Student loans can eat up a big portion of your paycheck before it even has the chance to hit your bank account. If you want your debt to go away ASAP, you’re going to have to upgrade your student loan repayment strategy. And this starts with learning how to pay off student loans fast.
Fortunately, you have lots of great options for paying off student loans faster, including:
- Make more than the minimum payment
- Do the math and find your payoff date
- Consolidate and refinance
- Use a cash windfall
- Take a job that offers forgiveness
- Apply your raises
- Avoid repayment programs
- Trim your budget
- Earn extra money with a side gig
- Be strategic about your debt
- Take interest rate deductions
- Take full advantage of tax deductions and credit
- Realize student loans aren’t “good debt” to keep around
- Pay every two weeks
- Visualize the future without student loans
How to pay off student loans fast
To learn more about these options for student loan repayment, and to get a few bonus tips, here’s our guide to paying off student loans fast with strategies that could work for just about anyone.
1. Make more than the minimum payment
Effectiveness level: Medium-High
This is one of the easiest ways to reduce your debt. Just take the payments you have and add extra money to the payment. You should already have payments set up, so anything extra goes straight toward your principal.
One easy way to do this: Set up automatic payments with this extra amount added in. This takes any indecision out of the equation and makes it harder for you to change your mind, too.
Even if you can only afford an extra $20 a month, it’s something. Start there, then gradually work on increasing your extra payments.
2. Do the math and find your payoff date
Effectiveness level: Low
Do you know exactly when you’ll be free of student loan debt? If you answered no, you’re not alone.
But figuring out your payoff date is always a good place to start when it comes to managing debt. Why? Because once you know this date, you can work on moving it closer.
The easiest way to figure this out: Use the National Student Loan Data System to view all of your federal loans and AnnualCreditReport.com to make a list of private loan lenders. Then, confirm payoff dates with your loan servicers.
3. Consolidate and refinance
Effectiveness level: High
Refinancing your loans is one of the best moves out there for paying off student loans faster. The goal of refinancing is to decrease interest rates, meaning more of your payments go toward paying down your student loans.
When you refinance multiple student loans, you’ll get one consolidated loan with one monthly payment. Alternatively, you could refinance just one student loan for lower rates. You’ll likely only want to refinance loans where you can actually decrease your interest rate.
For example, student loan refinancing rates below 3.00% are currently available. For current rates, see our post on student loan refinancing rates.
4. Use a cash windfall
Effectiveness level: Medium
Cash windfalls come in various forms. These can include lottery winnings, an inheritance, a settlement from a lawsuit or insurance claim and more.
When you suddenly get a chunk of money from these sources or others, you might be tempted to spend it. It’s so tempting that Bankrate reports an increase in lottery winners’ likelihood to declare bankruptcy within three to five years of receiving the cash windfall.
So instead of spending it on stuff you won’t even remember, use it for paying off student loans faster.
Even if you don’t get an inheritance or something similar, many taxpayers get a cash windfall once a year in the form of a tax refund.
There are several tax refund strategies for student loan debt that work for any sort of financial windfall. The main takeaway: Put at least some of your tax refund (and/or cash windfalls) toward student loan repayment, even if you don’t want to devote 100%.
5. Take a job that offers forgiveness
Effectiveness level: Medium-High
Certain jobs, like public service work or teaching, may offer forgiveness for part or all of your student loans. All you have to do is meet the requirements to get your student loans forgiven. See our guides to Public Service Loan Forgiveness and teacher student loan forgiveness for more details.
There is one potential downside: You need to meet all the requirements and complete the full term of work required to get any forgiveness.
Since these forgiveness programs are typically used in conjunction with income-driven repayment plans, your payments will decrease but interest charges will accumulate. If you wind up ineligible for forgiveness for any reason, you’ll be stuck with greater interest charges.
In addition to these federal student loan forgiveness programs, some states also offer loan repayment assistance programs (LRAPs). These LRAPs also usually come with a work requirement. If you qualify, you could get money toward paying off your federal (or in some cases, private) student loans.
6. Apply your raises
Effectiveness level: High
Hopefully, you work at a job where yearly raises are part of the compensation. But what do you actually do when you get a raise? You could just get more stuff — a bigger TV, a better car or more exotic vacations. But why not put a chunk of it toward student loan repayment?
We covered this in our post about how to start investing, but the same strategy could be used with student loans. Just put half of your raise amount straight toward student loan payments. This means either upping your automatic student loan payments or transferring the money to a savings account.
7. Avoid repayment programs
Effectiveness level: Varies
You might be focused on lowering your student loan payments; this makes a lot of sense if you’re struggling to repay your student loans. But if your goal is paying off student loans faster, you probably want to avoid income-driven loan repayment programs.
Why would you want to do this? Well, almost all of these federal student loan repayment programs are geared toward decreasing payments by lengthening the term of the loan. This means it’ll take longer to pay off student loans.
For example, Pay As You Earn (PAYE) stretches your federal student loan repayment term from 10 years to 20 years. We don’t have to tell you that’s a much slower repayment period.
Even direct loan consolidation can prevent faster student loan repayment. Why? Because you’re blending all your student loans, which have different interest rates, into one loan. This means you can’t target the high-interest loans with extra payments after you consolidate. For more detail on this, see student loan myth No. 4.
8. Trim your budget
Effectiveness level: Medium-High
If you want to find more money but can’t easily increase your income, decreasing your budget is an option. While it may sound extreme, some have trimmed their budgets drastically by moving to a cheaper apartment, skipping happy hours or meals out, earning more side income and other strategies.
The key to success: You only have to do this in the short term. It’s not for the rest of your life, but rather a short period where you’re focused on paying off student loans faster. A few common strategies are:
- Cancel cable TV
- Don’t go out to restaurants
- Give up alcohol
The options here are really only limited to your creativity and motivation.
Even if you can only handle it for a month at a time, it can still benefit your student loan repayment. Maybe you have a “no-spend month” where you don’t buy any new stuff all month and put the money toward student loans instead.
9. Earn extra money with a side gig
Effectiveness level: Medium
Along with trimming your budget, you could try supplementing your income with a side gig.
Side gigs come in all shapes and sizes. You could offer a service online, such as tutoring, editing or design. Maybe you could finally clean out your closets and sell your used clothes. Or, as this TV producer did, you could start your own cookie-baking business.
Whatever form your side gig takes, you can use it to earn extra money. Then, take those extra earnings and apply them directly to your student loan balance. Not only will your extra income help you pay off student loans faster, but you also might learn some new skills (and have fun) in the process.
10. Be strategic about your debt
Effectiveness level: Medium
The first step to repaying your loans faster is to add more money to your student loan payment. But how you apply that extra money could make a big difference, too.
For all student loans, it makes the most sense to pay off the highest interest loans first. This is called the “debt avalanche” method, where you pay just the minimum on all but the student loan with the highest rate.
You might be best off targeting private student loans first, too, before focusing on federal student loan repayment. Repaying private student loans often means higher interest rates and less-flexible repayment terms compared to federal student loans. Private loans can have variable interest rates as well, meaning your rate could rise over time.
By targeting the loans with the highest interest rates first, you’ll save the most money on interest.
An alternative approach is called the “snowball method.” This involves paying off your loans with the lowest balances first. Although you won’t save as much on interest, you might get a psychological boost from closing out an account.
Choose whichever method will motivate you to keep working toward your goal of paying off student loans faster.
11. Take interest rate reductions
Effectiveness level: Low
While you can cut down on the cost of your student loans and get some big wins with the strategies above, smaller savings can add up, too. One of them is the interest deduction from signing up for automatic payments.
Many servicers offer a 0.25% interest rate deduction on federal student loans for enrolling in automatic payments. While this isn’t a ton of money, it’s not bad to get a few bucks back.
Besides the interest savings, automatic payments can be a good idea to make life easier. By setting up automatic payments, you don’t have to worry about late or missed payments when paying back student loans (which matters for your credit score). Plus, you can use automatic payments in conjunction with other strategies on this list, like making payments higher than the minimum.
12. Take full advantage of tax deductions and credits
Effectiveness level: Medium
If you’re paying off student loans, you’re likely eligible for the student loan interest deduction on your federal taxes. You may deduct up to $2,500 on your taxes each year for the interest you pay on student loans.
While you must meet other requirements, generally a lot of student loan holders in their 20s will be eligible. That’s because this deduction can be taken even if you don’t itemize your taxes (which many young taxpayers don’t do).
Tax credits can be even more valuable than tax deductions. In general, a $2,500 tax credit will save you more money than a $2,500 deduction will.
You might be eligible for tax credits if you’re currently paying tuition, including while you’re in grad school. While there aren’t any tax credits related to simply paying student loans, it’s worth checking out if you’re currently in college or thinking about going back to school soon. See our post on student loan tax credits for more information.
13. Realize student loans aren’t “good debt” to keep around
Effectiveness level: Low
You might hear chatter about “good debt” and “bad debt.” And while student loans are generally a good investment based on increased income potential in your lifetime, along with some deductions, it’s not good debt to keep around.
The good-debt-versus-bad-debt debate is really about how that debt helps you increase the value in something. In this case, it’s the value of a salary.
But while taking out student loans is a good idea, letting them sit around forever isn’t. Interest charges stack up the longer you wait to repay loans.
Of course, you can be strategic when figuring out how to pay student loans, but merely calling student loans “good debt” as an excuse to drag out repayment isn’t a good idea.
14. Pay every two weeks
Effectiveness level: Medium
Another popular extra-payment strategy for student loans is to make a student loan payment every two weeks.
Now, you don’t need to pay double the amount of your monthly payment to make this work. Instead, here’s the common strategy:
- Split your monthly payment in half.
- Make a payment of that amount every two weeks.
By doing this, you’ll make a full extra payment over the year. The real strength of this strategy is that if you receive a paycheck bi-weekly, you shouldn’t feel the pain of paying the extra amount.
15. Visualize the future without student loans
Effectiveness level: Low
While this isn’t exactly a repayment strategy, it can help you find motivation to get rid of your debt, especially if it’s causing a lot of stress in your life.
Here’s an easy way to start your visualization. Think of the one thing you hate most about having student loans. Maybe it’s that you can’t afford to go on a vacation, or maybe you have to eat rice and beans to scrape together enough money to pay your bills. Perhaps you drive a crappy car that breaks down all the time.
Now close your eyes and imagine what your life would be like if that No. 1 most hated thing were no longer a problem because you don’t have student loans. How would your life change for the better? Would you be happier? What would you do without having to worry about student loans?
Is this a life you want to have? With enough hard work, getting rid of your student debt can become reality. Now go get it!
Rebecca Safier and Christy Rakoczy contributed to this article.
Interested in refinancing student loans?
Here are the top 9 lenders of 2022!Lender | Variable APR | Eligible Degrees | |
---|---|---|---|
![]() | 1.74% – 8.70%1 | Undergrad & Graduate | |
![]() | 1.74% – 7.99%2 | Undergrad & Graduate | |
![]() | 1.74% – 7.99%3 | Undergrad & Graduate | |
![]() | 1.89% – 5.90%4 | Undergrad & Graduate | |
![]() | 1.74% – 7.99%5 | Undergrad & Graduate | |
![]() | 2.05% – 5.25%6 | Undergrad & Graduate | |
![]() | 1.86% – 6.01% | Undergrad & Graduate | |
![]() | N/A7 | Undergrad & Graduate | |
![]() | 1.99% – 8.38%8 | Undergrad & Graduate | |
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