3 Signs It’s Time to Refresh Your Student Loan Repayment Strategy

Student Loan Repayment Advice and Help

When you’re trying to find student loan repayment advice, most help is aimed at borrowers who are struggling to make monthly student loan payments. And with good reason – when you’re shouldering tens of thousands of dollars in education debt, and monthly payments you simply can’t afford… you need all the help you can get.

But the fact is, student loan borrowers who aren’t struggling to make loan payments need student loan repayment advice, too.

Why? Because the tendency with most borrowers who are successfully repaying their student loans are using the “set-it and forget-it” student loan strategy. Does this sound familiar? You graduate, choose a repayment plan, maybe even set up auto-pay and never look back.

In fact, you probably don’t want to think about your student loans again until the day that final payment is made, somewhere in the distant future. This approach is understandable, but chances are, it will cost you thousands of dollars in interest you could have avoided.

Given federal student loan delinquencies are roughly 14% (as stated by the New York Federal Reserve), and another ~30% aren’t actively repaying due to grace, deferment, or forbearance period, we estimate roughly ~50-60% of borrowers are actively making their monthly payments comfortably.

So what’s the best advice for a student loan borrower who is able to make monthly payments? First off, be sure to revisit your repayment strategy every 6 months, and determine whether it’s time for a change.

For example, did your job or income change? Did your credit score improve? If so, you might be able to refinance your student loans at a lower interest rate, to save money on monthly payments or pay off your student loans faster, while also saving a significant amount in interest over the life of the loan. Here are 6 Reasons to Refinance Your Student Loans.

And because it’s typically easier to qualify for refinancing a year or two after graduation, you’re best bet is to ditch the set-and-forget approach in favor of a periodic check-in with your repayment strategy. How do you know when it’s time to do that? Here are three signs the day has arrived:

1. Making monthly payments is easier than it used to be

The first few years after undergrad or graduate school are tough for most people. Your degree may hold the promise of higher income in the future, but your first job out of school is still paying you like it’s your first job out of school. And until your pay goes up, student loan payments can swallow up a whole paycheck.

But ideally you spent the last few years working hard, maybe even receiving a promotion at work and, along with it, came a higher salary. You may not have noticed when the scales tipped, but if you’re not stressing about your monthly student loan bill anymore, chances are your cash flow has improved. Since this is one of the factors used to determine student loan refinancing eligibility, it may be a sign that you’re ready to refinance.

And if you’re not yet eligible for refinancing, consider using your monthly cash surplus to increase your student loan payments. Prepaying student loans is another great way to reduce interest and pay off your loans faster, and all education loans allow for penalty-free prepayment. Just make sure your lender is applying the extra money to principal instead of holding it for future payments. Here’s a great student loan prepayment calculator to help you find out how much you can save by prepaying.

2. You’ve been making on-time payments for a long time

Crazy as it might sound, having student loans can actually be a positive thing – at least when it comes to your credit – as long as you’re paying regularly and on time. Since federal loans are available to borrowers regardless of credit score, it gives them an opportunity to build credit history and prove that they can manage debt responsibly. Also, having a mix of debt types (i.e – revolving credit or credit cards vs. an installment loan or student loan) can also help improve your overall credit score. Having good credit can mean more borrowing power and lower interest rates on future loans – two things that can positively affect your financial bottom line.

If you’ve been paying your student loan bill on time, every time, it’s likely had a positive impact on your credit score. And since credit score is one of the biggest factors in determining refinance eligibility, your diligence may pay off in the form of a lower refinance rate. To learn the other factors that go into credit score, you can find FICO’s factors and weightings here.

3. You know your career path lies in the private sector

A common misconception about federal student loans is that they can’t be refinanced, but the truth is that the option is available now through a few lenders, and SoFi was one of the first lenders to offer it. Since the vast majority of outstanding student debt is made up of federal loans, it never made sense to us that borrowers couldn’t refinance these loans as market interest rates declined and the borrower’s financial stability improved.

The one consideration for refinancing federal student loans with a private lender (the only way it can be done, since the government does not currently offer refinancing) is that certain benefits and features do not transfer with the loans. For example, some federal loans offer conditional loan forgiveness for teachers and public employees. If you’re eligible for these programs, you probably don’t want to miss out on the benefits.

But if you don’t qualify for a public service loan forgiveness, it may not make sense to stick with federal student loans just for the “potential benefits” you’ll never get to use. Not sure whether a federal forgiveness program may apply to you? Check with your alma mater’s financial aid officer, your student loan servicer, or sign up with Student Loan Hero to see which program you are eligible for – the experts out there can help you navigate the fine print.


No one likes to think about their student loan debt, which is what makes the set-and-forget money management approach so understandable. But when leaving your student loans on auto-pilot for too long could mean leaving thousands of dollars on the table! It’s worth taking a second look to see if there’s a better student loan deal available. If you’re seeing the signs above, it’s probably time to consider implementing the student loan repayment strategies mentioned.

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