repayment plans or deferment options.

To make an informed decision, use a refinancing calculator to find out how much you could save and how much faster you can pay off your student loan debt by refinancing.

Student Loan Refinancing Calculator






8. Treat yourself

While you’re working toward paying off your student loan debt in full, it can be easy to feel deprived or exhausted by all of your hard work. That’s why it’s so important to set up small, achievable milestones along the way. When you meet those little goals, reward yourself with something affordable that refreshes you.

For example, you could celebrate every time you pay off $5,000 of your student loan debt. Have a picnic in the park with friends, indulge in a lazy day complete with a Netflix binge or open up a nice bottle of wine. Little treats can help you feel motivated to see your plan through.

If you’ve been trying to come up with a plan for how to pay off student loans in five years, know that it is achievable. If you’re diligent about both your spending and earning potential and you approach your student loans strategically, you can pay off your loans quicker than you might have imagined.

Just ensure your extra payments are being applied correctly.

Andrew Pentis and Laura Woods contributed to this report.