8 tips for paying off student loans fast

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While some may argue that you can’t put a price on a good education, many of today’s graduates face the grueling task of paying off student loans while trying to save for a house, pay their bills and start a family. If you’re feeling overwhelmed, there are a few ways to pay off your student loans quickly.

8 ways to pay off your student loans fast

Some of the best strategies to pay off your student loans faster include:

  1. Make additional payments.
  2. Establish a college repayment fund.
  3. Start early with a part-time job in college.
  4. Stick to a budget.
  5. Consider refinancing.
  6. Apply for loan forgiveness.
  7. Lower your interest rate through discounts.
  8. Take advantage of tax deductions.

1. Make additional payments

If you can afford it, make larger payments to cut the principal more quickly and reduce the total payoff time. By reducing the principal balance, you’re minimizing the duration of the loan period and the interest accrued.

For example, a $25,000 student loan with 6.8 percent interest and a 10-year payback period would cost $288 a month. Using a student loan calculator, you can see that paying $700 a month instead of $288 enables the borrower to repay the loan in just over three years.

Another strategy is to add payments, sending in checks every two weeks rather than monthly. “Just be sure to advise your loan servicer to apply your extra payment to your principal balance, rather than placing your account in a ‘paid ahead’ status,” says Jessica Ferastoaru, student loan counselor at Take Charge America. “This will allow you to pay down your principal balance more quickly and save money on interest.”

Takeaway: Making larger payments will help you cut through the principal quicker, which will allow you to pay off your loan sooner.

Next steps: To realistically determine how large your loan payments can be, consult your budget and see where you can reduce spending to accommodate a larger loan payment.

2. Establish a college repayment fund

If you’re not sure how much more you can devote to your student loans every month, set up automatic transfers to a separate savings account specifically for college debt. Transferring money automatically into savings is effective because you won’t be able to spend it on something nonessential like clothes or dining out.

Just make sure to set up a separate account for paying back your college debt. Don’t use a checking or savings account you already have, because you might be tempted to use that money for something other than your student loans. Compare savings accounts and put your money in a high-yield savings account to maximize your returns.

Takeaway: Setting up an account specifically for your student loan repayment funds can be a great way to compartmentalize your finances. It can also help you control out-of-budget spending, allowing you to potentially make extra payments.

Next steps: Research savings accounts with high yields, then contact your preferred bank to set up a new account specifically for student loan savings.

3. Start early with a part-time job in college

Getting a part-time job while attending college is one way to keep college debt in check, because you can use those earnings to get a head start on paying down your balance.

Let’s say you’re able to work a part-time job that allows you to put away $500 a month. In a year, that’s $6,000 you can put toward paying off your loans. What’s more, you can earn up to $6,970 a year without affecting your eligibility for need-based financial aid.

Takeaway: If you’re still able to properly manage your coursework, a part-time job is a great way to earn enough money for a student loan savings account while learning time-management skills.

Next steps: Check your school’s resources or career center to see if they’re hiring for any on-campus jobs. Typically, on-campus jobs are more understanding of unusual or busy class schedules.

4. Stick to a budget

Not knowing how to manage finances properly can prevent students from paying off their loans quickly. That can lead to delays in pursuing more fulfilling financial goals. By planning and understanding your monthly cash flow, you can make some necessary sacrifices and avoid falling off the budgetary wagon.

“If you’re trying to pay down your student loans faster, one of the best ways to reach your goal is to develop a budget,” says Ferastoaru. “If you’re able to meet a savings goal each month by sticking to a budget, you can use that money to pay down your student loans.”

Takeaway: Your financial health and spending habits can greatly impact your ability to pay off your student loans. Be diligent about sticking to a budget during your repayment period.

Next steps: Do an assessment of your spending habits and your ability to keep a budget. If you find it hard to maintain a solid budget as a college student, use a student budget calculator to help you get on track and stay there.

5. Consider refinancing

If you’re not sure how to pay off student loans quickly — or if it doesn’t seem feasible — you may be paying too much in interest.

In this case, you might want to consider refinancing your loan for a lower interest rate or a shorter repayment period. While refinancing federal loans with a private lender will cause you to lose some federal benefits, it could also allow you to pay off your loans faster.

Timing is key with this strategy. Your credit score is typically going to be at its lowest immediately after graduation, which generally means that the interest rates you’re offered will be higher.

“It takes a few years of repaying your debts responsibly, by the due date, for your credit scores to improve. You also need to have a steady job,” says student loan expert Mark Kantrowitz. “Shop around for the loans with the best rates. The best advertised rate is not necessarily the rate you will be offered, so you may need to apply for several loans to see which lender gives you a better deal.”

You can refinance your loans more than once, which may be worthwhile if you drastically improve your credit score or increase your annual income.

Takeaway: If you’re overwhelmed by the prospect of paying down your loans quickly, refinancing may be a good option — particularly if you have private loans. While it’s not for everyone, refinancing can help you score a lower interest rate or different repayment terms.

Next steps: Before applying, compare offers from multiple lenders to determine if refinancing will actually save you money in the long run. Also carefully weigh the benefits and drawbacks of refinancing federal student loans before going that route.

6. Apply for loan forgiveness

Forgiveness programs can eliminate part of your student loan debt, but each program has unique requirements and strict approval standards.

The most well-known program is Public Service Loan Forgiveness (PSLF). To be eligible for this program, you must be employed full time in a public service position by a government or nonprofit organization and make 120 qualifying payments under an income-driven repayment plan. Getting approved for the program is difficult, so read through the details carefully to stay on track.

The Teacher Loan Forgiveness program is another option. To qualify, you must have an eligible loan under the Direct Loan Program or FFEL Program and teach full time for five consecutive years in a low-income school or educational service agency. At least one of those years must be after the 1997-98 academic year. The program forgives up to $5,000 or $17,500, depending on your specialty.

It’s also possible to have a portion of your student loans forgiven if you’re on an income-driven repayment plan. Once the 20- or 25-year repayment term ends with these programs, any remaining balance is forgiven. If you hit the end of your repayment period before 2026, the forgiven amount is not taxable.

Takeaway: If you’re willing to work in a specific occupation and adhere to a variety of other program requirements, it may be possible to get a substantial portion of your loans forgiven, potentially saving you thousands of dollars.

Next steps: Be sure to research these programs thoroughly if you hope to qualify. You’ll want to make sure that you’re making qualifying payments and are employed by an eligible employer.

7. Lower your interest rate through discounts

Most lenders will offer a 0.25 percent to 0.5 percent discount if you set up automatic payments on your loan.

In addition, private lenders may offer other interest rate discounts if you meet certain criteria, like making a certain number of on-time payments or taking out another loan with the same company. If you have private student loans, contact your lender and ask about any opportunities for interest rate reductions or discounts.

Takeaway: It may be possible to reduce the interest rate on your existing loans by setting up autopay or asking about loyalty discounts.

Next steps: Contact your lender to inquire about the various rate discount programs that may be available.

8. Take advantage of tax deductions

The federal government offers a student loan interest deduction on your taxes for interest paid during the year on qualified loans. The law allows you to deduct up to $2,500, depending on your adjusted gross income. The deduction is available for both federal and private student loans.

You can claim this tax deduction if you’re legally required to pay interest on a qualified student loan and your filing status is not married filing separately. There are also adjusted gross income limits for this program, which are set annually. You do not need to itemize to claim this deduction.

Those who qualify for the deduction will generally save a few hundred dollars on their income taxes, which could help with student loan repayment. “If you pay less in taxes, this could free up some extra money to pay down your debt. It’s a good idea to speak with a tax advisor to make sure you’re taking advantage of any relevant tax benefits related to your education,” says Ferastoaru.

Takeaway: The student loan interest deduction allows for deducting as much as $2,500 in interest paid on federal and private student loans. It can be helpful to use the savings you receive through this deduction to pay down your education debt faster.

Next steps: Confer with a tax advisor to find out whether you’re eligible for any tax breaks and to make sure that you’re not missing out on this opportunity.

How long should it take to pay off student loans?

It typically takes between 10 and 30 years to pay off a student loan balance, but the time frame varies by individual and is impacted by several factors, including the interest rate, total balance owed, borrower’s annual income and repayment plan.

“If your total student loan debt at graduation is less than your annual income, you should be able to afford to repay your student loans in ten years or less,” says Kantrowitz. “The average student loan repayment term, however, is 16 years.”

Types of repayment plans

The choice of repayment plan has the greatest influence on how long it will take you to eliminate student loan debt. Here are some of the most common options:

  • Federal Standard Repayment Plan: If you receive a federal student loan, you’ll be automatically enrolled in the standard plan, which has a 10-year term.
  • Federal Extended Repayment Plan: Federal borrowers can apply for the extended plan if they have a Direct Loan or a FFEL Loan. Payments are made for up to 25 years.
  • Federal Graduated Repayment Plan: Federal borrowers with Direct Loans or FFEL Loans are eligible for the graduated plan. The terms range from 10 to 30 years, with payments starting low and increasing every two years. This option is designed for borrowers whose income may be low now but is likely to increase regularly.
  • Federal Income-Driven Repayment Plans: Some borrowers with federal loans may be eligible for income-driven repayment plans, which scale your monthly payment based on your current income and family size. The repayment timeline for income-driven plans is generally 20 to 25 years, depending on the specific plan.
  • Private student loan repayment plans: If you have private student loans, your repayment plan depends entirely on what your lender offers. Most lenders offer repayment plans from five to 20 years, and you can usually choose the term that works best for your budget. The repayment plan you choose typically influences which interest rates are available.

Reducing student loan payments

Reducing your student loan payments generally means taking longer to pay off your loans. The simplest way to reduce your student loan payments is by switching to a longer repayment plan, whether that’s by signing up for something like the extended repayment plan, income-driven repayment or refinancing. By spreading out your loan repayment over a longer time frame, each monthly payment will be a little lower — although it will usually result in more interest paid over the life of the loan.

In some cases, you may be able to refinance with the same term but a lower interest rate, which would lower your monthly payments without extending your repayment timeline.

Pros and cons of paying off student loans early

Here are some of the benefits and downsides to repaying your student loans ahead of schedule.

Pros

  • Reach other financial goals sooner. By paying off your student loans quickly, you’ll be able to put more of your focus into things like retirement, homeownership and savings.
  • Improve your debt-to-income ratio. Getting rid of a loan lowers the amount of debt you have relative to your income, which will help you qualify for other funding, like a mortgage or credit cards.
  • Pay less interest over the life of the loan. The less time you spend repaying your loans, the less interest you pay on them. By paying off your loans early, you can reduce the overall cost of your loans by hundreds of dollars.

Cons

  • Could lose eligibility for loan forgiveness. If you’re working toward loan forgiveness through an income-driven repayment plan or Public Service Loan Forgiveness, making extra payments or paying your loan in full will reduce the amount you will see forgiven.
  • May miss out on stock market gains. Paying extra on your student loans instead of investing could cause you to miss out on gains. In some scenarios, you may be able to make more money through investing than what you would save in interest by paying off loans early.
  • Draws focus from other forms of debt. Paying off student loans early isn’t worth it if you are dealing with other forms of high-interest debt. If you have a credit card balance with an interest rate of 16 percent, for instance, it makes more sense to put extra payments toward that account rather than toward a student loan with 5 percent interest.

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Written by
Hanneh Gundersen
Student loans reporter
Hanneh Gundersen specializes in everything related to student loans and helping you finance your next educational endeavor. She aims to help others reach their collegiate and financial goals through making student loans easier to understand.
Edited by
Student loans editor
Reviewed by
Nationally recognized student financial aid expert